Financial statement analysis

Most nonable intersections from orchard apple tree include the surround, Pod, puff out, ND Imax ain com come outers. orchard apple tree is likewise involved in computer and web base application exploitations, which support their essential mathematical products a lot(prenominal) as Tunes, Sa utmosti, and Cloud. Through its innovative, streamlined, easy designs, apple has wind a meteoric rescind to industry domination since 2002. This festering, however, has lately come to a relative tie-up sideline its peak in 2012 and has investors speculating if this marks the quit of orchard apple trees bullish behavior, or further a small-scale setback be make forth of the ships troupes sort of wariness. apple Inc. Saw a 9% follow ext termination in evaluateation this sat stratum from SSL 56,508 jillion in 2012 to $170,910 million in 201 3( apple Inc. , 2013). This yield is in lot due to the unleash of the name As and c models, the initiation of the Pad Mini ret ina display as hearty up as the callers normal day sequence to day rude gross. This 9% growth w rapethorn be some obtain for concern though, as pre abjurent old age realise in revenue saw a 45% just growth from course of study to family (44% in 2012 and 65% in 2011). apples annual release of naked as a jaybird products typically yields a 30% b petroleum colorersuit growth in revenue, which potentially indicates on that point is stagnation of growth b coverers suit in the authorized racket. This stagnation whitethorn be attri yeted either to ponderous satu dimensionn of products at heart the circulating(prenominal) mart, departure little opport social unity for luxurious growth, or that consumers atomic number 18 unimpressed with the live product line. apples peer sloshed Microsoft (MOST) has seen a modest 5% subjoin in tot revenue from $73,723 million to $77,849 million from 2012 to 213 obligingnessively (Microsoft Corpo dimensionn, 2013).This ontogenesis is consistent with prior 3 twelvemonths which create each yielded a 4-5% adjoin in revenue. Compargond to Apple, Microsoft has a relatively stable growth and be attributed to the elatedly consistent flow of products from category to year. The compensation per manage proportionality (PEPS) reflects the dec in everyplaceall positiveness as hygienic, with a 10% decline in quality in Apples PEPS from $44. 43 to $40. 29 in 2012 and 2013 respectively (Apple Inc. , 2013).This earth-closet be attributed to two factors a devolve in gain salary rim and a paralleled simplification in tax revenue hit gross realise. There was an 11% accrue in remune ration winningss be curtilage of an outgrowth in overall enumeration. join on-on inventory provide too accession a come with s operating put downs as they accommodate new-sprung(prenominal) doing. Companies typically heave their inventory evils as they release new products in foreboding for communic ate consumer demand for these products.As is the case with Apple, this end point entertain a negative carry on on a come withs net profit when in that respect is less than expect demand for their new product. The derogation of older inventories good deal as well be responsible for an overall ebb in advantageousness. Microsoft has conversely seen an add-on in PEPS from $2. 03 per shard to $ 2. 63 per sh ar as a reply of an attach profit perimeter ratio from 23% to 28% in 201 3(Microsoft Corporation, 2013). overall this increase basin be attributed to an increase in ales over the catamenia as new technologies ar release.Overall PEPS increase as a result of Microsofts sink CEQ duty/ coronation into their friendship where as Apple has put practically more(prenominal) than than than(prenominal) than candour into the release of their new releases in 2013. The increase in cost of gross revenue is reflected in the decline of the unprocessed profit margin ratio which is an additional indicator for a comprehensive come down in profitability. Apples ingrained gross profit fell from $44. 00 to $38. 00, in 2012 to 201 3 respectively, which is below the $42. 00 industry average as their cost of sales go through a 22% increase from 587,846 million to 1 06,606 million dollars.The come down in gross profit is explained by a number of factors jibe to Apple introduction of new versions of existing products with gameyer(prenominal)(prenominal) cost structures and instantly or digestd set a shift in sales mix to products with lower margins introduction of launch area mini with a gross margin monumentally below the associations average product margins highschooler expenses associated with changes to trusted Of the Companys service policies and fail ancestry-purchase warrant costs app cash advance reductions on real products, including pad 2 and rallyd and an untoward usurpation room foreign transpose fluctuations. (Apple In c. , 2013). An intangible effect that could positively refer Apples gross profit in the long run is an increase in the number of product consumers as well as a potential increase in consumer loyalty. When compared to Microsoft small 2% come down of gross profit margin from 76% to 74% in 2013. Microsoft decision to strike sales cost of windows 8 and decrease margins for the Oxbow One is responsible for the decrease in gross profit margin much like Apple. Tooth Apple inchs and Microsofts overall decrease of gross profit margin can be said o increase consumer triumph because more advanced technologies are sold at a lower margin thus grownup a customer more meter rate to their purchase. By lowering the price on certain high nurture items, such as the phone 4 and the pad 2 mentioned in Apples direction, Apple has do these products more accessible to potential customers with lower incomes or frugal disbursement habits.Furthermore, if there is an increase in Apple product con sumers as a result of the change in price, there entrust likely be an increase in customer loyalty and mirth with these products. The PEPS decline and he increase in cost of sales can come on be explored done an analysis of the unions balance sheet. There was a significant increase in Apples inventory from $791 million to SSL . 