Sunday, December 29, 2019
Sample details Pages: 5 Words: 1453 Downloads: 2 Date added: 2019/04/12 Category Art Essay Level High school Tags: 12 Angry Men Essay Film Analysis Essay Did you like this example? The movie name Twelve Angry Men (1957) is a story that focuses of jurys deliberation by 12 diversity background men, they all forcing the question by their ethics and values to decide whether a young man is guilty or not guilt basis on some reasonable doubt. The great philosopher Socrates proved by death that majority democracy may also be majority dictatorship, especially when the situation is working on a seemingly convincing murder case and twelve routine jurors, just as the company is under-prepared and routine. Decision-making meetings can easily belong to the leaders or authorities. DonÃ¢â¬â¢t waste time! Our writers will create an original "Analysis of the Movie Twelve Angry Men (1957)" essay for you Create order In this movie, it provides us with many useful ideas of decision-making in organizational behaviors, such as groupthink, social loafing, the minority in a group, conflict management, and the group-forming stage. Sometime, when people are working with a group, they will easily to compromise the majority decision, whether the decision is not making any sense. Consistent with Janis (1972), some key factors that aggravate groupthink, according to the theory, are high initial cohesiveness, directive leadership, and conditions of high stress. The impact of groupthink can lead to ineffective and unethical group decision making. As an example in the movie, the first vote for the defendant is guilty or not, some of the juries dont even understand the case or making any individual decision, they just vote guilt by following the majority groups. They are trying to avoid any unnecessary trouble or conflict. Under this condition, analyzing and assessing are less important, and decision making becomes more unreliable. Johnson (2005) give us some suggestion to avoid this problem which are listening, engaging in dialogue, and utilizing productive conflict will increase the chances that groups will come up with a better solution because members have examined their assumptions and considered more viewpoints and possible solutions. In the textbook have mention that individual characteristics like age, gender, race, ethnicity, and abilities can influence peoples performance. In this movie, the jury is made up of 12 jurors of different ages, occupations, values, and characteristics. The differences among these people lea d to miscommunication and misunderstanding that construct the most conflict within the movie. There is additional deep-level diversity than surface-level diversity during this movie. However, those jurors have the identical gender, similar race, and ethnicity, all of them have distinct values, personalities, and backgrounds, that lead them to hold different opinions throughout this decision-making process. As a result of diversity is inevitable in an organization, diversity management becomes necessary so as to make everyone more aware of and sensitive to the needs and differences of others. A task of a group leader is to avoid the group from coming to a conclusion too soon, or from getting stuck in endless debate. (Saaty, 2013) In the first voting, the architect was the only person who voted for not guilty, from the point of view of organizational behavior, his behavior shows that he is potentially leading all the group members into discussions. Once the problem is identified, the questioning spirit can again drive a different way of thinking toward the exact problem. Another challenge a group leader might face in a meeting is with maintaining group focus and keeping track of the progress. The jury is applying this practice well in this process, they vote after every important discussion and analysis to see the progress of the process of decision making. Keeping track of the progress helps them to be more effective and concentrated in the decision making process. Social loafing is refer to the concept that people are prone to exert less effort on a task if they are in a group versus when they work alone. ( Gary,1988) One of the juries is a watchmaker can be considered to be a social loafer because most of the time in the meeting, he is being quiet and hesitates to give his opinion. Another example is the salesman. He is less concerned and less committed in this murder case. He cares more about his baseball tickets than the discussion of humans life which taking place in front of him, and sometimes he even ignores what is happening. One reason the jury experiences social loafing can be the numbers of the member. Once the group has excess members, cohesiveness and mutual responsibility decline, social loafing increases, and people communicate less. The members of a large group have trouble coordinating with each other, especially under the time pressure. Under the situation in this movie, no one knows each other before is meeting, they have a t ime pressure to make the judgment, and it is attainable for the jury to have difficulty connecting with each other and therefore become social loafers. In this movie, I believe the most attractive all the people are their emotions and mood. Besides, each juror is in a bad mood because of the lack of fresh air and hot in the room and also a long discussion. This improves the conflicts. During most scenes of the movie, the jury appears to overstated express their feelings when someone says something they dont agree with. The conflict in this movie can be taken into the analysis by the Circle of Conflict Model in the book The Mediation Process: Practical Strategies for Resolving Conflict (Moore, 1986). Mr. Moore divides the causes of conflict into five types, which he depicts as slices of a circular pie, which he calls the circle of conflict. The five causes of conflict are data, structural, relationships, values, and interests. Each cause can cause the conflict individually, or the conflict might result from multiple causes. Thoughtful the impact of imbalances at intervals circle forces all parties to first identify and diagnose the source of conflict, and then parley for resolution. The most determining cause of the conflict in the movie is relationships, which is identified as negative past experience and stereotypes. One juror, who kept insisting on the guiltiness of the defendant till the end of the movie, is making his decision based on his negative past experience about his son. During the movie, he always has highly negative emotions. To conclude, relationship conflict, The personal past experience, and their stereotype is the most key factor of the conflict in this movie. The most key character in the movie is the architect who votes not guilty in the beginning, his vote puts himself in the position of one versus eleven. Because of his different opinions with others, the jury is able to make judgments carefully and correctly. According to Johnson (Johnson, 2007), a groups effectiveness increases when someone in the group has the courage to stand alone and express a minority opinion. This effectively eliminates the phenomena of groupthink. Having said that , this can be difficult to put into practice because being in the minority is never easy because it runs contrary to our strong desire to be liked and accepted by others (Johnson, 2007). Despite the other jurors insist on their objections, they start to begin negotiation. According to Johnson (2007), creating dialogue is a vital step to creating effective and ethical community groups. At the end of the movie, his persistence to stand as a minority in the group and to convince other jurors turns out to be successful; therefore, the jury can finally make a correct judgment. One of the other ideas that I found about the architect is he has the high skill of control ability and communications art. When other jurors find that architect had voted against him and asked him the reason. architect never said that the boy was not guilty, only that its possible may not be guilty. Such a statement is in organizing with the reasonable suspicion principle of jury trials and avoids direct conflict with other jurors, and start his subsequent theoretical proof. In the point of overturning the testimony from the witnesses, his also continuing asked other jurors to support his views through their answers, which is more substantial. Throughout the argumentation process, The architect used various methods such as common sense of life, life experience, legal common sense, scientific calculation, psychological presupposition, and a field experiment to reason, and finally achieved the purpose of persuading the group. According to Satyendra Kumar Sarna (2015), Faulty communication in the organization can lead to the lowered efficiency and effectiveness at the organizational as well as at the individual levels. Also, it may become a cause of the interpersonal friction between the employees. Overall, in this movie, it provided us with a lot of ideas that we can learn and discuss the behavior in any organization. Such as hierarchy versus dignity, opinions versus understanding, truth versus doubt, rationality versus emotion, passion versus calm, perseverance versus blind obedience, law versus ethics, these are the behavior that we should think carefully what we want to be in any society.
