Financial Analysis of Ted Baker Essay

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REPORT

To Mr. D.G. Farmer
From an analyst working for Devon Fund Managers (DFM)
Date 15 / 03 / 2013

Devon Fund Managers A regular report that analyses industry and performance of
Ted Baker plc. based on the
Ted Baker Annual Report 2011-12.

Executive Summary
This report is going to analyse and evaluate the Ted Baker plc. by providing the most important ratios of the company and interpretations to them. Furthermore, it is going to recommend to hold shares of this company to existing shareholders and also recommend potential investors to purchase the shares of Ted Baker plc. since the return of the company is expected to be high in the nearest future.

1. Introduction
This …show more content…
During 2010, 2011 and 2012 this ratio has not changed significantly and loosing approximately 40% of revenue after cost of sales is natural for a company in textile-apparel industry as they use relatively more raw material than other industries.
Generally, the profitability ratios shows that between 2010-2011 there is an increase in the profitability of the company, however from 2011 to 2012 there is a slight decrease in companies profit for the reasons of higher costs and expenses.

2.3.2 Liquidity ratios

Table 4. [10] [1] [9] (Workings in Appendices 1)
Liquidity Ratios
Type
2012
2011
2010
Current Ratio
1.98:1
2.14:1
2.36:1
Quick Ratio (Acid Test)
0.86:1
1.05:1
1.19:1

Liquidity ratio is a kind of analysis that measures the ability of a company to repay their short-term debts and higher liquidity means higher margin of safety[12].
In Table 4, current ratio shows that in 3 years company kept their current assets higher than current liability so Ted Baker was financially healthy[12]. However, the ratio falls from 2.36:1 to 1.98:1 between 2010-12, which might be a problem in the following years.
Because Ted Baker is operating in apparel clothing industry it would be more beneficial to analysis the company’s liquidity by using acid test ratio, subtracting inventory[11]. Apparel-clothing industry companies are highly dependent on inventories. However for a retail company slightly low quick ratio is
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