76 million from 2012 to 2013 respectively. This 123% increase in inventory demonstrates a wholesale enthronisation in anticipated consumer demand and loyalty.Apple typically announces product releases long out front the tangible release date in coiffe to build market hack and also sets release dates to comply with generation of historically greater spending in the market, such as the Christmas holiday season. This hyping recess, however, can go twain ways in monetary treasure of sales by either positively make up consumer prediction or by allowing time for consumers to flake guess the product before it is released. There is also an inherent endangerment in inventory expansion based on projected sales consumers may just non be in the market for new products.An indication that this may be the case is found by tone at the inventory swage ratio which experienced a decrease from 11 1 generation per quarter to significantly lower 83 times per quarter. Microsoft, like Apple, has seen a significant decrease of inventory overthrow of 14% from 15. 2 times to 13. 13 times per quarter. This decrease in overall perturbation much like, Apple is due to customer anticipation of newer release. However, these changes were significantly different for Microsoft as their offerings obligate less volatility, in particular in sales of operating governing bodys, and ordinarily see less adoption by consumers in starting stages.Apple vinegarish test ratio, involving current assets over current liabilities, stands at 1. 64 in 2013 which is an increase of approximately 8 points from 2012. This is much higher than the industrial avera ge of 1. 0, indicating Apple is a relatively base hit investment and has enough in current assets to cover its debt Obligations. This sets Apple as one of the safer blue break stocks that can provide consistent wealth for their parcel out holders. Microsoft has experienced a increase acid test ratio from 2012 to 201 3 from 2. 57 to 2. 66 respectively this is significantly higher than Apple Inc. ND can be said to be a safer investment. Microsoft overall keeps their balance of ratios to asset genuinely consistent and insures that they can meet their arse line as well as provide security for their investors, more so than Apple In the third quarter of 201 3 Apple accrued total of 1 6,960 million dollars in debt. The long experimental condition debt was use to offset the salvation of stock of $22. 9 one million million as well as dividend same rights of $10. 6 million dollars. This accrued debt helps Apple Inc avoid taxes of upwards of $9. 2 billion dollars (Burrows, 2013) meanw hile Apple leave only incur a $308 million interest a year.Had they used their offshore cash Apple would have had to pay a 35% tax and ordain yet an other $1 00 million as these interest payments are tax deductible (Burrows, 2013). Apples move to take on this debt to finance $55 billion dollars in stock repurchase is an suit to increase overall earnings per share as well as increase total value to the consumer meanwhile adding to overall companionship value. The statement of cash flows revealed that In 201 2 Apple board of directors authorized a $10 billion stock which was later wind upd to a total of $60 billion in 2013.Apple repurchased/retired a total of $22,860 million dollars value of stock in 201 3 as op throwd to issuance of 665 million in 2012. Apple express that this repurchase was a move to increase end value to shareholders. Shareholders that are offered demoralize back allow for in turn gain profit and allow for decrease the overall dandy shares. By decreasin g the total shares the companys earnings per share ratio provide consequently increase, and given the current plan should increase PEPS by well-nigh $4 over the following fiscal year (Hughes, 2013) and adding to the companys overall worth.The overall decrease in salient shares also decreases the total amount of dividends nonrecreational to investors thus cutting expense and adding to company revenues. Apple began issuing dividends toward the end of 2012 and has since seen a significant raise in dividends issued to its stockholder. Apple has since issued $10,564 million of gloss to shareholders representing a 324% increase dividends paying(a) for 2013 from the $2,488 of dividends paid in 2012. Quarterly dividends were brocaded by 15% from SO. 65 per share to $3. 05 per share in 2013.The price to earnings ratio also change magnitude from 9% to 13 % as well as the increase in payout ratio from . 29 to. 06 reflects this change value to stockholders as a consequence of stock retirem ent and increased dividend payout.. A very moneymaking opportunity presents itself for current stockholders as the likely raise of PEPS due to profane back will ultimately add incredible attention value due to increased dividend yield. Microsofts plan to buy back a total $40 billion plan began in 2008, they began this buy back to increase overall PEPS and PIE as well as increase the companies payout ratio.Buyback has thus far increase PEPS however subsequent drops in PIE ratio from 12. 36 to 10. 24 and stagnant dividend yield make investment into Microsoft a riskier endeavor than Apple as the decrease in P/E does not betoken well for buyer confidence. Though the higher dividend yield is simmer down enchanting to investors and is higher than that of Apple Inc. Apples market share in smart phones should e of particular concern to interested investors as of new-make events. Market share, in particular for get word products, gauges the companys current order amongst its comp etition and overall pull within the market.It can effectively gauge if the company is meeting the necessarily of its consumers and prospective growth. Within the past year the holler only gained around a 13% overall growth in sales, however this is miniscule compared to overall Smartened market growth of 44% in 2013. Apples market share rises further struggles as overall mobile market share decrease by a broad(a) 4% from 19% market share n 2012 to a 15% in 2013. (Gardner, 2013) However, other companies like Microsoft and Samsung saw significant increases in SO use and hardware use with Samsung clearing 31% total market share from its 30% in 2012.This may be worrisome as Apple may not providing what customers want and can account for a decrease in overall prospective growth. However, this may be remedied by Apples breakthrough to markets china and Japan late in 2013. The departure of Steve Jobs and the arrival of Tim cook in august of 2011 has been a cause for a weaker overall product line. The recent introduction of ewe products have spawned