Saturday, December 21, 2019
A Comparison of The Destructors and Lord of the Flies In Graham Greenes The Destructors, the author presents the Wormsley Common car-park gang, a group of adolescent delinquents who commit petty crimes for fun. William Golding, in his novel Lord of the Flies, presents a slightly younger group of boys who are wrecked on an uninhabited island and develop a primitive society that eventually collapses and gives way to despotic savagery. Although these two cases seem rather different, the boys in both situations show common characteristics. They react to the outside environment of their worlds in similar ways. There are also trends in the development of the dynamic characters in eachÃ¢â¬ ¦show more contentÃ¢â¬ ¦The boys, who hate all that is of a class above theirs, do not trust him, and see him as a mean old tyrant. A simple kind act is grossly misinterpreted by the boys, who have hardly ever experienced kindness: I got some chocolates, Mr. Thomas said. Dont like Ãâem myself. Here you are. Not enough to go around, I dont suppose. There never is, he added with somber conviction. He handed over three packs of Smarties. The gang were puzzled and perturbed by this action and tried to explain it away. Bet someone dropped them and he picked Ãâem up, somebody suggested. Pinched Ãâem and then got in a bleeding funk, another thought aloud. Its a bribe, Summers said. He wants us to stop bouncing balls on his wall. Well show him we dont take bribes, Blackie said, and they sacrificed the whole morning to the game of bouncing that only Mike was young enough to enjoy. There was no sign from Mr. Thomas. (Greene 50) This complete lack of trust not only shows that the boys have never been given anything for free, it also demonstrates the hate that the boys have for Old Misery and how they distance themselves from him. They form a belief system surrounding him in the same way that the boys in Lord of the Flies do for their beast. The beast in Lord of the Flies is a
Friday, December 13, 2019
string(62) " interests that might be difficult to measure quantitatively\." PART IPROJECT OBJECTIVES AND OVERALL RESEARCH APPROACH 1. 0. 0 INTRODUCTION Business and financial performance in the tourism industry Tourism is now one of the largest industries in the world. We will write a custom essay sample on Oxford Brookes Bsc(Hons) in Applied Accounting (Acca) or any similar topic only for you Order Now According to the WTO, the export income generated by international tourism ranks fourth after fuels, chemicals, and automotive products. Furthermore, the WTO points out that, for many developing countries, tourism is one of the main income sources of foreign exchange, and creates much-needed employment and opportunities for economic development. The industry has also enjoyed staggering growth over the past six decades. ttp://www. qfinance. com The tourism industry is also a major contributor to ZimbabweÃ¢â¬â¢s economy thus I chose to assess the performance of a company in this sector to obtain a clear picture of how the performance of a major player in such a sector would contribute to the economy. In the tourism industry business and financial performance is highly dependent on the political factors of the host country. Political stability and good international relations are important for the growth of firms in the tourism industry as tourists only go to places where they feel s afe and protected. Spending on tourism and hotels is also closely related to the economic cycle. Certainly, spending on leisure activities such as holidays tends to be one of the first things that consumers cut back in times of economic hardship. REASONS FOR CHOOSING RTG 1. 2. 1 Rainbow Tourism Group Background Rainbow Tourism Group was established in 1992, and is the second largest tourism group in Zimbabwe and a major player in ZimbabweÃ¢â¬â¢s Tourism Industry. Listed on the Zimbabwe Stock exchange, the company has spread its wings into the regional markets through management contractsÃ and Strategic Alliances. In Zimbabwe, RTG operatesÃ four brands namely, The Rainbow Towers, Rainbow HotelsÃ (three star city and resort hotels), Touch the wild (top of the range eco-tourism lodges offering unique safari experiences)Ã Ã and Zimbabwe Tourism Services (a destination management services company that caters for travel arrangements). (www. rtg. co. zw) RTG has a good corporate governance struct ure and is the second largest tourism group in Zimbabwe the largest being Africansun RTGÃ¢â¬â¢s operating environment For the period 2007 to 2009 ZimbabweÃ¢â¬â¢s business environment was extremely hostile, most businesses were closing down and the few lucky survivors were scaling down their operations massively. The economy was ranked the worst in the world and inflation at its peak was around 6. 5 quindecillionnovemdecillion percent (65 followed by 107 zeros) . Long term planning was impossible in the industry due to the political instability and bad publicity that the country received following violence surrounding the March 2008 presidential elections as well as cholera outbreaks affected tourist arrivals in 2008, thereby limiting any growth in the economy. The highest decrease in the number of tourist arrivals was reported from traditional source markets, such as the UK and the US. Http. //www. euromonitor. com/Zimbabwe The managed exchange rate and high inflation rate made budgeting difficult. The introduction of price controls by the government in the sector meant that RTG could not increase their prices in line with inflation as they were supposed to request for price increases first whereas their expenses were increasing therefore cutting down their profits unreasonably. The rampant shortage of basic commodities such as food and drinks increased costs as supply could not match demand it also meant that hotels and restaurants could not offer services to its customers and therefore a drop in revenues and standards of services. A high unemployment rate of about 94% and a shrinking economy also meant that the local customers had no disposable income as 98% of the population was living under the poverty datum line and had to cut back on leisure activities. The tourism sector also faced a crumbling air transport sector, with ramifications for the entire economy and the withdrawal of a number of reputable airlines, citing viability problems. Approximately 18 international airlines are reported to have left the country since the start of the economic crisis in the year 2000. Some of the airlines that pulled out of the Zimbabwe route were Zambian Airways, British Airways, Swissair, Lufthansa, KLM and Air France. High fuel prices, combined with political and economic turbulence, were the reasons cited for the withdrawals. ZimbabweÃ¢â¬â¢s isolation was a major blow to the already ailing travel and tourism industry, which relies heavily on high-spending incoming tourists. (www. newzimbabwe. com) Purpose and objectives of the research The objective of this research is to find out how RTGÃ¢â¬â¢s business and financial performance over the three year period 2007 to 2009 contributed to ZimbabweÃ¢â¬â¢s economy when it was in a massive economic recession and when foreign currency and jobs were needed most. RTG is a major player in the tourism sector which contributes a significant portion to the GDP of Zimbabwe therefore RTGÃ¢â¬â¢s business and financial performance was not only important to its shareholders but also to the whole economy. To achieve this objective the researcher will also establish the following: * To establish how RTG measures and assesses its performance. * To find out what strategies RTG adopted to meet its business and financial performance objectives. * To assess whether RTGÃ¢â¬â¢s business and financial performance was adequate to survive the economic crisis it was facing. The research aims to answer the following questions: What measures were used by RTG to assess the business and financial performance and were they adequate? * What were the strategies RTG used to achieve its business and financial objectives and were they adequate? * How did RTG perform compared to its main competitors? * How did RTGÃ¢â¬â¢s business and financial performance contribute to the economy of Zimbabwe? * Did RTG meet the expectations of all its stakeholders? * How can RTG improve its performance? Research approach The researcher used a case study approach employing both qualitative and quantitative techniques to evaluate the performance of RTG. This approach enabled the researcher to make a balanced assessment and to consider other stakeholderÃ¢â¬â¢s interests that might be difficult to measure quantitatively. You read "Oxford Brookes Bsc(Hons) in Applied Accounting (Acca)" in category "Papers" To