Every organisation plans strategically in order to gain financial profits. In this present discussion, a significant focus has been given to Next Plc. Next Plc is one of the leading retailers in the UK (Nextplc.co.uk, 2020). With respect to this particular company, it is also found that this company is not able to carry out its operations in an effective manner. Therefore, the financial analysis is being carried out to find out the major reasons for such kind of performance of this particular company. Apart from this, it is also observed that Next Plc also faces some of the major challenges in the industry. Therefore, in this context, some significant challenges, as well as opportunities, have been described in this discussion.
2. Financial Summary of Next Plc
Next Plc is one of the leading organisations in UK. However, in context of this particular company, it is observed that the performance of Next Plc is compared with the financial performance of Asos Plc. In this context, the financial ratios have been taken into consideration in order to analyse the financial position of Next Plc with that of Asos Plc. In the words of Linares-Mustarós, Coenders & Vives-Mestres (2018), financial ratios help an organisation to determine the financial position of an organisation.
With respect to financial ratios, following are the major financial ratios that have been taken into consideration for Next Plc as well as Asos Plc.
i. Profitability ratios
Profitability ratios are the financial metrics that help in determining the overall profitability of an organisation (Bayrakdaroglu, Mirgen & Kuyu, 2017). In this context, two major financial ratios, such as gross profit margin as well as net profit margin, have been evaluated. Following are the formulae for both of the metrics:
a. Gross profit margin = (Gross Profit / Revenue)* 100
b. Net profit margin = (Net Profit / Revenue) * 100
Table 1: Profitability Ratios for Next Plc