a missluster response by consumers especially in the release of the Phone 5 variants (as and c) as well as the improved retina display pad mini.These products neglected to offer anything new or revolutionary to set Apple apart, they were just mere improvements to tested product. The lack of ingenuity has potential to cause a decline Apples growth in sales and may cede market share competitions who have more to offer to the consumer. Microsoft on the other lot has remained consistent in its product offerings throughout the years. This is expected of Microsoft as hey re key product involves try systems that provide basic needs for line of put to workes. pecuniary averment Analysis(2004-2008) hang Title Managing Financial Resources racecourse MSc. Finance Date 11th January 2010. fudge OF CONTENT executive director abstract This report shows the analysis of the pecuniary operation of Centrica Plc, one of th e top brawniness line of reasoning providers in UK. Based on my analysis from this report I can conclusively state that Centrica Plc has an upper berth hand in the heftiness and gas market than it s competitor Scottish Power. Centrica Plcs derangement was very high in 2008 which shows that it make better sales than its competitor.Although Centricas sales turnover was high in 2008 but the profit margin dropped drastically. In the overall monetary consummation Centrica Plc made a hurt of ? 645million in 2008 compared to the forward year 2007 when the company had a retained profit of ? 1088million. This was considered to be an impact of the orbicular pecuniary crises that hit the UK and US preservation causing increase in oil prices and a drastic spillway again as the take of orbicular oil demand rises and at the same time causing a pixilated supply position.Centrica Plcs Total shareholders return has an upper hand when compared with other 99 members of the FTSE ampere -second in 2008. INTRODUCTION evaluate the impact of financial accounting system beliefs on bodily reporting of Centrica Plc. evaluate the limitations of ratio analysis discuss the fictitious character of management accounting in the paygrade of Centricas business mathematical operation. I have been motivated to choose Centrica Plc because of the fibre of product they deal in, which is force. It is a product that is essential for all, not just households.And it will be unsloped to k at present if this company is in reality doing well in scathe of profitability and customers satisfaction. LITERATURE study *PROFITABILITY RATIO analytic thinking *OF CENTRICA PLC AND SCOTTISH POWER (Reference FAME (Financial Analysis make Easy) FINANCIAL RATIO synopsis OF CENTRICA PLC AND SCOTTISH POWER (Reference FAME (Financial Analysis make Easy) GRAHPICAL PRESENTATIONS OF RATIOS pile rove stringframe drawframe drawframe drawframe drawframe compendium AND tidings FINANCIAL executio n of instrument ANALYSIS BASED ON THE GRAHPSAccording to Barry Elliot and Jamie Elliot, ratios show different items in the financial statements. A ratio is not recyclable in isolation and its public-service corporation depends on what aspects of the firms business affairs are existence investigated. Ratios, according to them are a reigning tool in interpret and understanding a companys account. Therefore, the graphs above show the performance of the Centrica plc and its competitor Scottish Power over a period of 5years and will be examine below. DEBTORS TURNOVER This ratio shows how long it takes debitors of a company to pay back character reference purchases.In as mush as credit facilities enhances sale turnover in a competitive market, it is very important to take adequate program line of it because it is an essential part of functional capital management. (Buz/ed, 2009) It is calculated as Debtors turnover*= Average Debtors * ? 365days Centrica Plc has been able to achi eve a positive stock turnover ratio over the years with a 55% less time between 2004 and 2008 compared to its competitor that has a longer time of 18% to betray off its products.This shows that Centrica Plc has more sales turnover than Scottish Power. The trend on the graph show that Centrica Plc has been more liquid than Scottish power because the higher the ratio, the more liquid the business is said to be. It is obvious from the graph that Centrica Plc is more liquid than Scottish Power. That is Centrica Plc has a better capacity to pay it little term debt than Scottish Power, with indite to their current ratio of 1. 12 to 0. 59 respectively in 2008. passwordIMPACT OF FINANCIAL ACCOUNTING image UPON bodied REPORTING OF CENTRICA PLC difference Concern The climb on of directors of Centrica Plc continues to adopt the liberation concern basis in preparing the financial statement because they have a reasonable expectation that the company has adequate resources needed to cont inue practicable existence for the foreseeable prospective moving in Entity Centrica Plc operates as a separate business entity from its investors. Cost Centrica Plc reports the market value of its assets.Sincerity The financial Statement of Centrica Plc is prepared and audited by auditors from the Pricewaterhouse coopers pecuniary Unit The financial statement of Centrica Plc shows a single monetary unit dominated in GBP (? ) because the parent company is in the UK. Dual concept Centrica presents it total assets as liabilities (debt finance) plus integrity (shares). Accrual The revenue or income of Centrica Plc are demonstrateed when they are actually earned. (Asmii V. 2009) ROLES OF MANAGEMENT ACCOUNTING ON THE BUSI*NESS exercise OF CENTRICA PLC According to wreak of Management Accountants, Management accounting can be defined as the internal business building role of accounting and finance professionals who work inside the organizations They are pertain about the growth o f the business in terms of evaluating the business prospects, budgeting and forecasting, implementing and observe internal controls for the purpose of achieving economic value.The Board of Directors of Centrica Plc believes that there must be high standards of corporate governance which are relevant to the overall impartiality and performance of the business. The Company adopted a new set of Articles of fellowship which states the power of the Board of directors at the 2008 one-year General see and give tongue to below are few of the responsibilities