answer the above questions the researcher will use traditional techniques such asratio analysis and trend analysis to establish the patterns of performance while comparisons with other organizations in the same industry will also be done. Modern techniques such as Kaplan and NortonÃ¢â¬â¢s balanced scorecard will also be used in order to develop a comprehensive framework of assessing the business and financial performance of RTG. Gaps will be identified, conclusions drawn and recommendations will be made as to how RTG can improve its business and financial performance in future. PART IIINFORMATION GATHERING AND ACCOUNTING / BUSINESS TECHNIQUES Introduction Description of methods This section identifies the research methodologies which will be used for data gathering by the researcher. Ã¢â¬Å"research methodology refers to a whole range of questions about the assumed, appropriate ways of going about social research and is therefore a theory or an analysis of how research should operateÃ¢â¬ (hitchcock and hughes 1995:20). Data collection procedures Data collection is about using the selected methods of investigation which Robson (1997:304) believes there is no generally best methods as all methods have their weaknesses. Various methods of data collection were used in this research and the following are the primary and secondary data collection methods that were used. Primary methods * Interviews * Observation Secondary methods * books * journals and publications * internet * Published financial statements Secondary data Secondary data are statistics not gathered for the immediate study at hand but some other purpose. Churchill 2002). Secondary data was used in this research to get an in-depth understanding of the business and financial performance of RTG. Saunders (2007) gave the following advantages and disadvantages of secondary data Advantages * Saves time and money * High quality of information compared to data gathered by an individual at the point of research * Provides a general framework for c omparing data collected by the individual. Disadvantages * Accessibility of data maybe costly or difficult * The purpose why the secondary data was collected may not be relevant to the research being undertaken. There is no control over the quality of secondary data therefore accuracy maybe difficult to verify * Information gathered maybe outdated Primary data Advantage * The most important benefit of primary data is that data is original. Disadvantages * Results may not be representative of what is found in the population * The flexible nature of methods used can result in ambiguous results Research instruments Interviews An interview is a social survey conducted in a face-to-face or personal conduct situation. Heyward and Sparks (1984) define an interview as an occasion when one or two people ask questions that seek to find out opinions and ideas. Advantages of interviews Face to face * Immediate feedback * Quick feedback * Easy to tell whether respondent understood the questions, * physical gestures and personal contact adds emphasis * allows for a wide exchange of ideas * Good relations are established E-mails and Telephones * Immediate feedback * Appropriate for Ã¢â¬Å"always busyÃ¢â¬ interviewees * E-mails can be easily stored for other uses Disadvantages of interviews Face to face * Data is difficult to record, code and analyze * time consuming interviewee accessibility may be difficult * The interviewee maybe uncooperative E-mails and Telephones * late feedback caused by disruptions due to network congestion and technical breakdowns * High telephone charges Literature review 1. 1. 11. 1. 1 Financial performance Financial performance is a subjective measure of how well a firm can u se assets from its primary mode of business and generate revenues. It measures a firmÃ¢â¬â¢s overall financial health over a given period of time and/or compare with similar firms across the same industry www. investopedia. com/terms/f/financialperformance. asp 1. 1. 2 Business Performance Business performance can be defined as Ã¢â¬Å"the integration of financial and non-financial systems and processes to achieve organization goals and objectivesÃ¢â¬ http://en. wikipedia. org/wiki/business_performance_management Business performance is about creating value for the stakeholders of a business. Measuring business performance is therefore very subjective and finding suitable measures is very difficult. An organizationÃ¢â¬â¢s business and financial performance cannot be measured in isolation it has to be compared with prior periods or other organizations in the same economic sector taking into consideration the companyÃ¢â¬â¢s business environment. Business performance is guided by an organizationÃ¢â¬â¢s vision and mission these outline the aims to be achieved and the desired end results. Research Approach The researcher will use a variety of business and financial performance measures. Firstly the researcher will consider traditional financial performance measures such as return on capital employed, liquidity gearing indicators, earning per share and trend analysis which shows the value added to the shareholderÃ¢â¬â¢s investments. The traditional argument is that shareholders are the legal owners of a company and so their interests should thus be to maximize shareholder wealth. Shareholders are generally concerned with the following: * Current earnings * Future earnings * Dividend policy * Relative The objective of wealth maximization is usually expanded into three primary objectives which are survival growth and to make profit Kaplan 2007:184) Traditional financial performance measures will be used to measure how RTG has been able to satisfy its shareholders. Weaknesses of ratio analysis As illustrated by Owen G (1994:386) the following are the main weaknesses of using ratio analysis * It uses historical information which maybe out of date * Can mislead when making comparisons if accounting policies are different * Can be distorted by one-off transactions * Takes no account of cyclical changes throughout a period * One dimensional To fully assess the business and financial performance of RTG the researcher will also use non-financial performance measures through the use of the balanced scorecard and other performance measures. The Balanced scorecard The balanced scorecard was developed by Kaplan and Norton as cited in Kaplan ACCA P5 (2009) defines it as a tool to translate an organizationÃ¢â¬â¢s vision and strategy into objectives and measures. It looks at four perspectives namely financial perspective, customer perspective internal business perspective and learning and growth perspective. The aim of the balanced scorecard is to enable the business to develop a comprehensive framework for translating a companyÃ¢â¬â¢s strategic objectives into a coherent set of goals and performance measures. Kaplan ACCA P5 (2009) Limitations of the balanced scorecard Neely (2002) argues that the most difficult problem of Balanced Score Card (BSC) is that it lacks several important interest groups in its structure: such as suppliers, co-operation partners and close neighbors. The International Institute of Management (2002) states the following implementation pitfalls and limitations of the Balanced Score Card: * Cut the jacket to fit the person do not cut the person to fit. * The balanced scorecard should not be balanced, success factors are not equal and their relationships are not linear. Trying to balance the scorecard will lead to confusion, conflict and lack of focus. * Insufficient cause and effect relationships and performance drivers. * Conflict of interest (different stakeholders want different things) * Measuring intangible assets (information and human capital) is difficult. Other measures of performance The researcher will also use other Critical success factors and Key performance indicators such as revenue per and room occupancy rates, among others to fully analyze the performance of RTG Ethical issues The researcher took into consideration ethical issues such as confidentiality and objectivity in carrying out the research and analysis. The researcher assured RTG that he was going to use the information he collected strictly for academic purposes. The researcher also assured all the individuals he interacted with that he was going to be objective in analyzing the information they provided. All the information the researcher obtained was kept secure at all times to preserve anonymity and confidentiality. . PART 3Ã Ã¢â¬â Results, analysis, conclusions and recommendations This section is dedicated to the presentation of the data collected, its interpretation, drawing of conclusions and making recommendations. The researcher will start by presenting and analyzing his findings on the financial performance of RTG for the period 2007 to 2009 using ratio and trend analysis. In latter sections the researcher will present his findings and analyze RTGÃ¢â¬â¢s performance using non-financial performance indicators to assess its business performance. 