Diageo PLC Financial Analysis

Document Type:Thesis

Subject Area:Finance

Document 1

Since then they have operated in various categories which include spirits and beer (Lee 26). Geographically its segmentation includes North America, Russia, Europe and Turkey, Caribbean and Latin America. Principal products currently include Gin, Vodka, Rum, Wine, Scotch whiskey, Canadian Whisky, and American Whisky. Current business strategy Their main brand includes Johnnie Walker, Smirnoff, Captain Morgan, Guinness, Baileys, and Tanqueray. The company’s management is done over various locations, of which it includes Ireland, United Kingdom, Italy, and Turkey. According to consumer behavior models, it is suggested that individuals are subdued to their original taste or favorite alcohol and understand their origin. Brand demand is what sells the company’s name and in that case, the share prices often go up. The current consumers are more focused and shifted their consumption habits back towards traditional drinks, especially in developed economies around the world.

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Consumers are pulled nearer to their innovative taste, their chosen alcohol and they understand their ‘origin stories’. Giant firms, showcase their exclusive diversity and groupings through open breweries and storehouses and a good example includes Pernod Ricard and Diageo (“Motley Fool Guru Analysis for Diageo Plc. There was an increase in the company’s EPS up to 18% of which the pre-exceptional EPS was up by 21%. This implies that the company’s had a higher operating profit which was moderately counterbalanced by higher rates of tax. Operating margins with respect to sales which is inclusive of excise duty, increased from 26. 4% in the fiscal year 2014 to 29. 5% in the fiscal year 2017, and this was as a result of an increase in operations in lower costs markets.

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In which they have achieved some financial performance target. Diageo PLC Balance sheet analysis Ratios 2016 2017 2018 Quick ratio 0. 75 Return on Equity 41. 37 Current ratio 1. 55 Debt/Equity 1. Return on capital invested is an investment ratio and it is important to be reviewed in this report since it brings sight to the fluctuation on the stock prices of the company (Libman & Feldman 43). It shows how well organizations generate revenue from the invested capital. A higher ratio is an indication that the capital cost in an organization is high and it fetches return on invested fund (Libman & Feldman 44). Return on capital invested for Diageo have been on the rise since 2016 to 2018 as shown in the table above. It implies that the company has been yielding returns from its invested money.

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55, and that is underneath the desirable 2:1. This indicates that Diageo’s current assets are double as big as their current liabilities. A ratio of 1. 55 is an indication that the company has enough assets to offset their current financial obligation as shown by investor’s preference ratio of 2:1. The quick ratio is another form of liquidity ratio that is important to analyze. 0 per share. It implies that currently, Diageo’s stock is trading at $64. 95 discount rate. Their stock is pricey at the moment making a better stock to invest on (Damodaran 45). By engaging a risk profile for the investor, it is evident that the current risk profile for Diageo is reasonable to progress investors (46). S exchange it may have been lesser than the previous year dividend pay (Lee 72).

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Risks can be weighed and countered and that is the strategy developed by the company to increase their stock prices hence their earnings. Users of financial reporting Recent studies conducted by European surveyors have indicated that financial statements and direct company conduct have been of benefit to professional equity investors. The most useful form of financial reporting has been determined as the income statement and management company contact is the most influential of all (Stefano, et. al. Due to Diageo’s global presence and diversity, their investment is expected to continue rising imaginably in the future. The disparity in the company’s stock prices at the time of publication was as a result of the firm operating their stock at $64. 95 discount rate.

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