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Business Background
The company ASOS plc was built in the year 2000 on June 3. This is also the year the company was registered in the registers of government. The name of the ASOS stands for the phrase "as seen on screen". As the company deals with clothing, accessories and beauty and daily care products, it is responsible to provide the exact product to the customer which the company offers. In reference to the year of 2004, the company was listed in the London stock exchange board. From that the company has projected a growth and development of almost 8 years in which the company developed various outlets and stores for customer acquisition and also to increase the total market capitalization. In respect to the year 2013 to the current year the company has expanded at a great pace at the global platform. In the current time the company is also utilizing the benefits of e-commerce selling of products directly to the customer.
Business Operations
The significant operation which is operated by the company is majorly in the industry of the clothing, wearable accessories, footwear and beauty and personal care products. The company serves its product across different parts of the world with relevant products and attire culture (Baghersad et al .2021). As the company is a publicly listed company which means the company is 38% hold by the public or any financial institutes. The headquarters of the company is in the UK, London. The company has several subsidiaries with the name of top man and Miss Selfridge. The total number of working employees across the world in the company is more than four thousand in numbers.
The different financial ratios of a company were used to understand the financial health of the company and the future prospect of the company. This information was used by both internal and external institutes of the company.
Profitability ratio
The metrics of the profitability ratio is often used in order to measure the total earning in respect to its generated revenue (Dam et al .2020). This ratio measures the total earnings compared to its total number of shares which is helpful for the investors of the company.
Return on Capital Employed
The fundamentals of return on capital employed refer to the operating profit of the company which is divided by the total earnings of the company before the payment of interest and taxes. The ideal return on capital employed is about 15% at the global platform. In respect to the 4 year financial data of the company, the ROCE of the company is must better in the year 2018 which is 22.7 2% whereas in the year of 2019 the company has a lower ROCE value which is 6.9 % but again in the year 2020 it jumps to 12.5 2% and latest financial year total ROCE is 9.39%.
Efficiency ratios
The financial ratios of efficiency are used to measure the capability of the company for generating incomes by the help of its total assets.
Stock Turnover
The ratio of stock turnover is referred to the company's inventory that is how many times the company is able to sell its total revenue or replace it in a particular period of time (Deshko et al .2019). According to the 4 year financial information of the company, the company has decent levels of stock turnover rate which is in the year of 2018 the company has 5.93% is the stock turnover ratio which decrease in the year 2019 and become 5.09 percent whereas in the year of 2020 the company has stock turnover ratio of 6.13% which again decrease in the latest year of 2021 and become 4.85.
Debtor Collection
The information of debtor collection days refers to the period of time and which the company is able to pay its debtors. In reference to the financial information of the company, the data collection days in the year 2018, the company has a time period of 2 months which increases in the year 2019 and becomes 2.5 months. In the year 2020 the company has again limited its total data collection days to represent 2.36 months whereas in the year of 2021 the company shows the total data collection days of 3.88 months.
Creditors Payment
The creditor’s payment days refers to the total number of days which are required for paying the suppliers of the company. According to the 4 year data of the company, the total creditors payment days of 2018 is 14.8 whereas it increases in the year 2020 and becomes 39.5 days. In accordance with the year of 2021, the total credit payment days of 36.81 are at a good level.
Liquidity ratios
Liquidity ratio refers to the ability of debtors to pay off of the current debt of the company without raising any further capital. The ideal liquidity ratio is 2:1 in which the current assets hold the value of 2 and current liability holds the value of 1.
Current ratio
The ability of paying short term liabilities of that specific year is known as the current ratio. Based on the financial information of a company, the current ratio of 2018 is around 0.9% which means the company is able to pay its short term liabilities in a total of nine months (Jannesson et al .2020). Therefore, the total percentage of current ratio in the year 2019 was decreased to 0.81. Whereas, in the year of 2020 the current ratio of the company is 1.19 % which increases in the year 2021 and becomes 1.56 %.