3. 1 Traditional Financial Ratios of RTG 3. 1. 1 Profitability ratios of RTG Analysis of profitability was made very difficult by the hyperinflationary environment that was in Zimbabwe between 2007 and 2008. On 14 February 2008, the Central Statistical Office announced that the inflation rate for December 2007 was 66,212. 3%. On 20 February 2008, the Central Statistical Office said that officially, inflation had in January 2008 gone past the 100,000% mark to 100,580. 2%. On 4 April 2008, the Financial Gazette (FinGaz) reported that officially, inflation in February 2008 jumped to 164,900. 3%. On 15 May 2008, the Zimbabwe Independent reported that officially, inflation in March 2008 jumped to 355,000%. On 21 May 2008, SW Radio Africa reported that, according to an independent financial assessment inflation in May 2008 jumped to 1,063,572. 6%. The state statistical service in April 2008 said there were not enough goods in the shortage-stricken shops to calculate any new (official) figures. On 26 June 2008, the Zimbabwe Independent reported that, latest figures from the Central Statistical Offices (CSO) showed that annual inflation rose by 7,336,000 percentage points to 9,030,000% by June 20 and was set to end the month at well above 10,500,000%. According to Central Statistical Office statistics, annual inflation rate rose to 231 million percent in July 2008. The month-on-month rate rose to 2,600. 2%. By December 2008, inflation was estimated at 6. 5 quindecillionnovemdecillion percent (65 followed by 107 zeros) The Zimbabwe Central statistical office stopped publishing inflation figures and therefore the Zimbabwe Consumer Price Index was not available to adjust the 2008 financial statement figures. The historical figures used were out of date and comparison of costs and revenues gave a false picture and thus care should be taken in interpreting them. The researcher therefore could not analyze trends in revenue and cost as they had been heavily distorted by inflation and no adjustments could be made as the Central Statistical Office stopped publishing the inflation figures and the Consumer Price Index. Gross Profit Margin The gross profit margins of RTG in 2007, 2008 and 2009 were 74%, 99% and 84% respectively. The gross profit margin shows the gross profit generated per every dollar of sales. In 2009 Africansun limitedÃ¢â¬â¢s gross profit margin was 65% therefore showing that although RTGÃ¢â¬â¢s gross profit margin had decreased from the prior year it was still better than its competitor. In the researcherÃ¢â¬â¢s interview with Mr L Chasakara RTGÃ¢â¬â¢s operations director, he said thatÃ¢â¬Å"RTG managed to increase its gross profit margin from 74% in 2007 to 99% in 2008 by specifically targeting the domestic marketÃ¢â¬ . Sales from the domestic market were increased from 78% in 2007 to 83% in 2008 as the foreign market was deteriorating due to the political instability in Zimbabwe in this period. The researcher however also noted that the increase in gross profit margin from 74% in 2007 to 99% in 2008 could have been due to the fact that the use of historical cost in 2008 overstated revenues due to high inflation figures and understated costs as most costs had been incurred earlier in the year. Revenue will generally be overstated in hyperinflationary environments if historical costs are used as costs are normally incurred before revenues are realized. Net Profit Margin The net profit margins of RTG in 2007 was (0. 62%), it rose dramatically in 2008 to 879% then decreased again sharply to 0. 13% respectively. In 2008 the net profit margin was heavily distorted by the RTGÃ¢â¬â¢S investment income which it gained from trading on the Zimbabwean Stork exchange which was booming at this time. In 2009 the use of the United States dollar as the official currency in Zimbabwe (Dollarization) saw inflation dropping to below zero percent. This resulted in more realistic profitability ratios with the gross profit margin dropping to 84% from 99% in 2008 and the operating net profit margin dropping to 0. 913% in 2009 from 879% in 2008. Removing investment income from the net profit before interest and tax in the 2008 statement of financial position gives us a net profit margin of 17% which is more indicative of RTGÃ¢â¬â¢s performance in 2008. The researcher asked Mr L. Chasakara, RTGÃ¢â¬â¢s operations director if the large profits that RTG had reported in 2008 were a true indication of its performance. Mr L. Chasakara responded saying Ã¢â¬Å"these were unusual results in unusual circumstances we did what we had to do in order to survive and excel in one of the most hostile economic situations in historyÃ¢â¬ The trend in the gross profit margin and the operating and the net profit margins of RTG from 2007 to 2009 is presented in the table below: Source; Kembo H (2011) The table below shows the trend in net profit margin after subtracting investment income from RTGÃ¢â¬â¢s 2008 net profit before interest and tax: Source: Kembo H (2011) Return on Capital Employed (ROCE) ROCE is an indicator of the managementÃ¢â¬â¢s efficiency in generating profit from resources. In 2007 RTGÃ¢â¬â¢s ROCE was 2%, it then rose sharply to93. 5% in line with the high profits that were earned in 2008 and then came down to 29. % in 2009. In 2009 Africansun Limited which is RTGÃ¢â¬â¢s main competitor had a negative ROCE of 18. 75%. Therefore even though RTGÃ¢â¬â¢s ROCE dropped from 93. 5% in 2008 to 29. 1% in 2009 it still was better compared to its rival in the Zimbabwean tourism industry. RTGÃ¢â¬â¢s ROCE was also higher than the average borrowing rate in 2009 of 15% which means that RTG added value to its investorÃ¢â¬â¢s funds as it managed ROCE above the minimum borrowing rate to compensate for the extra risk they took upon investing in RTG. Asset turnover The asset turnover ratio shows the revenue generated per dollar of assets that is the efficiency of assets in generating revenue. RTGÃ¢â¬â¢s asset turnover ratio for 2007 was 0. 20 times per annum then decreased to, 0. 094 times then rose to 0. 92 times per annum The Asset turnover trend between 2007 and 2009 is shown in the table below: Source Kembo H (2011) In 2007 and 2008 investment income contributed to the bulk of the net profit therefore RTGÃ¢â¬â¢s asset turnover ratios were very poor at 0. 20 times per annum and 0. 94 times per annumrespectively. This suggests that the group was using its funds for other investments rather than its operating activities as the operating environment was extremely hostile. In the researcherÃ¢â¬â¢s interview with the Operations Director of RTG, heexpressed that this move was necessary for survival as the mismatch of revenues and costs due to hyperinflation meant normal operations of the RTG would result in heavy losses. Asset turnover of RG T improved dramatically in 2009 rising to 0. 2 times per annum meaning that the group was using its assets effectively to produce revenue. Although RTGÃ¢â¬â¢s asset turnover ratio improved in 2009 it fades in comparison with its main competitor Africansun Limited which had an asset turnover ratio of 1. 32 times a year. This means that RTG was less efficient in generating revenue from its capital than its competitor. Working Capital Ratios Current ratio The current ratio measures the adequacy of current assets to meet liabilities as they fall due. (Financial Reporting F7 Kaplan 2009) In 2007 RTGÃ¢â¬â¢s current ratio was 0. 7:1 which meant that RTGÃ¢â¬â¢s could not service its liabilities in the event that they fall due. In an interview with the researcher the Accountant of RTG Mr G Nzunga said hyperinflation made it difficult to keep too much cash it would quickly be eroded, thus they had to channel their resources into the acquisition of tangible assets and keep current assets at a minimum. In2008there was further decrease of the current ratio to 0. 32:1 as inflation continued to rise and most people discouraged to keep cash or cash equivalents. In 2009 the current ratio of RTG was 0. 76:1, an improvement from the 2008 current ratio but still not satisfactory. In 2009 the use of the United States dollar as the official currency in Zimbabwe (Dollarization) saw inflation dropping to below zero percent thus the improvement as the economic environmentbecame began to normalize. Mr G Nzunga, RTGÃ¢â¬â¢s Accountant said that RTG was still in a difficult position as far as working capital management was concerned as a liquidity crisis began across industry soon after dollarization in Zimbabwe in 2009. The company was not generating enough money from its day to day activities to pay mostly suppliers and other current liabilities as they fell due. In 2009 Africansun Limited which is the biggest tourism group in ZimbabweÃ¢â¬â¢s current ratio was 0. 