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Lisa Estimated That Out and About Plc Will Need to Raise £14 Million for Its New Marketing Budget. Using Appendix B , and Any Other Relevant Data, Assess Out and About Plc Ís Current Financial Position and Recommend How

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Out and About plc

Capital is the funds that are invested into a business to be used for the growth and expansion of a business. In the case of Out and About plc, they are going to use this capital in order to fund its marketing budget.

Out and About have a current ratio of 0.87:1 and an acid test ratio to one. This suggests that they are suffering from very severe liquidity problems especially short term liquidity. As they have £800 million worth of non-current assets, it would be useful for them to sell off some of these assets because it will increase the amount of cash they have, thus also increasing their current assets figure. Also, they could then use this cash to also reduce its current liabilities figure by paying off some its trade payables; this then will cause both their current ratio and acid test ratio to increase.

Trade debtors are worth £70 million out of the £140 million of current assets. This means that they make up 50% of the total current assets. The trade receivables take 87 days to pay the business back; this suggests that they are to very quick in terms of repayment. This will cause further problems for Out and About plc because it could mean that they may not receive payments from its debtors causing them to write these debts off as 'bad debts'. If these bad debts start to build up, this can cause a business's expenses to increase and the value of the receivables asset to decrease.

One major concern for Out and About plc is its profit margins. They had made a gross profit of £158 million and an operating profit of £16 million. This means that they have a gross profit margin of 53.5% and a net profit margin of only 5.4%. This drop of almost 50% raises many questions about Out and About plc ability of managing its cost. This huge drop in profit shows that they are not very good at managing their indirect costs; they are not

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