Financial Statements

 1 M155LON Week 1 Seminar – Financial Statements

 Obtain the latest M&S financial statements via the following link. 

https://corporate.marksandspencer.com/annualreport 

Required 

If the report covers a group of companies answer for the group. The accounts may be entitled Consolidated (or Group) Balance Sheet and Consolidated (or Group) Income Statement. 

In small groups of 3, attempt the following: 

1. Which reporting and accounting standards does the organisation follow to prepare its financial statements?

 IFRS – International Financial Reporting Standards (Evidence is on pages 104 and many others as in notes of the Annual Report 2020 and around the financial statements too)

2. Are the statements prepared under the cash or accrual accounting method?

 Because of the large size of M&S and as a plc, only accruals accounting is appropriate as equally a large proportion of transactions are non-cash (e.g. payments by credit card, allowing for payables and receivables too) 

Look at the Income Statement 

3. What period is covered by the Statement? 52 weeks ended 28 March 2020 (stated on all financial statements from page 112) 

4. Did the organisation make a profit or a loss? How does this compare with the previous year? M&S made a profit of £27.4m (2020) compared to £45.3m (2019), signifying a huge drop in profits between the year. See page 112, consolidated income statement. 

5. How many different lines of text contain the descriptive term ‘profit’ or ‘income’? 

About six. See page 112. 

6. Is it helpful to see the different points at which ‘profit’ is reported? Yes, this helps to assess the quality of profits in more details. 

7. Is there any particular type of expense that has changed considerably 2 since the previous year? Not really, all appear comparable 

Look at the Balance Sheet

 At the foot of the statement you will see some dates and names. This information tells you when the accounts were ‘signed off’. At this date, directors and the independent auditor had to be satisfied that the statements represented a ‘true & fair view’ if reporting under UK GAAP or IAS of the position and performance of the organization. 

8. Calculate the net working capital for this organisation. Has it increased or decreased in comparison with the previous year? 

Net WC = Current assets – Current liabilities (All info is extractedfrom consolidated statement of financial position on page 113) Net WC (2020) = 1,215.0m – 1,849.4m = - £634.4m Net WC (2019) = 1,435.1m – 2,324.9m = - £889.8m Relatively, the net WC has increased by £255.4m, though still negative. 

9. Has the Equity increased or decreased? All info is extractedfrom consolidated statement of financial position on page 113) Equity has increasedfrom £6,024.8m (2019) to 6,597.8m (2020)

 Look at the Cash Flow Statement

10. Did the company experience a net inflow or a net outflow of cash from operating activities? From consolidated cash flow on page 115, NCF from operating activities was an inflow of £973.1m for 2020 year end 

11. Has there been an increase or a decrease in the total cash resources held within the company over the reporting period? The net cash flow decreased from £213.1m (2019) to £164.1m (2020) You can choose another public company or an organization that you deal with or are interested in studying to work on the questions after the seminar.