Financial Reporting Coursework Example | Topics and Well Written Essays - 1500 words

Financial Reporting - Coursework Example Due to this increase in performance of the financial statements of the company, the earnings per share increased as well as the dividend payout ratios went up with a coverage of 2.8 times for the full year, which is the shareholder’s interest in the organization. As compared with the market ratios from IHG company, Next company shown a growth in all its financial aspects. The accounts have been presented in accordance with the IFRS 7 and 12 which requires disclosure of interest in other parties IFRS 10 which requires consolidating the group accounts and IAS 1 to 9 which talks of all the disclosures. The disclosures of the segments are contained in IAS 14 but superseded by IFRS 8 which requires every segment to be disclosed separately (Weygandt 2012). Since the exceptional items are material in nature, the materiality concept applies and that is the reason why they are disclosed separately since they are matters which might have an impact on the financial statements. They are d ivided into continued and discontinued exceptional items. Ratio Analysis: Liquidity Ratios This is a ratio that measures the firm’s ability to meet its obligations financially. Historically these ratios have been used to measure the overall health of organizations. Their usefulness is being diluted as the modern companies Next PLC are holding fewer current assets to generate revenue. However, these ratios remain a good measure in this industry because the hotel industry relies on huge amounts of current assets to generate income. The meaning of these ratios is measured based on the relevant industry norms (Clatworthy 2005). Current Ratio Current Ratio = Total Current Assets Total Current Liabilities Account 2013 2012 Increase/Decrease Total Current Assets 1,207.8 1,139.9 Total Current Liabilities 816.0 742.4 Current Ratio 1.48 1.53 -0.05 From the above analysis, Next PLC is a company which can meet its short term obligations in both year 2013 and year 2012, however at a close r look, it shows that it has decreased its ability to meet these short term obligations in the year 2013 which is a fall back from the previous period. A further identification is that the group has disposed a lot of its current assets and also paid more of its obligations in terms of liabilities. In further analyzing the cash position of the group in the cash flow statement, the group has covered more of its expenses on the revolving cash flows from operations, which is a healthy indication of the organization's ability to operate in the foreseeable future (Gibson 2012). Quick Ratio Quick Ratio = Cash and Equivalents - Inventory Total Current Liabilities Account 2013 2012 Total Current Assets 1,207.8 1,139.9 Inventory 331.8 371.9 Total 876 768 Total Current Liabilities 816.0 742.4 Current Ratio 1.072 1.034 This ratio is more accurate than the current ratio since it reveals how the company can meet its short term liabilities without having to dispose its stock. And in this case of s tudy, the company still remains stable and even better since the stock levels are low and that means the company can meet its short term financial obligations with ease. In year 2013, it indicates that the company did better than year 2012 just like the previous ratio. Any ratio that is positive means that the company can meet its obligations and any figure that is negative means that th