49:1. The liquidity crisis in Zimbabwe made it very hard for companies in Zimbabwe to maintain decent current ratios and most of them had to employ aggressive working capital management. With a current ratio of 0. 76:1 RTG is considered to have performed quite well given the surrounding circumstances. Inventory Turnover Period Due to lack of information the researcher was unable to calculate RTGÃ¢â¬â¢s inventory turnover ratios, receivables periods and payables periods for the years 2007-2008 and could only calculate the inventory turnover ratio, receivables and payables periods for the year 2009. RTGÃ¢â¬â¢s inventory turnover ratio for the year 2009 was 143 days which was very bad considering the fact the larger percentage of RTGÃ¢â¬â¢s inventory is food that they sell to guests. Normally in the food industry inventory turnover should be fairly quick so as to preserve the reputation of the company and quality of the meals served. AfricansunÃ¢â¬â¢s inventory turnover in the same period was 70 days which was better than that of RTG in this period. The accountant of RTG commented in this high ratio saying that they purchased large amounts storks to avoid the effects of stork outs in the event of food shortages which were common in Zimbabwe in 2008. In 2008 the retail and Food industries were almost facing ruin as shelves in shops went empty due to the economic and political challenges Zimbabwe was facing, therefore it was generally reasonable for RTG to keep relatively large amounts of stork. Payables Period RTGÃ¢â¬â¢s payables period was 726 days in 2009 which represents the credit period it was taking from its suppliers. RTG had such a bad payables period mainly due to liquidity problems that the majority of companies was having in industry and partly as an aggressive working capital management strategy. This however resulted in RTG gaining a very bad credit reputation from its suppliers. One of their major security suppliers Chubb LocksÃ¢â¬â¢ Manager was once quoted saying Ã¢â¬Å"RTG is the worst paying customer in the countryÃ¢â¬ . Some suppliers have stopped supplying RTG as a result of RTGÃ¢â¬â¢s bad credit record but because they are a large firm RTG still gets new suppliers. Some suppliers now demand cash for all purchases made by RTG. RTG has also been forced to purchase their supplies from more expensive suppliers or poor quality supplies. RTG is also losing out on discounts they could gain by paying promptly. In an interview with the researcher Mr G Nzunga the accountant for RTG said that the company did not have enough liquid funds to pay all their suppliers. He also stated that it was also part of an aggressive working capital management strategy as they were receiving free financing from creditors. He however admitted that the strategy was getting over-aggressive and it was ethically questionable to pursue this strategy any further. In the same period African sunÃ¢â¬â¢s payables period was 12 days which was better than RTGÃ¢â¬â¢s period and hence its good reputation with suppliers across the industry. Receivables Period The receivables period for RTG in 2009 was 94 days. This was in line with their credit policy which states that the credit period allowable to customers should be three months. The receivables period for African sun was 59 days in 2009 which was better than RTGÃ¢â¬â¢s period this obviously shows that African sun Limited faces less risk from irrecoverable debts. Gearing The gearing ratio indicates the degree of financial risk the company is facing and the sensitivity of earnings and dividends to changes in profitability and activity levels. Kaplan ACCA F7(2009)) In the years 2007 and 2008 RTG did not have any long term borrowing thus the gearing ratio was zero. This meant that risk for financial risk for RTG was very low. Hyperinflation in Zimbabwe made long term loans difficult to get as any lender would find it very difficult to set interest rates as inflation was highly unpredictable in this period. The value of any money borrowed could be eroded within days if not hours therefore no companies had meaningful long term liabilities. In 2009 after the introduction of the US Dollar as the official currency in Zimbabwe companies started gearing up although the liquidity crisis that followed made it difficult to get funding from local financial institutions. In 2009 the gearing ratio for RTG was 2%. RTGÃ¢â¬â¢s gearing ratio was very low and induced very little credit risk to the shareholders. A low gearing ratio means that RTG has the scope to borrow more if there are any profitable ventures in the future and for their current refurbishment and expansion project at their AÃ¢â¬â¢Zambezi River Lodge unit and increasing the groupÃ¢â¬â¢s room capacity. Financing will also be cheap for RTG as lenders will face very low levels of risk in extending loans to them. In 2009 Africansun LimitedÃ¢â¬â¢s gearing ratio was also very low at 3. 5% which means it also had low levels of financial risk. The low gearing across industry also reflected the liquidity crisis which was eminent in Zimbabwe in 2009 where lenders did not have the funds to extend loans to firms and they were also still skeptical about the economic and political situation in Zimbabwe. Interest Cover Interest cover is the ability of a firm to pay interest out of its profits. In 2009 RTG Interest coverwas1. 52 timesand indicated that the shareholderÃ¢â¬â¢s dividends were at risk. However the ability of RTG to pay its interests having emerged from difficult economic times should satisfy its shareholders as Africansun Limited its major competitor failed to make profits to pay for their finance costs. Earnings Per Share The earnings per share of RTG for 2008was384 billion Zimbabwean dollars per share and the earnings per share for 2007 was 253. 7 Zimbabwean dollars per share. Converting these figures to United States dollars at the unofficial exchange rates that were ruling at the 2007 and 2008 year ends would make the respective earnings per share figures less than 0. 000001 US cents. Due to the hyperinflation in these periods the researcher found analyzing these figures very difficultand almost impossible. The earnings per share for RTG in 2009 was USD0. 01 which was quiet impressive compared to its rivals in the tourism industry as most of them. In 2009 the earnings per share for African sun Limited was negative USD0. 8. Customer Perspective Occupancy rates One of the main indicators of performance in the tourism industry is the occupancy rate of hotels. RTG managed an occupancy rate of 44% in 2007 which was below the Zimbabwean tourism industry average occupancy rate of 45%. In the tourism industry the more customers are satisfied by your service the higher your occupancy rate will be. In 2008 the occupancy rate of RTG decreased by 9% to 37%. The decr ease in occupancy rate was due to the economic and political instability during the 2008 Zimbabwean Elections were here was widespread violence in the country, therefore the number of tourists decreased. Most airlines also pulled out of the country ma The industry average room occupancy rate in ZimbabweÃ¢â¬â¢s tourism industry was 41% which was higher than that of RTG which was 37%. This shows that RTG performed badly compared to peers in the tourism industry. The fall in RTGÃ¢â¬â¢s occupancy rate can therefore be attributed to failure to satisfy customers better than its rivals. In 2009 RTGÃ¢â¬â¢s occupancy rate increased to 40% which was an increase of 3% from the 2008 occupancy rate. The increase could be attributed to the improvement in the political and economic environment in Zimbabwe after the formation of a Government of National Unity (GNU) and the dollarization of the economy. The industry average occupancy rate for 2009 was 31% which was 9% below that of RTG. In an interview with the researcher Mr L Chasakara the operations director for RTG attributed the higher occupancy rate to better brand management, better marketing strategies and service excellence. RTGÃ¢â¬â¢s higher occupancy rate means that it was more able to satisfy its customers better than its competitors. RTGÃ¢â¬â¢s main competitor and the largest hotel group in Zimbabwe African sun LimitedÃ¢â¬â¢s occupancy rate in 2009 was 32% showing that RTG performed exceptionally well in 2009 in managing to attract customers The table below shows RTGÃ¢â¬â¢s occupancy rate compared to the tourism industry average: Source Kembo, H(2011) . In an interview Mr G Nzunga RTGÃ¢â¬â¢s accountant said that the occupancy