Financial Performance Analysis of Aston Martin PLC: Ratio Analysis and Insights Case Study

Financial Performance Analysis of Aston Martin PLC: Ratio Analysis and Insights

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Option A

Introduction and Methodology

Financial performance analysis based on previous years provides information regarding organizational performance development with future possibilities. Aston Martin PLC is an automobile company in the UK that operates business activity for a long period of time and provides luxury cars to customers. Identification and evaluation of financial performance using ratio analysis would be beneficiary to conducting future potentiality of the organization regarding profitability. Consideration of approach of the Aston Martin PLC evaluation ratio analysis would present future prospects of the business growth based on previous years that are going to be conducted as an opportunity for investors and stakeholders. Aston Martin was founded in 1913 and has been considered as a business organization with a long period of experience in the comparative market. A ratio assessment would be helpful in identifying and assessing the financial performance in order to determine the organization's potential for profitability in the future (Finance.yahoo.com, 2023). Aston Martin PLC's evaluation ratio approach would provide potential future business growth based on prior years, which would be undertaken as an opportunity finding for investors and stakeholders. Aston Martin was established in 1913 and is regarded as a company with extensive experience in the competitive market.

Data Analysis

Ratio Analysis

Ratio analysis has been conducted to identify profitability segments of Aston Martin PLC where net profit, gross profit and RICE would be calculated to evaluate past performance. Three segments of profitability ratio going to evaluating organizational financial ability to achieve goals.

Profitability Ratios

Aston Martin PLC
Year	Net Profit Ratio	Formula	Amount	Ratio
2022	Net Profit	(Net Profit/Sales)*100	-£ 5,28,600.00	-38.26%
Sales	£ 13,81,500.00
2021	Net Profit		-£ 1,91,600.00	-17.49%
Sales	£ 10,95,300.00
2020	Net Profit		-£ 4,19,300.00	-68.54%
Sales	£ 6,11,800.00
Year	Gross Profit Ratio	Formula	Amount	Ratio
2022	Gross Profit	(Gross Profit/Sales)*100	£ 4,50,700.00	32.62%
Sales	£ 13,81,500.00
2021	Gross Profit		£ 3,43,700.00	31.38%
Sales	£ 10,95,300.00
2020	Gross Profit		£ 1,11,100.00	18.16%
Sales	£ 6,11,800.00
Year	ROCE	Formula	Amount	Ratio
2022	EBIT	EBIT / Capital employed = Total asset - Current liabilities	-£ 3,15,100.00	-15.92%
Capital employed = Total asset - Current liabilities	£ 19,78,900.00
2021	EBIT		-£ 52,500.00	-2.66%
Capital employed = Total asset - Current liabilities	£ 19,74,600.00
2020	EBIT		-£ 3,60,900.00	-18.94%
Capital employed = Total asset - Current liabilities	£ 19,05,300.00

Table 1: Profitability ratio

Net profit margin

Net profit margin identification evaluates -68.54% in the financial year 2020 that has been conducted regarding revenue and net profit growth is negative and fails to achieve financial benefits. Next financial year 2021 organizational net profitability margin has been evaluated -17.49% that could be considered as a positive growth for organizations due to the negative percentage that has been reduced by business operations and providing positive opportunity in future business operations (Husain and Sunardi, 2020). Additional calculations have been conducted regarding the financial year 2022 that provide information about -38.26%. Consecutive 3 years negative net profitability margin provides information regarding organizational revenue growth is not effective to provide sufficient profitability.

An evaluation of the net profit margin for the fiscal year 2020, which has been completed, shows a negative and unsuccessful growth in revenue and net profit. It is -68.54%. Additional calculations pertaining is the fiscal year 2022 yield information concerning -38.26%. Consecutive three years of negative net profitability margins indicate that organizational revenue growth is insufficiently profitable.

Gross profit margin

Gross profit margin identification evaluates business profitability growth before expanding expenses and taxes, where in the financial year 2020 Aston Martin PLC has achieved 18.16 percent that could be considered as a positive financial condition. Positive gross profit margin evaluates as an opportunity for an organization that the cost of business activity has been managed by leadership to gain advantage in B2B business operations (Ningsih and Sari, 2019). Information regarding the financial year 2021 gross profit margin of Aston Martin PLC has been identified as 31.38% that could be considered as a growth. Positive growth of gross profit margin in financial year 2021 is evaluating opportunity for business expansion with sustainable productivity development and supply chain management.

