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

An Interpretation of the proportions for attach and Spencers and the theatre of operations of FraserFindings========This section of the report will be undisturbed 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 PERFORMANCE fork out on Capital Employed Net profit before tax and interest x100 = %Capital employedThe Return on Capital Employed ratio (R.O.C.E) is a hugely significantratio, and a great deal can be taken from this ratio. The ratiorelates to the profit earned in relation to the semipermanent capitalinvested in the business. The term capital employed in this equationmeans the owners capital plus any long term liabilities (for examplelong-term loans). This ratio shows the % afford on capital invested inthe company. A business will aim to have this ratio as high percentageas possible. If the percentage upshot on capital invested is less thanthat offe red elsewhere, then it may be wise to close the business andinvest elsewhere.The ratio analysis shows that Marks and Spencer saw a slight drop ontheir R.O.C.E from 1999 to 2000, however, they managed to add theR.O.C.E the following year. The next 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 healthy increase, The House of Frasercurrently have a R.O.C.E th... ...tly. The company needs to be more pliant with the volume and style of clothing they stock. People argonmuch more fashion conscious than they used to be, it is essential forthe credibility of a company that they are consistently at the h eightof fashion.The results for the debtors army 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 safe(p) 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 longer own, and should have been paid for.