SBL PBA4807 Assignment 1
SBL PBA4807 Assignment 1
SBL PBA4807 Assignment 1
Assignment No: 1
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ACADEMIC INTEGRITY
DECLARATION
3. I have not allowed, and will not allow, anyone to copy my work
with the intention of passing it off as his or her own work.
4. I did not make use of another student’s work and submitted it as my own.
SIGNATURE: …………………………………………………….
DATE:……14…April…2023……………………………..
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INTRODUCTION :
Pick n Pay Stores Limited is a South African retailer company founded in 1967. It operates
through two business segments: the South African and the Rest of Africa operations. The
company's products include general merchandise, groceries, and clothing. It also operates
convenience stores, hypermarkets, and supermarkets.
Financial ratio analysis is a tool that helps to evaluate a company's financial performance. We
will use the following ratios to analyse Pick n Pay's financial performance:
Liquidity Ratios: Liquidity ratios measure a company's ability to meet its short-term
obligations.
Solvency Ratios: Solvency ratios measure a company's ability to meet its long-term
obligations.
Efficiency Ratios: Efficiency ratios measure a company's ability to manage its assets and
liabilities.
Profitability Ratios: Profitability ratios measure a company's ability to generate profits.
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2022 Pick n Pay calculations 2021 Pick n Pay calculations
1. LIQUIDITY RATIOS
There was not much improvement in PnP ability to settle its current liabilities using their current assets.
= R 6 425.30/ = 5 415.10/
R 22 972.30 R 20 107.60
= 0.28 = 0.27
2. EFFICIENCY RATIOS
There is improvement
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2.2 Days inventory on hand (in days)
= Inventory/ Cost of sales x 365
= ((Total Inventory (FY2021) + Total Inventory (FY2022)) / Cost of sales x 365
= (12 198.8 + 13 065.2) / 2)/ 79 476.7 = (12 198.8 + 13 065.2) / 2)/ 74 657.1 x
x 365 365
= 58.01 days = 56.01 days
Decline from 2021 to 2022
3. PROFITABILITY RATIOS
4. SOLVENCY RATIOS
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2022 Shoprite calculations 2021 Shoprite calculations
5. LIQUIDITY RATIOS
= 39673-21879 / = 32057-18396 /
32 488,00 28 285,00
= 0.55:1 = 0.48:1
6. EFFICIENCY RATIOS
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7. PROFITABILITY RATIOS
8. SOLVENCY RATIOS
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9. Ratio Comparison for PnP and Shoprite for year 2022
Current ratios 0.84 1.22 Shoprite seems to be doing better than PnP in
terms of settling its short-term obligations. If
CR<1 = CA<CL.
Acid test ratios 0.48 0.55 Both companies seem to be slightly not in a good
position to cover its all liabilities.
Inventory ratios 10.13 6.35 Pnp is doing better than Shoprite
Day’s inventory 38.01 57.4 Shoprite stock pend more time on the shelves as
on hand compared to PnP
Gross profit 58.01 24.0 PnP is far ahead with profit margin
margin
Operating profit 18.8 5.8 PnP operates its profit better than Shoprite
margin
Interest cover 2.5 9.9
ratio
3.67 0.2
Debt to equity
ratio
Horizontal Analysis.
A horizontal analysis is a process that involves comparing a company's financial data for several years.
It can help identify areas of weakness or improvement and potential opportunities for growth.
Calculate both income statement and Balance sheep by talking the current year figure (2022) minus the
previous year’s figure (2021), then divide by the 2021 figure.
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Vertical Analysis
A vertical analysis is usually performed on a company's net sales and revenue, as well as its various
base items. It allows analysts to identify changes in the company's composition over time. For instance,
if the cost of goods sold, which is a portion of net sales, has been increasing, this could mean that the
company is dealing with higher expenses.
Relationship of a particular Financial Statement will be set off 100% as a base figure, and all items are
reported as percentage of the base.
e.g on the Balance sheet we will take the Total Assets as the base, and on the balance sheet we take
total assets as a base.
The South African retail food and beverage industry is faced with various challenges. One of these is
the economic slowdown which has resulted in lower consumer spending. This has caused retailers to
face increased competition. Another challenge is the emergence of e-commerce, as it has changed the
shopping habits of consumers.
Online platforms and technology are becoming more important for retailers, as they allow them to
adapt to the changes brought about by the rapid emergence and evolution of e-commerce. However,
they are also facing increasing costs due to the rising fuel and electricity bills. To meet the demands of
their customers, retailers should focus on sustainable practices.
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Reference:
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