Financial year 2022 GP margin has been identified 32.62% is that could be considered as an opportunity for business growth with positive margin has been continued in operation activity. Considering 3 years gross profit margin it has been stated Aston Martin PLC continuously progress in gross margin development that is going to be impact positive on future business operation. The determined 32.62% GP margin for the fiscal year 2022 is something that may be taken into account as a chance for business expansion with positive margin has been continued in operation activity (Aulová et al. 2019). Positive gross profit margin is viewed as a chance for the company whose leadership has managed the cost of business activity to acquire an advantage in B2B business operations.

ROCE

Calculation of return on capital employed evaluates organization ability to achieve financial benefit by using working capital, which pres -18.94% in financial year 2020. Negative ROCE has been considered as a financial deficit and fails to provide sufficient return to stakeholders. Calculation of ROCE based on financial year 2021 is evaluating -2.66% that has been considered as an opportunity for business growth with positive development in financial return. According to the calculation of ROCE it has been evaluating business operational activity that has been growing positively that could provide opportunities for Business expansion and excellence in financial Resource Management (Arsyad et al. 2021). Next financial year 2022 ROCE of Aston Martin will face challenges because of -15.92%. Fall of ROCE organism’s financial resources management and allocation has failed to achieve standard return, where management needs to focus on allocation of financial resources.

Due to a -15.92% ROCE, Aston Martin may encounter difficulties in the upcoming fiscal year 2022. Financial resource management and allocation during the fall of ROCE organisms failed to produce the expected returns, and management must now concentrate on redistributing available funds. The calculation of return on capital employed assesses an organization's capacity to generate profits through the use of working capital, which is expected to decrease by -18.94% in fiscal year 2020. Negative ROCE is regarded as a financial deficit and fails to give stakeholders enough of a return (Parmar and Shukla, 2021). Based on the financial year 2021, the calculation of ROCE evaluates -2.66%, which is thought to be a potential for business expansion with a rise in financial return.

Findings and Analysis

Analysis in detail identifying problems

Logistical challenges

Regarding the placement of further normal shares to PIF and the 4-for-1 rights issue conducted in September 2022, the overall number of Aston Martin shares as of December 31, 2022, was 699 million. Warrants for 28.8 million shares are still remaining and effective through December 2027. The organization plans to integrate the initial batch of Mercedes-Benz AG innovation into its future plans for development and refurbishment. The offering of more stock to Mercedes-Benz AG in 2023 is not immediately anticipated. 

Geopolitical and health challenges

The chief auditor notifies the Standing Committee on the function's businesses on a regular basis, describing key audit outcomes, the status of the internal audit's plan and any modifications that have been made, as well as information on agreed-upon organizational measures to address control deficiencies. When acceptable, the Executive Director will go in-depth on a subject where neither the Committee has asked for additional information nor the Chairman thinks its relevant (Syarifah, 2021). A total of seven unexpected board conferences were held, four of which were held for the purpose of discussing the placing to PIF along with the rights issue to raise £654 million.

Operational challenges

The remaining three were held to discuss adjustments to the Chief Executive Officer and the Chief Financial Officer, the month-end trading update, and the end of operation of the Defined the advantages a pension plan. Considering the conviction that every competitive automobile company must work really jointly while making suppliers feel like cherished shareholders and this is a topic particularly excited about (Purike et al. 2022). As well as continuing to minimize expenditures, I have personally overseen a number of the steps taken to alleviate the transportation as well as supply chain challenges in 2022.

Recommending solutions for improvement

As their operations develop, each group and companies face obstacles and teams might have challenges with interactions or get rid of mission-critical scenarios. Organizations may encounter challenges with consumer concentration, team civilization, development, strategy, or even creation itself. In other words, all teams should have the master ship to solve challenges. The main destination of methods for cracking problems is to conduct individuals or tandems through the steps of admitting issues and complications, begetting potential explanations, and adopting the best one (Mariana and Rukmana, 2020). Authentic designation of issues necessitates that all those implicated can freely and safely communicate what they think. 

Individuals that use systems for problem-solving are additionally likely to develop unique tinctures that go to the source of the issue so they can do prior challenging tasks additional readily in the days to come. Procedures of problem-solving are essential for prosperous staff members since they assist individuals to tackle every deterrent effectively and unhurriedly (Devi et al. 2022). The time that has been economized can then be used by personnel to finalize more charges over the workday. Management, on the other hand, makes opinions on more complex issues to make sure their businesses run successfully. On a few occasions, they also offer guidance to staff workers who experience issues that prevent them from accomplishing what they are supposed to do.