rates also improved because 65% of their sales come from repeat business from satisfied guests and large groups of organizations who hold seminars at RTGÃ¢â¬â¢s hotels. Service lead time In 2009 RTG managed to reduce its service lead time in its hotels to an average of 20 minutes between the time food in restaurants and rooms is ordered to the time it is served. In 2007 and 2008 the average service lead time was 30 minutes. Better training and process improvement helped in achieving the reduction in service lead time as said by the Mr L Chasakara the operations director for RTG, he also added that benchmarking against the best restaurants also helped in achieving the improvement. In 2007 RTG was not recording complaints in late service delivery to customers but in 2008 RTG recorded 2700 complaints and the figure improved to 1100 in 2009 which was a 59% improvement. This improvement shows that RTG improved in satisfying its customers in 2009. Service Quality RTG keeps books at all its hotels were customers are asked to write a comment on the services they would have received before they leave. A review of these books at two of RTGÃ¢â¬â¢s units Victoria Falls Rainbow Hotel and AÃ¢â¬â¢Zambezi showed the results presented in the table below: Comment| 2007| 2008| 2009| Favorable| 98%| 96%| 99%| Unfavorable| 2%| 4%| 0. 9%| Will Return| 68%| 80%| 70%| Will not Return| 0%| 0%| 0%| The results from the review of the comment books showed that the majority of guests were satisfied by the service they received on staying at RTG units which means that RTG performed very well in this regard. Internal perspective Room service complaints were 3500 in 2007 and increased to 4550 in 2008. This was mainly due to the shortage of basic commodities in Zimbabwe in 2008. Shortage of commodities meant that the hotel could not provide its customers with some luxury items they were used to having every time they visited and hence the increase in complaints. The Accountant at RTG Mr G Nzunga explained that they made sure that their staff would explain the situation very carefully to the customers and extensive training of staff ensured that they were able to utilize the few commodities that were available. In 2009 complaints decreased to 2900. This could partly explained by the end of the commodity crisis in Zimbabwe. This also shows that RTG managed to improve its internal processes to reduce the number of complaints they were receiving from customers yearly. Learning and innovation RTG has invested heavily in the training of its staff in order to give better service to its customers. RTG has opened a Hotel School for the training of its workers and other external students. The commitment of RTG to continuously improve its operating processes and learn new ways of doing things has seen them being able to keep costs low and increase room capacity to make when its competitors are making losses and their occupancies are dropping. In an interview with the researcher Mr G Nzunga RTGÃ¢â¬â¢s Accountant said that every worker at RTG attends at least 1 seminar every month in order to keep them abreast of changes and new ways of doing things. Interview review Question1 In the first question the researcher asked the operations director and the accountant of RTG what their financial and business objectives were. The responses can be summarized as follows: * To be profitable and to create value for our shareholders. * To survive and grow in the long run thus protecting the interests of all our stakeholders. In 2008 the main objective was to survive in the harsh economic climate in order to save the tourism industry and the Zimbabwean economy itself * To achieve service excellence in tourism and hospitality. Question 2 In question 2 the researcher asked the accountant of RTG how they measure their business and financial performance. In response he said RTG assesses its performance through traditional financial perform ance measures such as ratio analysis and trend analysis and other modern measures especially the balanced scorecard as they are equally concerned about the qualitative aspects of performance. Question 3 In the third question the researcher asked the accountant and the operations director of RTG if they could explain the trend in the ratios that had been calculated from 2007 to 2009 financial statements. They gave various explanations for all the fluctuations in these ratios some of them have been quoted in the analysis of these ratios in the section above. The most common response to the financial ratios was that they were unusual results in an unusual environment referring to the hyper inflationary environment that was in Zimbabwe during this period. Question 4 Question 4 was to establish which strategies RTG used to ensure that they met their business and financial objectives. In response the accountant and operations director outlined the following as some of the strategies they implemented: * Employing an aggressive working capital strategy to mitigate the liquidity and operational challenges they were facing * Investing in money markets rather than core operating activities to improve the cash and revenue inflow. Focusing on the local markets rather than the traditional international markets that had been negatively impacted by bad publicity and political instability. * Process and service improvement through employee training. * Intensive marketing both nationally and internationally * Strict stock management to curb the shortages of basic commodities that were prevailing as a result of price controls by the government. Questions 5, 6 and 7 These questions were to establish how RTG business and financial performance contribu ted to the economy and how it can improve its performance in future. In response the interviewees stated that in making profits and surviving through the historic hyperinflationary environment in the period under review RTG saved the tourism industry in Zimbabwe as its downfall would have surely resulted in the collapse of the tourism and hospitality industry. They also stated that they managed to save thousands of jobs and provided business for hundreds of their suppliers. They also stated that to improve performance RTG would spend more on capital through hotel refurbishments and also taking advantage of their low gearing by taking loans thus improving working capital. They also stressed the need to advertise and restore the image of Zimbabwe as a tourist destination. Conclusion The researcher found out that RTG uses both financial and non-financial performance measures through the balanced score card which gives a comprehensive framework for performance measurement. This ensures that both quantitative and qualitative performance objectives are assessed. RTG used various strategies to ensure that it met its financial and business objectives which were mainly to survive the harsh economic environment and to protect its investors employees and all its stakeholders. RTG used strategies such as aggressive working capital management, investing in the money markets instead of its core operational activities and shifting their attention on the local market rather than the traditional international market. RTG also innovated through constantly innovating and improving its processes to achieve its business and financial objectives. Limitations of results The major limitation of these results is the unavailability of inflation adjusted figures for the proper analysis of financial ratios and trend analysis which might have given a false picture. The researcher held interviews with only 2 members of the executive management team which might have given a narrow picture of RTGÃ¢â¬â¢s performance. Interviewing all members of the management and the board would have given the researcher a broader understanding of the business and financial performance of RTG, but time and the availability of most of these people was a challenge. The researcher could not visit all RTG companies due to limitation of resources as they are geographically dispersed. This might have limited the researcher especially when he looked at the qualitative aspects of RTGÃ¢â¬â¢s performance. Recommendations The researcher recommends that RTG should employ less aggressive working strategies. RTGÃ¢â¬â¢s current working capital strategy may see suppliers refusing to supply them with critical supplies. RTG might also face legal action from its suppliers which may increase its legal costs and even loose customers who may not want to be associated with firms who have bad credit reputation. RTG should thus reduce its payables period to a more reasonable period of perhaps 90 days. The researcher also recommends that RTG should increase its gearing levels as they are currently very low in order to take advantage of loans which provide cheaper financing than equity. ZimbabweÃ¢â¬â¢s reputation as a safe tourism destination was severely damaged due to the political and economic instability in 2007 and 2008. The researcher thus recommends that RTG should form partnerships with other players in the tourism industry to market the Zimbabwean brand in the international tourism market. How to cite Oxford Brookes Bsc(Hons) in Applied Accounting (Acca), Papers