Liquidity ratio
The liquidity ratio refers to the ability of debtors to pay off of the current debt of the company without raising any further capital. According to the 4 year data of the company, The Liquidity ratio of the company in the year 2018 was 0.17 % which decreased in the year of 2019 and became 0.1%. With respect to the year of 2020 the liquidity ratio of the company increases and becomes 0.57% and in 2021 it again increases and becomes 0.75%.
Financial Structure ratios
The ratio of financial structure was mainly used by the managers of the company for evaluating the total mix of debt and equity in the company. It also generalizes the total time in which the company can dissolve or go bankrupt.
Gearing ratio
The financial ratio of gearing refers to the financial leverage and provides the measurement through which the company can utilize its debt and equity (Merritt et al .2018). In reference to the financial information of the company, the gearing ratio of the company in the year of 2018 is 2.32% which drastically increases in the year of 2019 and becomes 20.88%. Again in the year of 2020 the gearing ratio of the company has doubled from the previous year and become 42.8 6% similarly, the latest year 2021, the earnings ratio of the company became 85.13% which is almost double from the previous year of the company.
Here it is concluded from the above section of the assignment that the company serves its product across different parts of the world with relevant products and attire culture. The company has several subsidiaries with the name of top man and Miss Selfridge. All the financial ratios of the company are nearly at the ideal levels except the liquidity ratio of the company which is considered one of the most important ratios in the financial evaluation of a company.
Section B
(a) Prepaid Expenses
The impact of prepaid expenses in the preparation of profit loss account and balance sheet that it is it reduces the total amount of cash which is going to be taxed. Therefore, help the company to less tax.
(b) Accrued Expenses
The impact of accrued expenses refers to the non receipt of invoices and not billed of the total revenue of the company in the balance sheet and profit and loss account.
(c) Prepaid Income
The prepaid income is responsible for the reduction of the company's cash in both the profit and loss account and balance sheet.
(d) Accrued Income
The significance of accrued income in the profit and loss account and balance sheet refers to the total income which is done by the company through short investments and abnormal gain (Oliveira et al .2018). Therefore, it increases the total amount of current assets of the company.
(a) Depreciation
According to the method of accountants, total value of depreciation is involved in the total amount of net income but in order to calculate the exact net income of the company from various operations depreciation needs to be deducted while in the total form the amount of depreciation is again added to find the total net income of the company.
(b) Disposal of non-current asset
In respect to the indirect method of accounting, total disposal of noncurrent assets is deducted for calculating the total amount of operating activities but again it is added in the account because it does not impact the total expense amount of the company.
(c) An increase in inventories
The operations for the increase in inventory amount is again added because if the company paid for the inventory in cash then it must be deducted from the overall cash of the company which decreases the total net earnings of the company.
Journals
Baghersad, M., Zobel, C.W., Lowry, P.B. and Chatterjee, S., 2021. The roles of prior experience and the location on the severity of supply chain disruptions. International Journal of Production Research, pp.1-20.
Brief, I.L.O., 2021. The post-COVID-19 garment industry in Asia.
Dam, J., 2018. The influence of board diversity on firm’s financial performance: a comparison between firms from the Netherlands and the United Kingdom (Master's thesis, University of Twente).
Deshko, A., 2019. Sustainable Consumption of Clothing Among the Millennium Generation in Finland.
Jannesson, R., Xu, A. and Rikardsson, J., 2020. Aktivism-Pessimism eller Opportunism?.
Kizil, C. and Ka?ba??, B., 2018. Accounting scandals and eye-catching frauds: USA-Japan comparison by considering the role of auditing. Journal of Asian Research, 2(3).
Li, Z. and Sezkir, D., 2019. Hållbarhet i leveranskedjan: Miljöpåverkan av transporter inom klädbranschen.
Merritt, K. and Zhao, S., 2020. An investigation of what factors determine the way in which customer satisfaction is increased through omni-channel marketing in retail. Administrative Sciences, 10(4), p.85.
Oliveira, M.R.S., 2020. Equity Valuation: LVMH Moet Hennessy: Louis Vuitton SE (Doctoral dissertation).
Stevenson, M. and Cole, R., 2018. Modern slavery in supply chains: a secondary data analysis of detection, remediation and disclosure. Supply Chain Management: An International Journal.
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