Business accounting Essay Example | Topics and Well Written Essays - 1500 words

Business historying - Essay ExampleThis essay discusses that the family, if considered from an topple of investing is quite stable and rewarding but its position in the capital market, London investment society Exchange, in this case, is a little bit skeptical. This is because of its abnormal Price to Earnings Ratio in 2011 of much than than 890 multiplication which has decreased from a massive 1043 times in the previous year. This means that the companys share is trading at 890 times its earnings which depict Next as a really expensive share but in contrast to the previous year, its share has gone through a discount with a reduced P/E ratio. The normal practice in the market is of get shares with a P/E ratio of maximum 20 times but in this case, theory seems to have happened in the market.The company, on an overall basis, is quite stable and it has formulated, planned and implemented quite good and effective policies to retain its competitiveness in the market domesticall y as well as internationally. The companys new growth opportunities are encouraging and if this pace is consistently attained in the future, the company can perform even better and expand effectively. But the company has to prepare for even deteriorating times to come ahead with adverse situations ranging from inflation, rising interest rates, a weakening Euro and fluctuations in other currencies, change magnitude competition and switching customer preferences and demand. Overall, the company is a good choice to be invested in, taking into account its respectable dividend payout ratio.... Liquidity Analysis Talking about liquidity, the company is performing fine but in contrast to the previous year, it has lacked in some areas. The underway and quick ratios have decreased by 0.092 and 0.127 from 2010 to 2011 showing a decrease in liquidity and this is mainly because of a larger increase in current liabilities compared to current assets. Moreover, inventories have increased from a considerable 19.19% from ?309 million to ?368.3 million in 2011, mainly collectable to the companys policy of fulfilling market demand and solving out supplier constraints by purchase stocks way earlier than required. Though the cash available before share and bond buybacks is a considerable ?92 million, the company has less cash liquidity available in 2011 with a decrease of more than 60% in the cash and cash equivalents balance and the cash ratio falling from 9.83% to only 3.66%. This readiness obstruct the company in opening and extending new stores and repurchasing more shares in the upcoming year, which has been forecasted at belligerent levels. However, this cash balance can increase in the following year with the rise in the skid of cash customers relative to credit customers or account holders especially in the case of Next Directory this go forth in turn definitely decrease the level of accounts receivable and bad debts (CPAClass.com 2011). The manner of collection of receivables and payments to creditors has remained around the same from 2010 to 2011. But as the inventories have risen, the inventory conversion period has escalated from 47 days to 55 days, which has in turn helped in increasing the cash conversion cycle from 30 to 42 days.