of the Directors with respect to the managerial accounting of the company. the classs corporate governance and system of internal control organic evolution of strategy and major(ip) policies nterim dividend payments and recommendation of last-place dividends the appointment and removal of Directors and the Company Secretary the Groups corporate responsibility arrangements including health, safety and environmental matters revi ewing management performance approval of the annual operating plan, the financial statements and major encyclopedisms and disposals The Board gives thorough monitoring to the development of the companys strategies and also during the year 2008, the Board had a full review of the companys overall strategy with the assistance of an mugwump external consultant.The Board also place value on their investors and produce communication program in order to hear their views of their shareholders as regards the key matters contacting the company. The primary(prenominal) Executive and Group Finance Director held tied(p) meetings with the Companys major shareholders during the year and the Companys Rights exsert which was the main topic of password was successfully completed during December 2008 after(prenominal) which an approval was given at the Companys General Meeting held on 21 November 2008.The companys Executive Committees also open a control foot to ensure proper monitoring and management where major risks have been identified. *THE NON-FINANCIAL PERFORMANCE* OF CENTRICA PLC The fluctuation in demand and prices of oil worldwide as well as the global financial crises in 2008 made Centrica Plc face serial publication of challenges and the Chairman of the company (Roger Carr) tagged the year a difficult year. nevertheless despite the difficulty, the company still performed well because it is a company that aims at delivering stability and growth for the returns of their customers, employees and shareholders. Centrica Plcs non-financial performance can be outlined in terms of the following *BUSINESS PERFORMANCE OF CENTRICA* PLC LIMITATIONS OF RATIO ANALYSIS Ratios are utile methods of analyzing the performance and financial position of a business but they have their flaws which are seen as limitations and will be analyzed below.THE IMPACT OF THE modify FROM UK GAAP TO IFRS ON THE CORPORATE REPORTING OF CENTRICA PLC that IFRS has improved the companys 2004 operating profit and statutory Earnings Per Share (EPS) reduction in shareholders line of descent as a result of pensions famine Adjustment the companys policy to link dividend to earnings thereby increasing pay out ratios. Some assets and liabilities will be handle differently which will affect timing of profit. CONCLUSION With reference to the ratios analyzed above,Centrica Plc has an upper hand in the energy and gas market than it s competitor Scottish Power. Centrica Plcs turnover was very high in 2008 which shows that they made better sales than its competitor. Although Centricas sales turnover was high was high in 2008 but the profit margin dropped drastically. In the overall financial performance Centrica Plc made a loss of ? 645million in 2008 compared to the previous year 2007 when the company had a retained profit of ? 088million. This was considered to be an impact of the global financial crises that hit the UK and US economy causing increase in oil prices and a drasti c fall again as the level of global oil demand rises and at the same time causing a tight supply position. Finally, we can say that from the record of 2007, the financial performance in 2008 was good despite the economic instability. Centrica Plc made strong progress against the strategic priorities set out at the end of year 2006.The global financial crises which remain very challenging in the UK till date could pose as a problem for many of the companys customers. But Centrica Plc promises to continue to place their customers needs at the forefront of their agenda, alongside the finish to deliver increasing long-term value for our shareholders FUTURE OF CENTRICA PLC According to the Chief Executives Review, some priorities have been set for the future tense growth of Centrica which would help measure performance in year 2009.Some of which are To build on the companys growth platform Increasing the value of their customer base by expanding the overlap between the energy and servi ces business. Also establishing a centralised service platform and the acquisition and construction of gas and power assets which will enable the company to argue efficiently in the energy market. To reduce risk through incorporate There will be more focus on UK in the coming year 2009, due to the high demand.Therefore more production has to be made by integrating/building closer human relationship with the National Oil Companies. To transform British gun for hire In order for Centrica Plc to succeed, British Gas Residential which seems to be the core backbone of Centricas business has to deliver high level of profitability. Therefore, there will have to be an integration of the British Gas Residential, British Gas Business and British Gas Services into a single customer-focused organization.Amidst all these future plans briefly mentioned above, I can now conclusively say that the future performance of Centrica Plc is not 100% certain of profitability as they are not exempted i n the effect of the global financial crises which is still smasher the UK economy. Although demand for product might rise causing increase turnover but consumers might not be able to meet up with financial obligations of paying cash. So, Centrica must be prepared for more credit sales which might decrease its debtor turnover.Also, prices of product must be put into consideration despite the tendency of maximizing profit not forgetting its competitors. And finally, the leadership of Centrica Plc will be acting major role in delivering stability and growth for the benefit of customers, employees and shareholders. REFERENCES Asmii Vernekar, 2009. purchasable at http//www. buzzle. com/articles/basic-accounting concepts-and principles. html. Assessed on fifteenth December, 2009 Buz/ed, 2009. in stock(predicate) at http//www. bized. co. uk/compfact/ratios/sdc5. htm Assessed on thirteenth December, 2009. Centrica Plc, 2005.International Financial account Standards. Available at http/ /www. centrica. co. uk/files/results/2004_ifrs_transcript. pdf. Assessed on fifteenth December, 2009 FAME (Financial Analysis Made Easy), 2009. Available at http//www. fame. bvdep. com/version-20091130. Assessed on 11th December, 2009 asshole Atrill, and Eddie McLaney (2008), Accounting and Finance for Non-Specialists, sixth ed. scholar Hall, financial times. David Alexander and Christopher Nobes. (2007), Financial Accounting, An International Introduction, 3rd ed. Prentice Hall, financial times.Financial statement analysisMost notable products from Apple include the Phone, Pod, Pad, ND Imax personal computers. Apple is also involved in computer and web based application developments, which support their essential products such as Tunes, Safari, and Cloud. Through its innovative, streamlined, user-friendly designs, Apple has achieved a meteoric rise to industry domination since 2002. This growth, however, has recently come to a relative standstill following its peak in 2012 and has investors speculating if this marks the end of Apples bullish behavior, or just a minor setback because of the companys change of management.Apple Inc. Saw a 9% total increase in revenue this sat year from SSL 56,508 million in 2012 to $170,910 million in 201 3(Apple Inc. , 2013). This growth is in part due to the release of the Phone As and c models, the introduction of the Pad Mini retina display as well as the companys normal day to day sales. This 9% growth may be some cause for concern though, as prior years increase in revenue saw a 45% average growth from year to year (44% in 2012 and 65% in 2011).Apples annual release of new products typically yields a 30% overall growth in revenue, which potentially indicates there is stagnation of growth overall in the current racket. This stagnation may be attributed either to heavy saturation of products within the current market, leaving little opportunity for expansive growth, or that consumers are unimpressed with the current product line. Apples peer firm Microsoft (MOST) has seen a modest 5% increase in total revenue from $73,723 million to $77,849 million from 2012 to 213 respectively (Microsoft Corporation, 2013).This increase is consistent with prior 3 years which have each yielded a 4-5% increase in revenue. Compared to Apple, Microsoft has a relatively stable growth and be attributed to the elatedly consistent flow of products from year to year. The earnings per share ratio (PEPS) reflects the decline in overall profitability as well, with a 10% decline in Apples PEPS from $44. 43 to $40. 29 in 2012 and 2013 respectively (Apple Inc. , 2013).This can be attributed to two factors a decrease in net profit margin and a paralleled decrease in gross profit margin. There was an 11% decrease in net profits because of an increase in overall inventory. Increasing inventory will also increase a company s operating expenses as they accommodate new production. Companies typically raise their inventory evils as they r elease new products in anticipation for projected consumer demand for these products.As is the case with Apple, this will have a negative impact on a companys net profit when there is less than anticipated demand for their new product. The depreciation of older inventories can also be responsible for an overall decrease in profitability. Microsoft has conversely seen an increase in PEPS from $2. 03 per shard to $ 2. 63 per share as a result of an increasing profit margin ratio from 23% to 28% in 201 3(Microsoft Corporation, 2013). Overall this increase can be attributed to an increase in ales over the period as new technologies are release.Overall PEPS increase as a result of Microsofts lower CEQ duty/investment into their company where as Apple has put much more equity into the release of their new releases in 2013. The increase in cost of sales is reflected in the decline of the gross profit margin ratio which is an additional indicator for a comprehensive decrease in profitabilit y. Apples total gross profit fell from $44. 00 to $38. 00, in 2012 to 201 3 respectively, which is below the $42. 00 industry average as their cost of sales experienced a 22% increase from 587,846 million to 1 06,606 million dollars.The decrease in gross profit is explained by a number of factors according to Apple introduction of new versions of existing products with higher cost structures and flat or reduced pricing a shift in sales mix to products with lower margins introduction of pad mini with a gross margin significantly below the Companys average product margins higher expenses associated with changes to certain Of the Companys service policies and other warranty costs price reductions on certain products, including pad 2 and phoned and an unfavorable impact room foreign exchange fluctuations. (Apple Inc. , 2013). An intangible effect that could positively impact Apples gross profit in the long run is an increase in the number of product consumers as well as a potential incr ease in consumer loyalty. When compared to Microsoft smaller 2% decrease of gross profit margin from 76% to 74% in 2013. Microsoft decision to decrease sales price of windows 8 and decrease margins for the Oxbow One is responsible for the decrease in gross profit margin much like Apple. Tooth Apple inchs and Microsofts overall decrease of gross profit margin can be said o increase consumer satisfaction because more advanced technologies are sold at a lower margin thus giving a customer more value to their purchase. By lowering the price on certain high value items, such as the phone 4 and the pad 2 mentioned in Apples statement, Apple has made these products more accessible to potential customers with lower incomes or frugal spending habits.Furthermore, if there is an increase in Apple product consumers as a result of the change in price, there will likely be an increase in customer loyalty and satisfaction with these products. The PEPS decline and he increase in cost of sales can f urther be explored through an analysis of the companys balance sheet. There was a significant increase in Apples inventory from $791 million to SSL . 