Conclusion

Mtichells and Butlers have certainly seen a better financial year of 2011 compared to that of

2010 and this is clearly represented by the analysis of the financial ratios.

In all the key aspects, the firm has done better. The firm had a higher gearing ratio in 2010, with

 a very weak Acid ratio of 0.62, which posed great risks for the firm, but this year the firms

liquidity issues have been sorted and the acid ratio is around the ideal figure of 1 and the firm

 has reduced financial leverage. The ROCE has marginally improved and that is in part due to

 the increase of the gross profit margin of M and B. However if the firm wants to continue

developing and deliver even stronger financial results, it will have to strive to improve the

profitability figures. This can be done due to increased production efficiencies. All in all, the

year of 2011 was one of success which would have certainly raised the market's expectations

of the firm, thereby resulting in a rise in stock price of M and B.

Brands people love (2011) Annual report [Online]. Available at: http://www.mbplc.com/investors/annualreport/ (Accessed: 20 May 2012).

                                           Mitchells and Butlers Ratio Analysis 2010 & 2011

Acid Test Ratio:

                                2010                                                                                                                       2011

                                349 – 25                                                                                                                451 – 25

                                525  = 0.62:1                                                                                                       408 = 1.04:1

The ratio has improved from 2010 to 2011. The ideal for this liquidity ratio is 1:1.

Gross Profit Margin

                                449                                                                                                                         404

                                1980 x 100 = 22.68%                                                                        1796 x 100 = 22.49%

The gross profit margin figure has decreased from 2010. It tells us something about the businesses ability to consistently control its production costs or manage the margins on products it buys and sells.

ROCE

                                (127)                                                                                                                      132

                                4077 x 100 = (3.12%)                                                                                       4008 x 100 = 3.29%

The primary ratio has improved for 2011. This ratio tells us what returns management has made on the resources made available to them before making any distribution of those returns.

Gearing

                                3392                                                                                                                       2916

                                997 = 3.40                                                                                                            1092 = 2.67

This ratio measures the proportion of assets invested in a business that are financed by borrowing.

Operating Profit Margin

                                33                                                                                                                           275

                                1980 x 100 = 1.67%                                                                           1796 x 100 = 15.31%

The operating profit margin tells us something about a company’s ability to control its other operating costs or overheads.

Trade Debtor Days

                                40                                                                                                                           70

                                1980 x 365 = 7.37 days                                                                1796 x 365 = 14.23 days

Gives an idea of how long it takes for debtors to be recovered and whether or not debtors are being allowed excessive credit.