The following are key extracts from the financial statements and market data of Kings Motors PLC and its competitor LSE Motors PLC for financial years ending 31st of December 2020 and 2021: Kings Motors PLC LSE Motors PLC 2020 2021 2020 2021 Revenue 26,000,000 132,000,000 Revenue 900,000,000 950,000,000 Gross Profit 15,000,000 80,000,000 Gross Profit 300,000,000 320,000,000
The following are key extracts from the financial statements and market data of King’s Motors PLC and its competitor LSE Motors PLC for financial years ending 31st of December 2020 and 2021:
King’s Motors PLC | LSE Motors PLC | ||||
2020 £ | 2021 £ | 2020 £ | 2021 £ | ||
Revenue | 26,000,000 | 132,000,000 | Revenue | 900,000,000 | 950,000,000 |
Gross Profit | 15,000,000 | 80,000,000 | Gross Profit | 300,000,000 | 320,000,000 |
Operating Profit | (35,000,000) | 12,000,000 | Operating Profit | 120,000,000 | 160,000,000 |
Interest Expense | (2,000,000) | (8,000,000) | Interest Expense | (20,000,000) | (30,000,000) |
Profit for The Year | (37,000,000) | 4,000,000 | Profit for The Year | 100,000,000 | 130,000,000 |
Trade Receivables | 3,000,000 | 19,000,000 | Trade Receivables | 25,000,000 | 30,000,000 |
Inventories | 5,000,000 | 12,000,000 | Inventories | 80,000,000 | 90,000,000 |
Cash | 36,000,000 | 60,000,000 | Cash | 50,000,000 | 60,000,000 |
Trade Payable | 5,000,000 | 18,000,000 | Trade Payable | 120,000,000 | 150,000,000 |
Long term Loan | 4,000,000 | 35,000,000 | Long term Loan | 250,000,000 | 400,000,000 |
Share Capital (£100) | 5,000,000 | 25,000,000 | Share Capital (£1) | 250,000,000 | 300,000,000 |
Retained Earnings | 7,000,000 | 11,000,000 | Retained Earnings | 200,000,000 | 285,000,000 |
Dividends (Total Payout) | 0 | 0 | Dividends (Total Payout) | 30,000,000 | 45,000,000 |
Share Price (per share) | 20 | 100 | Share Price (per share) | 670 | 650 |
Cash from operations | 2,000,000 | 6,000,000 | Cash from operations | (35,000,000) | (50,000,000) |
- Adopting the perspective of a financial analyst, evaluate the performance of King’s Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given the information above and why? Please state your rationale behind your chosen investment. In your answer, please also discuss what further information you might seek to support your decision.
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