Thursday, December 5, 2019
Question: Discuss about theLegal Environment for Professional Cycling. Answer: Introduction The firm that has been used for this stock valuation task is Woolworths Limited which deals with organised retail business with the predominant format being that of supermarkets. The company enjoys a healthy share of around 40% and together with Coles form a virtual duopoly which in the recent years has been challenged to some extent by the entrance of German discount retailers like Aldi. The company besides being present in the grocery and liquor business also has major presence in fuel retailing (in association with Caltex), runs discount department stores, has presence in the home improvement segment besides hotels. The major market served by the company is Australia which accounts for more than 85% of the revenue generated. The company has presence in wide parts of Australia with estimated store strength of about 975 stores and is steadily increasing its presence and market share in the New Zealand market. The company also has limited presence in selective verticals in South Afri ca, Hong Kong, India and UK (Woolworths, 2016). The current market capitalisation of the firm is $ 30.77 billion. The given report aims to conduct a quantitative and qualitative analysis of the company taking into consideration the last five year financial statements so as to opine on whether investment should be made in the stock or not. Recent Stock Movement The stock price movement of Woolworths during the last one year is captured in the graph shown below (Yahoo Finance, 2016). It is apparent from the above that in the last one year, the stock has delivered negative returns and has underperformed the ASX 200 index. Further, it is also apparent that there is a range bound movement of the stock with support coming in at lower levels and resistance at the higher value of the stock as investors book profits (Geurard, 2013). Considering the competitive nature of the industry and the current macroeconomic conditions that are not ideal for the industry, such kinds of sideways movements are not unexpected. Further, even though the fundamentals of the company remain in place, it seems that the stock is poised to underperform the broader markets primarily on account of industry dynamics, lower fuel prices and lacklustre trading environment (Petty et, al., 2015). Quantitative Factors The impact of various quantitative factors include the trend analysis with regards to the major items in the financial statements namely the income statement and balance sheet along with analysis of selected ratios so as to comment on the financial performance of the firm. The concerned period of interest is from FY2012 FY2016 which constitutes a period of five years. Income Statement Items Revenue The revenue growth for the company has been impressive in FY2013 as compared to FY2012 on the back of improved trading environment coupled with rising consumer confidence and increased prices of fuel. After a uptrend from FY2012 to FY2014, there has been a negative growth or de-growth witnessed in the revenue in FY2015 and FY2016. The negative growth in these years may be attributed to namely two years i.e. increased competition especially with the entry of international German discount retailers which have increased their market share coupled with sharp decrease in the fuel prices which has adversely impacted the fuel sales. Further, in FY2015, there has been decrease in the number of Caltex outlets which have been added to the revenues and hence the revenue has been lower (Woolworths, 2012; 2014; 2016). Gross Profit From FY2012 to FY2014, there is an increasing trend in the gross profit which has increased from $ 14.46 billion to $ 16.48 billion. The encouraging trend in this regard is the improvement of gross profit margins by 54 bps and 17 bps in FY2013 and FY2014 respectively. The improvement is primarily driven by expanding margins in the Australian food and liquor business coupled with Hotels. Besides, in FY2014, the gross profits were negatively impacted by the decreasing margins in the general merchandise business. However, during FY2015 and FY2016, there have been shrinking gross profit margins which are attributable to the lower prices of fuel coupled with higher competition in the food and liquor segment which is stalling price increases and thus in order to stem the falling market share, the margins have fallen (Woolworths, 2012; 2014; 2016). Net Financing Costs With regards to financing costs, there has been an increase trend in this regard from FY2012 to FY2016 which has been briefly interrupted in FY2014 as there has been a slight decrease in the finance costs on the back of stellar performance in FY2013 on the basis of which there has been a reduction in the outstanding debt and hence leading to the decreased expense in the form of finance costs. Additionally, some part of the total interest costs in the various years is also capitalised which influences the overall financing costs (Woolworths, 2012; 2014; 2016). Net Profit With regards to net profit, there has been an increasing trend from FY2012 to FY2014 but the same has been reversed in the subsequent years and infact in FY2016 the company has reported a loss. While the decrease in FY2015 net profit may be explained on account of lower gross profit margins coupled with increased operational costs, but the losses made in FY2016 can be explained on the basis of loss to the extent of $ 3.1 billion on account of discontinued business (Hydrox Holdings Pty Ltd). Further, there has been a steep rise in the administrative expense by about 21% on a y-o-y basis which has led to steep fall in the operating margins of the continued business operations (Woolworths, 2012; 2014; 2016). Balance Sheet Items Cash From FY2012 to FY2015, there is an uptrend with relation to the cash balance which has come down only in FY2016. While during FY2012 to FY2014, there has not been much change in cash balance, however the FY2015 cash balance is significantly greater than FY2014 corresponding figure which is caused due to lower cash flow on amount of investing due to a weak trading environment persisting in Australia. However, the lower cash balance in FY2016 is primarily attributed to the lower cash flow from operations which have led to decrease in the overall cash balance (Woolworths, 2012; 2014; 2016). Intangible Assets With regards to intangible assets, there has been an increasing trend from FY2012 to FY2014 which has then reversed into a declining trend over the period FY2015 FY2016. While, the decline in FY2015 is only marginal and caused due to discontinued business, the decline in FY2016 is comparatively more significant and prompted by the decline in goodwill to the tune of $350.9 million and this decrease has been witnessed in relation to the continued operations only(Woolworths, 2012; 2014; 2016). Trade and Other Payables There is an increasing trend in the trade and other payables which is witnessed during the given period i.e. FY2012 FY2016. This is apparent from the fact that trade and other payables have increased from $ 5.24 billion as on June 30, 2012 to $ 6.26 billion as on June 30, 2016. It is apparent that the increase of trade payables reflects towards a greater credit period for the company which to an extent may be driven by the difficult conditions in the retail industry and hence the company would want to minimise the working capital requirements (Woolworths, 2012; 2014; 2016). Non-Current Borrowings In relation to the non-current borrowings, there is a declining trend from FY2012 to FY2015 but has increased only in FY2016. The increase in FY2016 is primarily on account of increase in long term bank loan to the tune of $ 853.2 million. The decrease in the long term borrowings augers well for the company and ensure that the company has less leverage and therefore could raise more debt to withstand the competitive environment using deep financial pockets (Woolworths, 2012; 2014; 2016). Shareholders Equity There is an increased equity trend from FY2012 to FY2015 primarily due to increase in issued capital and higher retained earnings on the basis of the profitable operations of the company. The issued capital has seen an incline in every year of the given