Complete 12 page APA formatted essay: WPP PLC Financial Report.
The comparison of these ratios shows that current asset has not been utilized well as compared to fixed assets. The stock turnover ratio indicates that WPP PLC has replaced its stock almost 62.4 times during the year. In other words, it can be said that the company generated $62.4 worth of sales for every $1 invested in stock.
Debtor Day’s Collection Period
Cash Sales= 50 days
Creditor Day’s Payment Period
Purchases= 125 days
Difference between creditor and debtor days for 2004 is positive:
Creditor days – Debtor days= 125 days – 50 days= 75
The firm takes considerably longer (75 days longer, on average) to pay its creditors than it does to obtain payment from its debtors, having a good sign for the business.
The ability of WPP PLC to ‘pay its way’ or to satisfy financial obligations without difficulty as and when they become due can be analyzed with the help of following ratios:
Current Liabilities= 0.87: 1
Acid Test (Or Quick) Ratio
Current Assets- Stock
Current Liabilities= 0.82: 1
Thus, the above ratios don’t show a good position of the company in terms of its current assets and liabilities. It reveals that the company doesn’t have enough liquid assets to pay off its short-term liabilities when they become due.
To obtain an indication of the company’s longer-term solvency and its degree of financial risk, following ratios would be used:
Gearing (Or Leverage) Ratio
Total Debt Capitalx 100
Total Equity Capital= 33.28%
Total Debt Capital_________x 100
Total Assets (Fixed + Current)= 11.
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