Key Elements In Strategy Of Jaguar Company Ltd Accounting Essay

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Jaguar Company Ltd. Is a British luxury car manufacturer founded in 1922 by (Swallow Sidecar Company) in Coventry England, by two motorcycle enthusiasts, Sir William Lyons and William Walmsley. In 1989 ford made offers to the US and UK Jaguar shareholders to buy their shares; Jaguar's list of the stock exchange was removed in 1990, and in 1999 Jaguar merged with Ford's new Premier Automotive Group as well as Aston Martin, Volvo Cars, Land Rover, and Aston Martin. In 2007 Ford announced their plan in selling Jaguar and retain their services of Goldman Sachs, Morgan Stanley, and HSBC to advice them on the deal, but the deal was delayed till 2008. Ford purchased Jaguar in 1989 and sold it in 2008 earning no profit for the Dearborn-based auto manufacturer.

The company's short- and longer-term actions focus on the marketplace challenges and address the fundamental structure of the business and its future strategy. They will act as Jaguar's foundation for the remainder of the decade. Recently Jaguar Company Ltd. announced their Aims and objective plans for the company's foreseeable future. The plan includes:

Product actions

Marketplace actions

Cost actions

Based on the plan mentioned above jaguar aim is to trigger the supply and demand of the product, Market strategy and distribution, Revenue management, brand and marketing, and Lenear cost structure. These are the key elements Jaguar wishes to accomplish.

Aims and Objectives:

The aim and objective of this report is to elaborate comprehensive evaluation performance of Jaguar Company Ltd. To evaluate the company the report will use the financial tools such as, Accounting concept and principles, and ratio analysis. As well in the report will include corporate financial report standard, and Advantages and disadvantages of that principle adopted. The report will also evaluate the benchmark of the company's 5 years economic trends along with their competitor to see how well Jaguar is performing. Finally the report will evaluate the Non financial side of the company's strategy.

Financial accounting concepts and principles and their role in evaluating business performance:

The main business performance evaluation is the presentation of the economic information given in three different types of forms evaluating different aspects of the business which are; Profit and Loss account, Balance sheet, and Cash flow.

Profit and loss presents information on the financial result of a company's business activities over a period of time. The income statement communicates how much revenue the company generated during a period and what costs it incurred in connection with generating the revenue.

Balance sheet presents the company's current financial position by disclosing resources the company controls (assets) and what it owes (liability) at a specific point in time

Although the income statement and balance sheet provides a measure of a company's success in terms of performance and financial position, cash flow is also a vital to a company's long term success. Disclosing the sources and uses of cash helps creditors, investors, and other statement users evaluate the company's liquidity, solvency, and financial flexibility

Britton and Waterston (2006, pp.53) highlight the reason to familiarise oneself with the accounting concepts when evaluating a company's financial statements;

'Given that such underlying theoretical principles can radically change the view the financial statements give an entity, it should be obvious that preparers and users of those statements should be very clear about the particular principles that have been applied'.

Britton and Waterston (2006, pp.3) maintain 'Financial accounting is concerned with the recording, processing and presentation of economic information after the event to those people outside the organization who are interested in it'.

IFRS and GAAP Accounting Principles comparison

Note: (write more about comparison between IFRS and GAAP Acc Policies)

CFA Financial reporting Analysis level 1 (2009, pp. 31) "The recent adoption of IFRS as the required financial reporting standard by the EU and other countries has advanced the goal of global convergence. Nevertheless, there are still significant differences in financial reporting in the global capital market". Arguably, the most critical are the differences that exist between IFRS and US GAAP. After EU adoption of IFRS in 2005, these two reporting standards account for a significant number of the world's listed companies.

Jaguar Company Ltd. adopted U.S GAAP ( General Accepted Accounting Principle) due to it was merged with an American car manufacturing company (Ford), which have the same principle in their accounts. To change their accounting principle it will impact on the company's financial reports.

