MBA Finance Assignment – Financial Ratio Analysis of Burberry Plc Using Penman’s Decomposition Method (2013)
This MBA Finance paper presents a financial ratio analysis of Burberry Group Plc and Gap Inc using the Penman’s financial ratio decomposition method. The idea is to analyse Burberry’s performance in the apparel industry as a UK-based company and compare it to its US-based competitor and also compare it against the overall UK apparel industry averages. Gap Inc is also analysed in terms of performance and then compared with the overall US apparel industry averages.
The aim and objective of the paper is achieved by reformulating the balance sheets and income statements of the two companies so that it becomes easier to identify the components of the balance sheet and income statement that entail working and financing activities. The profitability owing to each activity is then worked out. The ratios that focus on leverage, operating and financing profitability and general shareholder profitability are used to assess the positions of Burberry Group Plc in relation to its competitors and the entire apparel industry. Burberry is selected for its long history of operation in the clothing industry, having been established in 1856.
Gap Inc is selected for the fact that it has witnessed rapid growth despite being young since its establishment in 1969. The apparel industry has seen a rapid growth over the last 4 years yielding interest in it. This has also attracted more firms into the industry. The literature review section reviews various theories and studies that have been researched on the topic and views of various authors regarding the relationship between market-to-book ratio, profitability and leverage of a firm on the capital structure decisions made by the firm are discussed to help in fitting the study into the context of existing work. The results indicate that Burberry has poor position both in the industry and against its US affiliated competitor.
- 8,000 words – 34 pages in length
- Good use of literature
- Good analysis of subject area
- Well written throughout
- This is an MBA assignment not dissertation
- Ideal for MBA finance students
Background overview of Burberry Plc (UK)
Background overview of Gap Inc. (US)
2. Literature Review
Theories on Profitability and Capital Structure
Relation between Market-to-book ratio, profitability and leverage
Overview of the Global Apparel Industry
4. Data Analysis and Results
Comparison between Gap and Burberry
Comparison between Burberry and the UK Industry Averages
Comparison between Gap and the US Industry Averages
5. Conclusion and Recommendations