The logic-based strategy, and one of the most common techniques for addressing challenges, is a lengthy process that is effective for an assortment of issues. It may be advantageous to start with the approach that is logical before going on to other methods of problem-solving considering numerous other strategies reproduce or build off of its seven steps. As per the narration of Widyasari and Adi (2021), the creative approach makes use of techniques for brainstorming including mental mapping, storyboards, and comparisons. The issue-based method, consisting of five steps, is frequently used in consultation organizations and can be helpful when helping another individual address an issue that they're encountering. 

Operating cash cycle

Multiple factors affect the effectively a firm operates and the management of financial resources is one of these factors that is of special importance. Working capital oversight is the process that occurs when an enterprise monitors how its current assets and liabilities are being used while simultaneously handling its cash reserves in order to ensure efficient company operations. Let's first comprehend the principles of capital oversight idea and the general description of the cash operating cycle. Working capital oversight is the method by which a company monitors how its current resources and current liabilities are being used while simultaneously handling its financial resources in order to ensure efficient company operations. An efficient working capital plan may assist the organization in boosting its financial viability and revenues.

Productive staff workers need to know able to solve difficulties since they can then deal with barriers patiently with effectiveness. Personnel can then make use of the saved time for finishing more charges throughout the workday. Aston Martin PLC is an automobile company in the UK that operates business activity for a long period of time and provides luxury cars to customers. This is something that excites me more than anything since feel that any strong vehicle business needs to work closely together while treating suppliers like valued shareholders. When it is appropriate, the Executive Director will go additionally into a topic about which neither the committee's members nor the chairman has asked for additional information.

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Conclusion

Based on the above discussion it can be concluded that the Board held seven regular gatherings, one unscheduled Member Strategic Planning Day, and an additional eight-hour meeting during the year. The logical strategy and the innovative approach are similar; nonetheless, the creative strategy emphasizes the problem-solving stage more. The Board met throughout the year for a Board Strategic Day, an extra eight unplanned sessions, and seven conventional meetings of the Board.

Referance list

Arsyad, M., Haeruddin, S.H., Muslim, M. and Pelu, M.F.A., 2021. The effect of activity ratios, liquidity, and profitability on the dividend payout ratio. Indonesia Accounting Journal, 3(1), pp.36-44.

Aulová, R., Pánková, L. and Rumánková, L., 2019. Analysis of selected profitability ratios in the agricultural sector. AGRIS on-line Papers in Economics and Informatics, 11(665-2019-4010), pp.3-12.

Devi, D.A.M.S., Sudiartha, I.K. and Karma, I.G.M., 2022. Activity Ratio and Profitability Ratio Analysis to Know Causes of Decreasing Profit: Case Study at the Village Credit Institution of the Suwat Village. Journal of Applied Sciences in Accounting, Finance, and Tax, 5(2), pp.112-120.

Husain, T. and Sunardi, N., 2020. Firm's Value Prediction Based on Profitability Ratios and Dividend Policy. Finance & Economics Review, 2(2), pp.13-26.

Mariana, L. and Rukmana, H.S., 2020. Analysis Of Liquidity, Solvency, Activity And Profitability Ratio To Assess The Financial Performance Of PT. Martina Berto Tbk For The Period 2014-2018. Neraca: Jurnal Akuntansi Terapan, 2(1), pp.1-15.

Ningsih, S. and Sari, S.P., 2019. Analysis of the effect of liquidity ratios, solvability ratios and profitability ratios on firm value in go public companies in the automotive and component sectors. International Journal of Economics, Business and Accounting Research (IJEBAR), 3(04).

Parmar, H. and Shukla, D., 2021. Comparative financial analysis of cement manufacturing company and relationship between inventory management and profitability ratio. International Journal of Engineering Applied Sciences and Technology, 6(6), pp.2455-2143.

Purike, E., Ginting, O.S.B., Azizah, N. and Kesumah, P., 2022. Measuring Financial Performance Over Profitability Ratio Analysis. Jurnal Ekonomi, 11(03), pp.1706-1712.

Syarifah, S., 2021. Effect of Earnings Management, Liquidity Ratio, Solvency Ratio and Ratio Profitability of Bond Ratings in Manufacturing:(Case Study Sub-Sector Property and Real Estate Sector Companies listed on the Indonesia Stock Exchange (IDX)). International Journal of Business, Economics, and Social Development, 2(2), pp.89-97.

Finance.yahoo.com, 2023, Annual report of Astron martin PLC, Access at: https://finance.yahoo.com/quote/AML.L/balance-sheet?p=AML.L [Acessed on; 15th May, 2023]