Ratio Analysis Advantages

To have a well insight of a company's performance we use financial ratios to analyze:

Profitability

Efficiency

Liquidity

Financial gearing

Investment

Out of the five categories mentioned above the report will analyze Jaguar's profitability ratios such as ROA (Return on Asset ratio), Equity entity ratio, (Stock turnover ratio) Current Ratio Calculating the profitability ratios will determine how well the company is doing, and can benchmark the ratios with its competitor to analyze who has the edge advantage in the market; McLaney and Atrill (2008, pp. 222) 'A ratio simply relates one figure, appearing in the financial statements to some other figure appearing there (for example, operating profit in relation to capital employed) or, perhaps, to some resource of the business '

Profitability ratios are used to analysis a business's performance to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. Most of the profitability ratios, has a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well

Jaguar Car Company Ltd. Profitability Ratios and Evaluation

Note: During year 2007 there world economic crisis accrued and might be a main factor Jaguar Car Company Ltd, profitability ratios decreased.

Asset (-) Liability = Equity

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

716,700

396,200

110,600

261,900

-544,500

(FAME 2010a)

This ratio evaluates the company's measure of capital, the worth of the company. Jaguar Car Company has been expanding and meeting new market demands hens the company's equity increased since 2005. in year 2008 it shows in their current ratio figures they have liquidized their assets cause of world economic recession has accrued, and ford has sold Jaguar Car Company Ltd to Tata Motors .

Current ratio (Current Asset / Current Liability)

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

0.65

1.36

0.79

1.08

0.25

(FAME 2010a)

Current ratio measures ability to meet current debts with current assets. In this table shows Jaguar they have been increasing there assets for the past four years when there was inflation during these periods having high demand in the market. In 2008 their current ratio decreased cause of Jaguar sold their assets to maintain the company's performance during the world economic crisis, and Jaguar merged with Ford so any past debt Jaguar accrued it was divided by the added current assets ford hold as a company.

Total Assets per Employee (Unit)

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

161,984

1095,18

92,971

66,708

50,260

(FAME 2010a)

Define the ratios and evaluate the ratio figures and ref if available

Return on Total Asset (%)

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

-3.53

31.95

-36.6

-90.81

-88.81

(FAME 2010a)

http://www.investopedia.com/terms/r/return_on_total_assets.asp"ROTA ratio measures a company's earnings before interest and taxes (EBIT) against its total net assets. The ratio is considered an indicator of how effectively a company is using its assets to generate earnings before contractual obligations must be paid".

Ford automobile company sold Jaguar in 2007 and retains their services of Goldman Sachs, Morgan Stanley, and HSBC to advice them on the deal, but the deal was delayed till 2008, in the table shows high return on total asset in 2007.

Stock turnover ratio

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

12.95

10.04

18.03

17.26

19.15

(FAME 2010a)

http://www.bized.co.uk/learn/business/accounting/busaccounts/notes/sto-th1.htm "To analyze stocks a little further it is possible to use ratio analysis. The STOCK TURNOVER RATIO shows how many times over the business has sold the value of its stocks during the year. The higher the stock turnover the better, because money is then tied up for less time in stocks".

Jaguar's stock turnover dramatically decreased in 2007 during the recession when the market demand has fallen and Jaguar Car Company Ltd. being sold to Tata Motors Company.

Jaguar Car Company Ltd. Profitability Ratio benchmarking with Competitor Bentley Motors Limited

Asset (-) Liability = Equity

Company

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

Jaguar

716,700

396,200

110,600

261,900

-544,500

Bentley

-94,600

27,300

-79,700

-166,300

-175,400

Jaguar's equity has increased dramatically apart form its rival Bentley automobile Company has not been doing so well; in the past five years Bentley's equity ratio shows very low, and Jaguar shows its expanding into more market hens merged with ford adding more value to the company's equity then sold to Tata Motors.

Current ratio (Current Asset / Current Liability)

Company

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

Jaguar

0.65

1.36

0.79

1.08

0.25

Bentley

0.69

0.84

1.02

0.95

0.83

Jaguar Car Company Ltd shows in the figures above that it is meeting its debt obligations since year 2005, but Bentley has more steady rate of meeting its demand payables.

Total Assets per Employee (Unit)

Company

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

Jaguar

161,984

1095,18

92,971

66,708

50,260

Bentley

140,234

110,574

122,959

139,672

140,723

evaluate the ratio figures

Return on Total Asset (%)

Company

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

Jaguar

-3.53

31.95

-36.6

-90.81

-88.81

Bentley

-24.72

22.67

14.38

-0.04

-12.06

Jaguar's return on asset in very compared to Bentley using most of there assets to there operations to meet more of the market demand, but Bentley took another approach.

