An Interpretation of the ratios for Marks and Spencers and the House of

An Interpretation of the ratios for tag and Spencers and the House of FraserFindings========This section of the report depart be composed of an interpretation ofthe ratios for both companies. All ratios that form the ratio analysiswill be explained, and any trends from within ratios will behighlighted.OVERALL PERFORMANCEReturn on Capital Employed Net profit earlier tax and interest x100 = %Capital employedThe Return on Capital Employed ratio (R.O.C.E) is a hugely signifi butt jointtratio, and a great embrace can be taken from this ratio. The ratiorelates to the profit earned in relation to the long-term capitalinvested in the business. The term capital employed in this equation government agency the owners capital plus any long term liabilities (for examplelong-term loans). This ratio shows the % return on capital invested inthe company. A business will aim to have this ratio as high percentageas possible. If the percentage return on capital invested is less thanthat offered else where, then it may be wise to close the business andinvest elsewhere.The ratio analysis shows that attach and Spencer saw a slight drop ontheir R.O.C.E from 1999 to 2000, however, they managed to increase theR.O.C.E the following year. The abutting year, 2002 shows the mostsignificant changes. The R.O.C.E increased from 9.61% in 2001, to20.89% in 2002. This is almost a 120% increase on R.O.C.E.The House of Fraser had a slightly better R.O.C.E than Marks andSpencer in 2000, however, the following year they experienced a dropof around 1.5%. The result for 2002 shows that The House of Frasermanaged to almost double their R.O.C.E from 8.6% in 2001 to 15.91% in2002. Although this was a rosy increase, The House of Frasercurrently have a R.O.C.E th... ...tly. The company needs to be moreflexible with the volume and style of clothing they stock. People are much(prenominal) more fashion conscious than they used to be, it is essential forthe credibility of a company that they are consiste ntly at the heightof fashion.The results for the debtors collection period for Marks and Spencerare very worrying, especially when compared to The House of Fraser.Marks and Spencer need to dramatically reduce the collection period inorder to avoid any problems in the future. Marks and Spencer currentlyoffer their customers the option of having a store card. Although intheory, this is a good idea, especially form a marketing perspectiveit can cause many problems in the long run. Customers can leavepayment for long periods of time. This leads to Marks and Spencer notbeing paid for stock they no prolonged own, and should have been paid for.