Financial Analysis of M&S Essay Example | Topics and Well Written Essays - 1500 words - 1

Financial Analysis of M&S - Essay Example An important point to make here is that M&S is a UK based brand with 50% of its stores being in the UK. Its revenue generation is mostly derived from UK operations which accounts for 90% of the total revenue of the company. The company has shown a steady increase in the revenues in the last three years. In 2011 the revenue increased by 2%, followed by the same in the year 2012. However, the operating profits in the last two years haven’t increased in the same line. In the year 2011, the operating profit was  £836.9m which fell to  £746.5m, resulting in operating profit margin of 9.53% in 2011 and 8.84% in 2012. This clearly shows that company’s cost control is weak and the cost of goods sold hasn’t increased in the same line as revenues. The reason for such instability in profits for 2012 is the expansion and improvement plan the company is implementing till 2013 which will result in increased sales and satisfied consumers in the future. Because of the very r easons the company has experienced the increased cost of sale, interest expense, administrative and selling expenses. Similarly, the company’s net profit margin has also decreased from 8.13% in 2011 to 7.54% in 2012. The company’s return on capital employed (ROCE) has been increasing at a slow pace from being 17.24% in 2010, 19.0% in 2011 which declined to 18.8% in 2012. The reason for declining ROCE can be linked to declining PAT of the company accompanied by an increase in the total assets. (MARKSANDSPENCER. 2012) The company’s gearing ratio has decreased in last three years. In 2010, the company had a gearing ratio of 108.6% which was a lot, in the year 2011, the company reduced its long-term liabilities and the ratio fell to 76.91% which further was decreased to 74.54% in 2012. The reason for falling gearing ratio is the fall in the total liabilities of the company, which is beneficial as it will reduce in lower interest payments.