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The report is prepared in terms of addressing the financial situation of the enterprise known as "Pizza Express Plc".

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Introduction

Terms of Reference The report is prepared in terms of addressing the financial situation of the enterprise known as "Pizza Express Plc". The analysis is based on the "Pizza Express Plc" annual report from 2002, requested February 10th, 2004 and handed in March 2nd, 2004. Introduction The principle activity of Pizza Express Plc is operating restaurants, franchising restaurants and the wholesale and merchandising of food and beverages. Hence, the operating cycle should be relatively short. Pizza Express Plc may be identified as enjoying the fifth consecutive year of sales increase, which is a 214% growth since 1998. This is in accordance with the growth strategy proposed by the company. Similarly, one may identify the company's assets to have increased by 14.03% in 2002. One may recognize this capital expenditure to be financed primarily through net cash funds generated by operating activities. This could also have resulted in the company having a negative working capital. Moreover, the company raised �1.9 million in equity as a result of the conversion of deferred convertible non-voting shares and the exercise of share options. However, the company was still able to increase paid and proposed dividends per share for the year by 25%. One may also identify that Pizza Express Plc's relatively small amount of debt has remained changed by paying of the debts to the extend of 0.4. This may reflect a strategy to obtain a better credit rating in order to borrow at favourable rates in the future. One may also recognize that according to Porters 5 forces model (Appendix 2) each of the environmental forces affect industry profitability. A bonus scheme for employees is in place, however no bonuses were issued in 2002, which suggests good control over agency problems. Issues * Growth * Working capital * Operating cycle * Debt Growth The group evidently has an aggressive growth strategy, which is explained in substantial detail in the report. ...read more.

Middle

Accounting, 5th ed., Van Nostrand Reinhold, USA FLS Daily, (2004), Financial Times, [Online], Available from : www.ft.com, [Accessed on : 29/02/2004] Gitman, L. J., (2000), Managerial Finance Brief, Addison Wesley, US Porter, M., cited in Wheelen, T., and Hunger, D. (1998), 'Environmental Scanning and Industry Analysis', Strategic Management and Business Policy, 6/e, Addison Wesley, US Schmidall, R., S., (1997), Hospitality Industry Managerial Accounting, 4th ed., Educational Institute AH & MA, Michigan Schmidall, R.,S., and Damitio, W., J., (1996), Hospitality Industry Financial Accounting, Educational Institute AH & MA, Michigan The Econimist, (2001), The Party is Over ,The Economist, [Online], www.economist.com, [Accessed on : 22/02/2004] Bibliography Glynn, J. et al., (2003), Accounting for Managers, 3rd ed., International Thomson Business Press, Australia Appendix 1. Ratios 2. DuPont Analysis 3. Porters Model of Forces Driving Industry Competition 4. Comparative and Common size analysis of Balance sheet and Income statement 5. Statement of Cash Flow 6. Trend Analysis of Turnover Ratio Analysis and calculation Analysis Ratio Formula 2002 2001 Change Explanation Return on Assets Net Income Total Assets 0.14 0.16 - 0.02 The ratio determines the yield on the firms assets by relating net income to Total Assets. ROA is 14%, which means there is profit of 14 cents for every pound of total assets Return on Equity Net Income Total Equity 0.19 0.24 - 0.05 A ratio relating earned income to the common stockholders investment. In year 2002 for every �1 of owners equity 19 pence was earned. Operating Cycle Accounts Receivable Turnover in Days + Inventory Turnover in Days 35 days N/A N/A The operating cycle represents the period of time elapsing between the acquisition of goods and the final cash realization resulting from sales and subsequent collections. Debt to Equity Total Liabilities Total Equity 0.41 0.45 - 0.04 Compares operations net worth and indicates the operations ability to withstand adversity and meet its long-term obligations. It indicates for each �1 of owners net worth, the Pizza Express owed creditors �0.41. ...read more.

Conclusion

Asset held for resale 0.9 0.48% 38.9 39.1 -0.2 -0.51% 20.72% 23.75% Total assets 187.7 164.6 23.1 14.03% 100.00% 100.00% Creditors: amounts falling due within one year 40.1 38.2 1.9 4.97% 21.36% 23.21% Provision for liabilities and charges 14.3 13.1 1.2 9.16% 7.62% 7.96% Total Liabilities 54.4 51.3 3.1 6.04% 28.98% 31.17% Capital and reserves Called up share capital 7.3 7.2 0.1 1.39% 3.89% 4.37% Share premium account 61.9 60 1.9 3.17% 32.98% 36.45% Profit and loss account 64.1 46.1 18 39.05% 34.15% 28.01% Shareholders' fund 133.33 113.3 20 17.65% 71.02% 68.83% (Including non-equity interest of �0.2m) Total Liabilities + Owners equity 187.7 164.6 23.1 14.03% 100.00% 100.00% Cash Flow Statement for the year ended 30 June 2002 2002 2001 Difference �'m �'m �'m �'m �'m % Reconciliation of operating profit to operating cash flows Group operating profit 38.2 39.4 -1.2 -3.05% Depreciation 9.7 8.2 1.5 18.29% Increase in stocks -0.9 -0.4 -0.5 125.00% (Increase)/Decrease in debtors -1 -2.6 1.6 -61.54% Increase in creditors and provisions 0.9 4.6 -3.7 -80.43% Net cash inflow from operating activities 46.9 49.2 -2.3 -4.67% Investing Activities Purchase of tangible fixed assets -32.7 -31.5 -1.2 3.81% Sale of tangible fixed assets 0.5 1.2 -0.7 -58.33% Loan to joint venture -0.8 0.8 -100.00% Purchase of own shares -0.5 Interest 0.9 0.5 0.4 80.00% Acquisition of subsidiary undertaking -1.5 -0.2 -1.3 650.00% Purchase of share in fixed assets -0.2 Cash acquired 0.1 0.1 Purchase of investment in joint venture -0.5 -33.2 -31.5 -1.7 5.40% Financing Activity Issue of share capital 1.8 13.2 -11.4 -86.36% Decrease in short term deposits with banks 0.3 -2.9 3.2 -110.34% Redemption of loan notes -0.4 -0.6 0.2 -33.33% Equity dividends paid -6.4 -4.9 -1.5 30.61% -4.7 4.8 -9.5 -197.92% 9 15.3 -6.3 -41.18% Supplementary Taxation -11.6 -9.4 -2.2 23.40% Decrease In cash -2.6 13.1 -15.7 -119.85% Trend Analysis of Turnover Year �m Change in percentage 1998 99.6 100% 1999 126.6 127% 2000 150.1 151% 2001 185.6 186% 2002 213.7 214% Accounting Assignment 1 Finance Assignment 8 ...read more.

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