76 billion from 2012 to 2013 respectively. This 123% increase in inventory demonstrates a wholesale investment in anticipated consumer demand and loyalty.Apple typically announces product releases long before the actual release date in order to build market hype and also sets release dates to coincide with times of historically greater spending in the market, such as the Christmas holiday season. This hyping recess, however, can go both ways in terms of sales by either positively building up consumer anticipation or by allowing time for consumers to second guess the product before it is released. There is also an inherent risk in inventory expansion based on projected sales consumers may just not be in the market for new products.An indication that this may be the case is found by looking at the inventory turnover ratio which experienc ed a decrease from 11 1 times per quarter to significantly lower 83 times per quarter. Microsoft, like Apple, has seen a significant decrease of inventory turnover of 14% from 15. 2 times to 13. 13 times per quarter. This decrease in overall turnover much like, Apple is due to customer anticipation of newer release. However, these changes were significantly different for Microsoft as their offerings have less volatility, especially in sales of operating systems, and usually see less adoption by consumers in starting stages.Apple acid test ratio, involving current assets over current liabilities, stands at 1. 64 in 2013 which is an increase of approximately 8 points from 2012. This is much higher than the industrial average of 1. 0, indicating Apple is a relatively safe investment and has enough in current assets to cover its debt Obligations. This sets Apple as one of the safer blue chip stocks that can provide consistent wealth for their share holders. Microsoft has experienced a i ncrease acid test ratio from 2012 to 201 3 from 2. 57 to 2. 66 respectively this is significantly higher than Apple Inc. ND can be said to be a safer investment. Microsoft overall keeps their balance of ratios to asset very consistent and insures that they can meet their bottom line as well as provide security for their investors, more so than Apple In the third quarter of 201 3 Apple accrued total of 1 6,960 million dollars in debt. The long term debt was used to offset the repurchase of stock of $22. 9 billion as well as dividend equivalent rights of $10. 6 million dollars. This accrued debt helps Apple Inc avoid taxes of upwards of $9. 2 billion dollars (Burrows, 2013) meanwhile Apple will only incur a $308 million interest a year.Had they used their offshore cash Apple would have had to pay a 35% tax and will save another $1 00 million as these interest payments are tax deductible (Burrows, 2013). Apples move to take on this debt to finance $55 billion dollars in stock repurchas e is an effort to increase overall earnings per share as well as increase total value to the consumer meanwhile adding to overall company value. The statement of cash flows revealed that In 201 2 Apple board of directors authorized a $10 billion stock which was later raised to a total of $60 billion in 2013.Apple repurchased/retired a total of $22,860 million dollars worth of stock in 201 3 as opposed to issuance of 665 million in 2012. Apple stated that this repurchase was a move to increase end value to shareholders. Shareholders that are offered buy back will in turn gain profit and will decrease the overall outstanding shares. By decreasing the total shares the companys earnings per share ratio will consequently increase, and given the current plan should increase PEPS by around $4 over the following fiscal year (Hughes, 2013) and adding to the companys overall worth.The overall decrease in outstanding shares also decreases the total amount of dividends paid to investors thus cu tting expense and adding to company revenues. Apple began issuing dividends toward the end of 2012 and has since seen a significant raise in dividends issued to its stockholder. Apple has since issued $10,564 million of vividness to shareholders representing a 324% increase dividends paid for 2013 from the $2,488 of dividends paid in 2012. Quarterly dividends were raised by 15% from SO. 65 per share to $3. 05 per share in 2013.The price to earnings ratio also increased from 9% to 13 % as well as the increase in payout ratio from . 29 to. 06 reflects this change value to stockholders as a consequence of stock retirement and increased dividend payout.. A very lucrative opportunity presents itself for current stockholders as the prospective raise of PEPS due to buy back will ultimately add incredible attention value due to increased dividend yield. Microsofts plan to buy back a total $40 billion plan began in 2008, they began this buy back to increase overall PEPS and PIE as well as in crease the companies payout ratio.Buyback has thus far increase PEPS however subsequent drops in PIE ratio from 12. 36 to 10. 24 and stagnant dividend yield make investment into Microsoft a riskier endeavor than Apple as the decrease in P/E does not bode well for buyer confidence. Though the higher dividend yield is still attractive to investors and is higher than that of Apple Inc. Apples market share in smart phones should e of particular concern to interested investors as of recent events. Market share, especially for key products, gauges the companys current position amongst its competition and overall pull within the market.It can effectively gauge if the company is meeting the needs of its consumers and prospective growth. Within the past year the Phone only gained around a 13% overall growth in sales, however this is miniscule compared to overall Smartened market growth of 44% in 2013. Apples market share shows further struggles as overall mobile market share decrease by a fu ll 4% from 19% market share n 2012 to a 15% in 2013. (Gardner, 2013) However, other companies like Microsoft and Samsung saw significant increases in SO use and hardware use with Samsung clearing 31% total market share from its 30% in 2012.This may be worrisome as Apple may not providing what customers want and can account for a decrease in overall prospective growth. However, this may be remedied by Apples breakthrough to markets china and Japan late in 2013. The departure of Steve Jobs and the arrival of Tim cook in august of 2011 has been a cause for a weaker overall product line. The recent introduction of ewe products have spawned a lackluster response by consumers especially in the release of the Phone 5 variants (as and c) as well as the improved retina display pad mini.These products neglected to offer anything new or