Strategic Financial Management Essay Example | Topics and Well Written Essays - 2000 words

Strategic Financial Management - Essay Example The operating margin and operating profit stood at 7.7% and  £115.6million respectively compared with 8.3% and  £111.3million respectively in the same period last year. The Company has taken on an extra five-year bank facility with Handelsbanken, hoping to increase their overall facilities to  £740 million (Yahoo Finance) Without profit, a firm would be unable to attract outside capital. That is why I identified the profitability ratios as the most efficient and effective way to evaluate the financial performance of the Wetherspoons Company. The profitability measures enable me to evaluate the company’s profits in relation to the level of assets, or owners’ investment as stipulated in the company’s financial statements. I looked into statements dating back from 2010 to 2014. I calculated Return on Capital Employed (RECE) by determining the ratio between the operating capital and the capital employed. This helped me know how well the firm utilizes the capital employed. In 2014, the Return on Capital Employed (RECE) for the company was 12.94%, as compared to 11.83% in 2013.It means that the company has had a steady increase on its return on capital employed thus showing that the Company keeps on improving its’ utilization of capital employed. To begin with, I established the Gross profit margin by determining the ratio between gross profit and net sales. The gross profit of the firm in 2014 was  £79.4m, compared to  £76.9m in 2013, which translates into a 3.1% increase in profit. This growth in gross profit margin serves as a good indicator that J D Wetherspoon firm is progressing well and promises good returns on investment. The decrease in the net profit margin of J D Wetherspoon can be attributed to external forces such as taxes. I established the assets turnover by determining the ratio between sales revenue and total assets to find out how efficiently J D Wetherspoon