period including FY2016. As a result of this, the issued share capital has increased from $ 4.37 billion at the end of FY2012 to $ 5.35 billion at the end of FY2016. This highlights that during the period under assessment incremental shares to the tune of $ 0.98 billion have been issued by the company. However, the major increase in equity is on account of increased retained earnings. The decline in equity as on June 30, 2016 could be explained on the basis of sizable reduction in the retained earnings due to loss of $ 3.1 billion incurred due to discontinued business as explained above (Woolworths, 2012; 2014; 2016). The selective ratios for the company for the given time period are computed as follows (Woolworths, 2012; 2014; 2016). Particulars 2012 2013 2014 2015 2016 Return on total assets 8.42% 10.15% 10.13% 8.47% -5.25% Net profit margin 3.29% 3.85% 4.02% 3.64% -2.12% Inventory Turnover 11.0 10.2 9.5 8.8 9.4 Current ratio 0.9 0.9 0.9 0.8 0.8 Price earnings ratio 17.93 18.05 18.01 15.83 -21.38 Debt ratio 0.61 0.58 0.57 0.56 0.63 The explanation with regards to the above ratios is offered below. ROA or Return on Total Assets The ROA has jumped from 8.42% in FY2012 to 10.15% in FY2013 primarily on account of higher percentage increase in net profits as compared to the total asset increase. However, there was a marginal decline in ROA in FY2014 over the previous year as the profit increase was marginal and not able to match the percentage increase in total assets. But the real worry is the decline in FY2015 and FY2016. There is a drop in ROA in FY2015 due to the drop in profitability of business operations caused to falling margins of fuel retailing besides higher competition experienced in the food and liquor segment leading to negative growth in revenues. Besides, in FY2016, the company incurs a loss due to discontinued operations which leads to a negative ROA (Woolworths, 2012; 2014; 2016). Net Profit Margin There has been a positive trend in the net profit margin during the period FY2012-FY2014 on the back of growing margins in the food and liquor segment coupled with hotels business. This is the result of various initiatives undertaken by the company to streamline the operations and cut down on the overheads costs so as to ensure that the company stays competitive in a market highly sensitive to prices. However, the net profit margins have taken a dip in FY2015 primarily on the back of lower gross profit margins as the competition level increased coupled with higher operational expenses. The decline in margins in FY2016 from continued businesses is on account almost 21% increase in the administrative costs over the corresponding values in FY2014. Further, the discontinued business loss to the tune of $ 3.1 billion has resulted in the PAT turning negative (Woolworths, 2012; 2014; 2016). Inventory Turnover There is a declining trend in the inventory turnover from FY2012 to FY2015 which hints at higher cash cycle and is not in the best interest of the company or the shareholders. This may be attributed to the continuously rising inventory levels from $ 3.7 billion as on June 30, 2012 to $ 4.87 billion as on June 30, 2015. This may be reflective of the muted sales of the company which may not be in accordance with the expectations of the company. However, at the end of FY2016, there is a decline in the inventory level and hence an improvement in the inventory turnover (Woolworths, 2012; 2014; 2016). Current Ratio The current ratio for the company has shown very slight variation as from FY2012 to FY2014, the current ratio remains almost constant at 0.9. This may be attributed to proportionate changes in both current assets and current liabilities. However, in FY2015, there is a decrease in the current ratio fuelled by the higher percentage increase in the current liabilities caused due to increased amount of current borrowing in FY2015 as compared to the previous year. In FY2016, even though there is a decrease in current borrowing by almost $ 1.1 billion, but to some extent this is balanced by increase in $ 0.8 billion on account of provisions, the net result of which is that the current ratio has not improved (Woolworths, 2012; 2014; 2016). Price earnings ratio With regards to P/E ratio, there is a slight improvement from FY2012 to FY2013 which may be on account on better financial performance by the company. However, for FY2014, the P/E ratio remained almost static. Then, in FY2015, due to increased competition and falling margins especially on fuel retailing, the P/E ratio was adversely impacted particularly on concerns with regards to growth especially in the short term. The concern continued in FY2016 as earnings became negative on the back of loss to the tune of $ 3.1 billion arising from discontinued business (Woolworths, 2012; 2014; 2016). Debt Ratio The debt ratio has shown a marginal declining trend from FY2012 to FY2015 but there has been a reversal in the trend in FY2016. The declining value of debt ratio was favourable for the company implying that the liability as a percentage of debt was on the decline. The increase of the debt ratio in FY2016 is primarily on account of the decrease in total assets brought about mainly in decrease of PPE from $ 10.06 billion as on June 30, 2015 to $ 8.26 billion as on June 30, 2016. This has been brought about due to the discontinued business (Woolworths, 2012; 2014; 2016). Industry Comparison and Recommendation Strengths of the company The ROA of the company for all the given years (on basis on continuing operations) is greater than the industry average of 1.88%. The current ratio of the company is marginally better than the industry average of 0.88 for FY2012 to FY2014. The net profit margin and debt ratio of the company is also superior to the level of the industry. Position of being market leader with a sizable market share. Weakness of the company The company needs to improve with regards to short term liquidity particularly considering the competitive landscape of the industry. The overall competitive nature of organised retail industry in Australia. The e-retailing segment of the company lacks strength. The macroeconomic conditions associated are not favourable at the present. From the above, it is apparent that the company in the long run would deliver returns as the business fundamentals remain sound. But in the near to medium term, the stock is expected to be range bound only as the margins made witness more pressure and thus have a downward bias. Clearly, it is best to avoid the retail industry stocks and instead look at companies in other industry segments which offer much better value and growth upside. Hence, taking above factors into consideration, it may be recommended that investment should not be done in the companys stock (Parrino Kidwell, 2011). Stock Valuation Exercise Dividend paid by Woolworths in FY2016 ($ per share) = $ 1.65717 Perpetual dividend growth rate (given) = 4% p.a. Expected return on Woolworths stock = 9% p.a. Hence, expected dividend in FY2017($ per share) = 1.6517*1.04 = $ 1.72345 Thus, by applying the Gordon Dividend Discount Model, we get (Northington, 2011) Fair price of the stock = 1.72345/(0.09-0.04) = $ 34.47 Thus, at current price, the stocks seem to be underpriced. However, it is imperative to note that market dynamics tend to function differently from theoretical prices and it may take a long time before this aberration is corrected as the markets may not be efficient (Kane Marcus, 2013). References Guerard, J 2013,Introduction to financial forecasting in investment analysis, 6th eds., Springer, New York Kane, BZ Marcus, AJ 2013, Essentials of Investment, 9th eds., McGraw-Hill International, Singapore Northington, S 2011, Finance, 6th eds., Ferguson, New York Parrino, R Kidwell, D 2011, Fundamentals of Corporate Finance, 3rd eds., Wiley Publications, London Petty, JW, Titman, S, Keown, AJ, Martin, P, Martin JD Burrow, M 2015, Financial Management: Principles and Applications, 6th eds., Pearson Australia, Sydney Woolworths 2012, Financial Report 2012, Woolworths Website, Available online from https://www.woolworthslimited.com.au/annualreport/2012/pdf/WW_AR12_FinReport.pdf (Accessed on October 11, 2016) Woolworths 2014, Annual Report 2014, Woolworths Website, Available online from https://www.woolworthslimited.com.au/annualreport/2014/files/Woolworths_Annual_Report_2014.pdf (Accessed on October 11, 2016) Woolworths 2016, Annual Report 2016, Woolworths Website, Available online from https://www.woolworthslimited.com.au/icms_docs/185841_Annual_Report_2016.pdf (Accessed on October 11, 2016) Yahoo Finance 2016, Woolworths Summary, Yahoo Finance Australia, Available online from https://au.finance.yahoo.com/q?s=WOW.AX (Accessed on October 11, 2016)