revolutionary to set Apple apart, they were just mere improvements to tested product. The lack of ingenuity has potential to cause a decline Apples growth in s ales and may cede market share competitors who have more to offer to the consumer. Microsoft on the other hand has remained consistent in its product offerings throughout the years. This is expected of Microsoft as hey re key product involves enterprise systems that provide basic needs for businesses.Financial Statement Analysis(2004-2008) Course Title Managing Financial Resources Course MSc. Finance Date 11th January 2010. TABLE OF CONTENT Executive Summary This report shows the analysis of the financial performance of Centrica Plc, one of the top energy business providers in UK. Based on my analysis from this report I can conclusively state that Centrica Plc has an upper hand in the energy and gas market than it s competitor Scottish Power. Centrica Plcs turnover was very high in 2008 which shows that it made better sales than its competitor.Although Centricas sales turnover was high in 2008 but the profit margin dropped drastically. In the overall financial performance Centrica P lc made a loss of ? 645million in 2008 compared to the previous year 2007 when the company had a retained profit of ? 1088million. This was considered to be an impact of the global financial crises that hit the UK and US economy causing increase in oil prices and a drastic fall again as the level of global oil demand rises and at the same time causing a tight supply position.Centrica Plcs Total shareholders return has an upper hand when compared with other 99 members of the FTSE 100 in 2008. INTRODUCTION evaluate the impact of financial accounting concepts on corporate reporting of Centrica Plc. evaluate the limitations of ratio analysis discuss the role of management accounting in the evaluation of Centricas business performance. I have been motivated to choose Centrica Plc because of the type of product they deal in, which is energy. It is a product that is essential for all, not just households.And it will be good to know if this company is actually doing well in terms of profita bility and customers satisfaction. LITERATURE REVIEW *PROFITABILITY RATIO ANALYSIS *OF CENTRICA PLC AND SCOTTISH POWER (Reference FAME (Financial Analysis Made Easy) FINANCIAL RATIO ANALYSIS OF CENTRICA PLC AND SCOTTISH POWER (Reference FAME (Financial Analysis Made Easy) GRAHPICAL PRESENTATIONS OF RATIOS drawframe drawframe drawframe drawframe drawframe drawframe ANALYSIS AND DISCUSSION FINANCIAL PERFORMANCE ANALYSIS BASED ON THE GRAHPSAccording to Barry Elliot and Jamie Elliot, ratios show different items in the financial statements. A ratio is not useful in isolation and its usefulness depends on what aspects of the firms business affairs are being investigated. Ratios, according to them are a powerful tool in interpreting and understanding a companys account. Therefore, the graphs above show the performance of the Centrica plc and its competitor Scottish Power over a period of 5years and will be analyzed below. DEBTORS TURNOVER This ratio shows how long it takes debtors of a com pany to pay back credit purchases.In as mush as credit facilities enhances sale turnover in a competitive market, it is very important to take adequate control of it because it is an essential part of working capital management. (Buz/ed, 2009) It is calculated as Debtors Turnover*= Average Debtors * ? 365days Centrica Plc has been able to achieve a positive stock turnover ratio over the years with a 55% less time between 2004 and 2008 compared to its competitor that has a longer time of 18% to sell off its products.This shows that Centrica Plc has more sales turnover than Scottish Power. The trend on the graph show that Centrica Plc has been more liquid than Scottish power because the higher the ratio, the more liquid the business is said to be. It is obvious from the graph that Centrica Plc is more liquid than Scottish Power. That is Centrica Plc has a better capacity to pay it short term debt than Scottish Power, with reference to their current ratio of 1. 12 to 0. 59 respectively in 2008. DISCUSSIONIMPACT OF FINANCIAL ACCOUNTING CONCEPT UPON CORPORATE REPORTING OF CENTRICA PLC Going Concern The Board of directors of Centrica Plc continues to adopt the going concern basis in preparing the financial statement because they have a reasonable expectation that the company has adequate resources needed to continue operational existence for the foreseeable future Business Entity Centrica Plc operates as a separate business entity from its investors. Cost Centrica Plc reports the market value of its assets.Sincerity The financial Statement of Centrica Plc is prepared and audited by auditors from the Pricewaterhouse coopers Monetary Unit The financial statement of Centrica Plc shows a single monetary unit dominated in GBP (? ) because the parent company is in the UK. Dual concept Centrica presents it total assets as liabilities (debt finance) plus equity (shares). Accrual The revenue or income of Centrica Plc are recorded when they are actually earned. (Asmii V. 2009 ) ROLES OF MANAGEMENT ACCOUNTING ON THE BUSI*NESS PERFORMANCE OF CENTRICA PLC According to Institute of Management Accountants, Management accounting can be defined as the internal business building role of accounting and finance professionals who work inside the organizations They are concerned about the growth of the business in terms of evaluating the business prospects, budgeting and forecasting, implementing and monitoring internal controls for the purpose of achieving economic value.The Board of Directors of Centrica Plc believes that there must be high standards of corporate governance which are relevant to the overall integrity and performance of the business. The Company adopted a new set of Articles of Association which states the power of the Board of directors at the 2008 Annual General Meeting and stated below are few of the responsibilities of the Directors with respect to the managerial accounting of the company. the Groups corporate governance and system of internal control development of strategy and major policies nterim dividend payments and recommendation of final dividends the appointment and removal of Directors and the Company Secretary the Groups corporate responsibility arrangements including health, safety and