THORNTONS PLC

Managing Finance

Managing Finance

Section A

Introduction

Thorntons is a chocolate and confectionery company based in the United Kingdom. Thorntons plc is engaged in the manufacturing, retailing and distribution of confectionery and other sweet foods. Thorntons plc's products can be found across a commercial network that includes 377 shops and cafes and 222 franchises. Thorntons plc's operations are organized along two operating segments, UK Retail, which operates stores and cafes across the United Kingdom and Ireland, a franchise estate of over 220 stores and Thorntons Direct, company's online corporate and consumer delivery service; and sales & operations which is comprised of commercial sales, purchasing, manufacturing and distribution.

Ratios

As it is known that the most important factors in the well being of a business, is to see how the company operates at a profit and to organize it in order to be able to meet its liabilities at appropriate times. If either of these points is not covered efficiently it could mean that the business might have to be closed down. This is the reason why we choose to calculate profitability, liquidity, asset management, debt ratios and per share which are the most important and reliable guides. In addition, various past studies states that we decide to calculate activity ratios in order to see how efficiently the company like Thorntons plc has managed its debt management ratios, asset management ratios and per share values to commend upon the Thorntons's sources of finance and whether a risk arises from increased debt.

Calculation Of Ratios For Torntons PLC

2011

2010

Profitability Ratios

£' 000

£' 000

ROA % (Net)

=

Net Income X 100

=

-253

=

0

=

4,354

=

4 %

Total Assets

116,928

114,595

ROE % (Net)

=

Net Income X 100

=

-253

=

-1 %

=

4,354

=

15 %

Stockholders' Equity

26,333

28,180

ROI % (Operating)

=

Operating Income X 100

=

852

=

12 %

=

7,582

=

111 %

Invested Capital

6,837

6,837

EBITDA Margin %

=

EBITDA X 100

=

-1,071

=

0 %

=

6,137

=

3 %

Revenue

218,255

214,553

Calculated Tax Rate %

=

Taxation X 100

=

818

=

- 76 %

=

-1,783

=

- 29 %

EBT Continuing

-1,071

6,137

2011

2010

Liquidity Ratios

£' 000

£' 000

Quick Ratio

=

Quick Assets

=

18,172

=

0.32

=

17,540

=

0.32

Current Liabilities

56,567

54,594

Current Ratio

=

Current Assets

=

55,182

=

0.98

=

47,922

=

0.88

Current Liabilities

56,567

54,594

Net Current Assets % TA

=

Net Current Assets

=

55,182

=

0.47

=

47,922

=

0.42

Total Assets

116,928

114,595

2011

2010

Gearing Ratios

£' 000

£' 000

LT Debt to Equity

=

Long-Term Obligations

=

34,028

=

1.292219

=

31,821

=

0.000622

Shareholders' Equity

26,333

51,150,000

Total Debt to Equity

=

Total Debt & Leases

=

90,595

=

3.44036

=

86,415

=

0.001689

Shareholders' Equity

26,333

51,150,000

2011

2010

Efficiency Ratios

£' 000

£' 000

Total Asset Turnover

=

Revenue

=

218,255

=

1.86657601

=

214,553

=

1.87227191

Total Assets

116,928

114,595

Receivables Turnover

=

Revenue

=

218,255

=

13.0535287

=

214,553

=

13.4204666

Receivables Period

16,720

15,987

Trade Payable Turnover

=

Revenue

=

218,255

=

6.67160849

=

214,553

=

7.16012014

Trade Payable

32,714

29,965

Cash & Equivalents Turnover

=

Revenue

=

218,255

=

150.313361

=

214,553

=

138.153896

Cash & Equivalents

1,452

1,553

2011

2010

Investment Ratios

£' 000

£' 000

Cash Flow per Share

=

CFO

=

13,208

=

1.93184145

=

12,978

=

1.89820097

Shares

6,837

6,837

Earnings per Share

=

Net income

=

-253

=

-0.0370045

=

4,354

=

0.63682902

Shares

6,837

6,837

Evaluation of Ratios

Profitability Ratios

The profitability of Torntons plc is not satisfactory as the trends of the company from 2010 to 2011 shows that the company has been decreasing its profits. This statement can be endorsed by the evaluation of the profitability ratios. The return on assets of Torntons plc from 2010 to 2011 is reflecting that profitability structure of the company is decreased from 4 % to negative; the return on assets describes the ability of the company's management to effectively use its assets to generate profits. In addition, this ratio reflects the average yield obtained on all sources of capital that are equity and debt. In addition to this, return on equity also shows decrease over the five year period that is from 2007 to 2011. As the return on equity was 15 % in 2010 and - 1 % in 2011. This figure is often considered one of the most ...