Stock turnover ratio

Company

2008 (GBP) UK GAAP

2007 (GBP) UK GAAP

2006 (GBP) UK GAAP

2005 (GBP) UK GAAP

2004 (GBP) UK GAAP

Jaguar

12.95

10.04

18.03

17.26

19.15

Bentley

8.33

9.94

10.28

8.97

7.59

The stock turnover has been steadily high for three years since (2004-2006) compared to Bentley. In 2007 Ford sold Jaguar to Tata Motors, and stock owners sold their shares during the business merge diversification.

Disadvantages of using ratio Analysis

The ratio measures are not definitive, and ratios need to be carefully interpreted. Ratios give clues of the company's performance. They require accurate quantitative information as much as possible. Outdated figures in a set of accounts are likely to be at least few months old, so this will not give proper ratio analysis to indicate the company's current financial statues.

Britton and Waterston (2006 pp.204-205) add that there are seven principle limitations of ratio analysis:

The historical nature of accounts.

Differences in accounting policies.

Absence of suitable comparable data.

Changes in the value of money.

Hidden short-term fluctuations.

Differences in the environments of periods compared.

Other non-monetary factors.

http://cbdd.wsu.edu/kewlcontent/cdoutput "Ratio analysis is useful, but analysts should be aware of these problems and make adjustments as necessary. Ratios analysis conducted in a mechanical, unthinking manner is dangerous, but if used intelligently and with good judgment, it can provide useful insights into the firm's operations".

Jaguar Company Ltd. Non Financial review evaluation

Product actions - New all-aluminum XK strengthening of the XJ range with a premium diesel engine saloon

Marketplace actions - Getting reviews of Jaguar's retail and market

infrastructure throughout the world, and revenue management steps that

include a reduction in daily rental units and revised series and model

actions.

Cost actions - including the discontinuation of assembly operations at

Browns Lane; the transfer of 425 jobs to Castle Bromwich, including

generous terms for 400 voluntary separations at Browns Lane; and a

reduction of 750 staff and agency positions. In addition, the Jaguar

brand will withdraw from Formula One at the end of 2004.

Key elements of the plan:

Product:

- New all-aluminum XK sports car; Jaguar changed there product quality by using all new type of aluminum car and will be the first production car to feature Jaguar's new design language, developed by Design Director (Ian Callum).

- XJ range significantly strengthened the XJ range will be extended and strengthened by introducing a premium diesel engine next year to respond to growth in luxury diesel saloons in Europe and further enhance the customer appeal of a car which is already segment leader in the UK. The new long wheelbase version of the XJ, which is targeted at the US market, has received very strong reviews having just gone on sale.

Market place:

- Supply and demand balanced; Jaguar reduced 15,000-unit in production in 2004 to

Better align stock with on-going demand.

- Market strategy and distribution

Jaguar Car Company Ltd has reviewed there retail and market infrastructure in their markets around the world to improve both dealer and market profitability.

Leaner cost structure:

- Jaguar consolidated their premium aluminum vehicles in Castle Bromwich. The result is a fully integrated, efficient and technically advanced aluminum vehicle production facility with panel stamping, body assembly and final assembly on the same site.

The reason Ford is selling Jaguar to Tata Motor Company in Asia, because Jaguar reports said losses at Jaguar stood at USD 715 million in 2006. Jaguar has not been able to provide any profit for Ford because of high manufacturing cost

Jaguar Car Company Ltd SWOT Analysis

Strength Weakness

Ford selling Jaguar due to high manufacturing cost in UK

Very low on retune on asset profitability ratio

They Dominate most of the market compared to their rival

High stock turnover

Relatively high equity compared to Bentley

Opportunity Threats

Change in Management

Change in Accounting policies

Merging with Tata Motors

Change in business strategy

Conclusion

Nothing has been published on what is Tata's strategy on Jaguar. The reason Ford is selling Jaguar to Tata Motor Company in Asia, because Jaguar reports said losses at Jaguar stood at USD 715 million in 2006. Jaguar has not been able to provide any profit for Ford because of high manufacturing cost. With the new merge Jaguar has made with Tata Motor company will emphasize the future of Jaguar Car Company Ltd.

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