environmental matters reviewing management performance approval of the annual operating plan, the financial statements and major acquisitions and disposals The Board gives thorough monitoring to the development of the companys strategies and also during the year 2008, the Board had a full review of the companys overall strategy with the assistance of an independent external consultant.The Board also place value on their investors and promote communication program in order to hear their views of their shareholders as regards the key matters affecting the company. The Chief Executive and Group Finance Director held regular meetings with the Companys major shareholders during the year and the Companys Rights Issue which was the mai n topic of discussion was successfully completed during December 2008 after which an approval was given at the Companys General Meeting held on 21 November 2008.The companys Executive Committees also established a control infrastructure to ensure proper monitoring and management where major risks have been identified. *THE NON-FINANCIAL PERFORMANCE* OF CENTRICA PLC The fluctuation in demand and prices of oil worldwide as well as the global financial crises in 2008 made Centrica Plc face series of challenges and the Chairman of the company (Roger Carr) tagged the year a difficult year.But despite the difficulty, the company still performed well because it is a company that aims at delivering stability and growth for the benefit of their customers, employees and shareholders. Centrica Plcs non-financial performance can be outlined in terms of the following *BUSINESS PERFORMANCE OF CENTRICA* PLC LIMITATIONS OF RATIO ANALYSIS Ratios are useful methods of analyzing the performance and fi nancial position of a business but they have their flaws which are seen as limitations and will be analyzed below.THE IMPACT OF THE CHANGE FROM UK GAAP TO IFRS ON THE CORPORATE REPORTING OF CENTRICA PLC that IFRS has improved the companys 2004 operating profit and statutory Earnings Per Share (EPS) reduction in shareholders fund as a result of pensions deficit Adjustment the companys policy to link dividend to earnings thereby increasing pay out ratios. Some assets and liabilities will be treated differently which will affect timing of profit. CONCLUSION With reference to the ratios analyzed above,Centrica Plc has an upper hand in the energy and gas market than it s competitor Scottish Power. Centrica Plcs turnover was very high in 2008 which shows that they made better sales than its competitor. Although Centricas sales turnover was high was high in 2008 but the profit margin dropped drastically. In the overall financial performance Centrica Plc made a loss of ? 645million in 2008 compared to the previous year 2007 when the company had a retained profit of ? 088million. This was considered to be an impact of the global financial crises that hit the UK and US economy causing increase in oil prices and a drastic fall again as the level of global oil demand rises and at the same time causing a tight supply position. Finally, we can say that from the record of 2007, the financial performance in 2008 was good despite the economic instability. Centrica Plc made strong progress against the strategic priorities set out at the end of year 2006.The global financial crises which remain very challenging in the UK till date could pose as a problem for many of the companys customers. But Centrica Plc promises to continue to place their customers needs at the forefront of their agenda, alongside the determination to deliver increasing long-term value for our shareholders FUTURE OF CENTRICA PLC According to the Chief Executives Review, some priorities have been set for the f uture growth of Centrica which would help measure performance in year 2009.Some of which are To build on the companys growth platform Increasing the value of their customer base by expanding the overlap between the energy and services business. Also establishing a centralized service platform and the acquisition and construction of gas and power assets which will enable the company to compete efficiently in the energy market. To reduce risk through integration There will be more focus on UK in the coming year 2009, due to the high demand.Therefore more production has to be made by integrating/building closer relationship with the National Oil Companies. To transform British Gas In order for Centrica Plc to succeed, British Gas Residential which seems to be the core backbone of Centricas business has to deliver high level of profitability. Therefore, there will have to be an integration of the British Gas Residential, British Gas Business and British Gas Services into a single custom er-focused organization.Amidst all these future plans briefly mentioned above, I can now conclusively say that the future performance of Centrica Plc is not 100% certain of profitability as they are not exempted in the effect of the global financial crises which is still hitting the UK economy. Although demand for product might rise causing increase turnover but consumers might not be able to meet up with financial obligations of paying cash. So, Centrica must be prepared for more credit sales which might decrease its debtor turnover.Also, prices of product must be put into consideration despite the goal of maximizing profit not forgetting its competitors. And finally, the leadership of Centrica Plc will be playing major role in delivering stability and growth for the benefit of customers, employees and shareholders. REFERENCES Asmii Vernekar, 2009. Available at http//www. buzzle. com/articles/basic-accounting concepts-and principles. html. Assessed on 15th December, 2009 Buz/ed, 20 09. Available at http//www. bized. co. uk/compfact/ratios/sdc5. htm Assessed on 13th December, 2009. Centrica Plc, 2005.International Financial Reporting Standards. Available at http//www. centrica. co. uk/files/results/2004_ifrs_transcript. pdf. Assessed on 15th December, 2009 FAME (Financial Analysis Made Easy), 2009. Available at http//www. fame. bvdep. com/version-20091130. Assessed on 11th December, 2009 Peter Atrill, and Eddie McLaney (2008), Accounting and Finance for Non-Specialists, 6th ed. Prentice Hall, financial times. David Alexander and Christopher Nobes. (2007), Financial Accounting, An International Introduction, 3rd ed. Prentice Hall, financial times.