Ratio Analysis - First Group Company

In order to measure First Group’s efficiency and its short-term financial health, a ratio analysis capital exercise is performed for the years 2010 and 2011. Having a look at the balance sheet of First Group Plc Company (see below), it can conclude that there is not much significant change in the current ratio of the company. In the year 2010, current ratio of the company was 0.78:1 and for the year 2011, current ratio of the company was 0.77:1.   

Current Ratio (2010) = Current Assets/ Current Liabilities

            Current Ratio (2010) = 1066.2/ 1350.0

            Current Ratio (2010) = 0.78

Current Ratio (2011) = Current Assets/ Current Liabilities

            Current Ratio (2011) = 110.6/ 1427.0

            Current Ratio (2011) = 0.77

Although there is an increase in the current assets of the company, this increase is also supported by the increase in the current liabilities of the organization hence there is no significant changed observed in the current ratio of the company.

According to Moles (2011) the quick Ratio is similar to the current ratio except that inventories are subtracted from current assets in the numerator. 

The quick ratios of 0,72 and 0.71 times means, if we exclude inventories, First Group Company had for the year 2010 £ 0.72 and for 2011 £0.71 of current assets for each £ of current liabilities, cited by Moles (2011).

According to ABE (2009) working capital is defined as current assets less current liabilities, and its represents a measure of the ability of the company to pay its way.

Working Capital = Current Assets – Current Liabilities

Working Capital (2010) = Current Assets – Current Liabilities

Working Capital (2010)  = 1,066.2 – 1,350.0

Working Capital (2010) =  -283.8

Working Capital (2011) = Current Assets – Current Liabilities

Working Capital (2011)  = 1,104.6 – 1.427.0

Working Capital (2011) =  - 322.4

For the years 2010 and 2011 First Group plc Company had a negative working capital, means that during these years First Group was unable to meet its short-term liabilities with its current assets.

Source: First Group Company (2012)

BIBLIOGRAPHY

BOOK:

• Moles, P. (2011) “ Corporate Finance”.  First Edition. John Wiley and Sons Ltd. England.

• The Association of Business Executive ABE (2009) "Introduction to Business" . First Edition. ABE Publishing. England.

WEBSITE:

• First Group Company (2012), “Latest News”, [online] Available at: http://www.firstgroup.com/corporate/latest_news/ Accessed ( April 14, 2012).

Analysis of the Financial Statement for the year 2010 & 2011 - First Group plc

Statement of the comprehensive income for the company for the year 2010 and year 2011 are given below. It is clear from the below statements that the company income is reduced in the year 2011 as compared to the previous year, this reduce in the income of the company shows the decline in the profit of the organisation. In 2011, profit of the company was £117.11m as compared to the profit  of £147.1m in 2010 , this shows the clear decline in the profit of the company by almost (147.1-117.11) £30m,  hence this reduce in the profit of the company is not a very encouraging sign as far as the profitability of the organization is concern, cited by Rajendra  (2007).

It can see a very serious decline in other comprehensive income of the year that was £69.1 m in year 2010 reduced to £28.9 m in year 2011. Total comprehensive income of the First Group company is reduced to £ 146 m in year 2011 from £ 216.2 m in the year 2010. From all the above, it can easily judge that the profitability of the company is reduced to the great extent in the year 2011 as compare to the year 2010,  and as the profitability of the company is reduced,  the dividend per share given was also reduced, cited by First Group Company  (2012).

Source: First Group Company (2012)

Source: First Group Company (2012)

BIBLIOGRAPHY

Book:

• Rajendra S. (2007), “Firms of Endearment: How World-Class Companies Profit from Passion and Purpose”, 1^st Edition, Pearson Prentice Hall

Website:

• First Group Company (2012), “Annual Report and Accounts 2011”, [Online]  Available at: http://www.firstgroup.com/assets/pdfs/investors/annual_reports/2011_annual_report.pdf (Accessed           5 April 2012).

Media Coverage - First Group Warns on UK Bus Margins

According to Jacobs (2012) the European market operates with a negative sign, as risk aversion has been reactivated after Standard & Poor's warned that Greece may have to restructure its debt again. Retailers such as Marks & Spencer Group, Next and Kingfisher are down on the FTSE 100 Index, just as FirstGroup, which collapsed. Tim O'Toole Chief Executive has pointed out that not considers opportunities for growth for 2012 and 2013 on the industry sales of buses in the UK. According to Jacobs (2012) Last week First Group Company recorded its worst day on the FTSE 100 Index since 2009, falls of shares exceeded 13%, after recognizing the difficult conditions still has its business as a result of the economic crisis. FirstGroup plc drags more than 3% in London stock exchange to other bus companies such as Stagecoach and National Express Group. Nowadays, First Group plc is struggling to raise rates at a time when the cost of fuel has soared, cited by Jacobs (2012).

It can be a difficult time for the British economy and First Group, but the good thing is that at least consumers tend to be more aware and more sober as a final result.

BIBLIOGRAPHY

Journal

·      Jacobs, R. (2012) “ First Group Warns on UK Bus Margins” Financial Times, p 22.