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Understanding company accounts and reports Mothercare

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Understanding company accounts and reports

Mothercare meets the needs and aspirations of parents for their children, worldwide. Talktalk TalkTalk (officially TalkTalk Telecom Group PLC) is a company which provides pay television, telecommunications and internet access services to businesses and consumers in the United Kingdom. Talk started in 2003 as a fixed landline provider but now operates and sells broadband, home phone and mobile packages to UK customers. TalkTalk has grown rapidly during the past few years through a combination of acquisition and organic growth. They have spent the last year integrating their businesses to build a leaner, more efficient company which provides the best value to homes and businesses by offering competitive pricing and innovative products backed up by good service. Accounting Policies and Audit: Mothercare’s financial statements (individual and consolidated) are prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the European Union, International Financial Reporting Interpretations Committee (IFRIC) and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. They therefore comply with Article 4 of the EU IAS Regulation. The directors are responsible for the preparation of the company financial statements and for being satisfied that they give a true and fair view. Their responsibility is to audit and express an opinion on the company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require then to comply with the Auditing Practices Board’s Ethical Standards for Auditors (Ferber, 2001). The Consolidated financial statements of the Talktalk Company are also prepared in accordance with International Financial Reporting Standards (‘IFRS’) as adopted for use in the European Union and as applied in accordance with the provisions of the Companies Act 2006. These financial statements therefore comply with Article 4 of the European Union International Accounting Standard regulation. The Company has, however applied United Kingdom Generally Accepted Accounting Practice (‘GAAP’) in the preparation of its individual financial statements unlike mothercare. Similar to mothercare, directors are responsible for the preparation of the company financial statements and for being satisfied that they give a true and fair view. Financial Analysis Liquidity Ratios Liquidity ratios illustrate the company’s ability to pay off obligations in the short term (Jae K. Shim, 2008). Current asset ratio and quick ratio are observed closely when liquidity is in question. Mothercare is in a good position in both of these parameters (Alexander &amp. Nobes, 2007) . In 2010, their Current ratio was 1.54 which decreased steadily to 1.39 in 2011. This dip is due to decrease in current assets from ?201.6m to ?193.8m and increase in current liability from ?131.0m to ?139.4m. However, the ratio is still significant enough for day to day operations of the company. The Quick Ratio of the company has increased drastically from 0.84 to 0.56 which is a cause of concern for the company. Along with the decrease in current assets, it also suggests that a lot of stock is accumulated in inventory. In 2011, the company only has ?15.8m cash in hand and ?116.0 is piled up in inventory. Quick ratio is an illustration of immediate liquidity of the firm (Perks &amp. Levy, 2007) The current ratio for Talktalk company is very low as compared to other companies in UK. The current ratio