Module Code & Module Title

CC6001KP Advanced Database Systems Development

Assessment Weightage & Type

30% Individual Coursework

Year and Semester

2018-19 Autumn / 2018-19 Spring

Student Name: Prasiddha Pradhan

London Met ID: 18030163
College ID: NP01BA4A180084
Assignment Due Date: 3/may/2019
Assignment Submission Date: 3/may/2019
Word Count (Where Required): 1000

I confirm that I understand my coursework needs to be submitted online via Google Classroom under the
relevant module page before the deadline in order for my assignment to be accepted and marked. I am
fully aware that late submissions will be treated as non-submission and a marks of zero will be awarded.
 Table of Content
Barnes and Noble ratio analysis 3
Limitations on the use of ratio analysis 4
External factors 4
Appendix 5, 6
Techniques 7
LMU machine recommendations 7, 8
Reference 8
 Barnes and Nobel Inc.
Barnes and Nobel Inc. is the world largest bookstore and a leading retailer of content, digital
media and educational products and it also operates the best bookseller in the United States
[ CITATION blo19 \l 1033 ]. The company also acclaimed the Guinness world records for the
largest bookstore in the world. The company also runs 630 Barnes and Noble bookstores in 50
States [ CITATION bar18 \l 1033 ]. The company also operates through two sections B and N
retail and NOOK which provides e-Readers and an expansive collection of digital reading
content. The company also provides café products and services which helps customers to be
comfortable and enjoy foods and drinks.
Initially examining the profitability ratio of Barnes and Nobel Inc. over the multiyear time span
2015, 2016 and 2017 we can see that the gross profit margin overall revenue is higher in the
financial year 2015 while it is a bit lower in the year 2016 after monetary year 2017. Net income
of the year 2015 is more than that of the year 2016 and 2017. From the performance ratio we can
notice that gross profit margin of 2015, 2016, and 2017 which is 33%, 32% and 31%
respectively are decreasing by 1% per fiscal year this is because due to lower store traffic and
also Barnes and Nobles Inc. failed to keep up with their competitors for example Amazon.
Amazon dominated in the field of e-book market and would have a cohesive plan and services to
keep with the new generations [ CITATION Jul \l 1033 ].
Firstly by analyzing the return on total assets of Barnes and Noble we can notice that assets of
each year are low especially with the year 2016 which has a negative number. This shows us that
the company are not maintaining their assets properly. 2016 was a rough year for Barnes and
Noble as its spinoff business Barnes and Noble education also suffered from losses which lead to
a negative number.
Ultimately discussing the arrival on return on capital employed, the year 2017 is somewhat at a
higher value which is 7% than the monetary year 2015 which the value is at 6% however there is
an immense decrease in the year 2016 which is 2%. This could be result of their business Barnes
and Noble Education which went downhill and there was also decreasing sales in their e-book
NOOK which also affected the decrease in return on capital employed.
By evaluating the liquidity ratio of the fiscal year 2015, 2016 and 2017 of Barnes and Noble Inc
it is shown that in the table the current ratio is above 1 in the year 2015 and 2017 whereas the
ratio is below 1 in the fiscal year 2016. Since the ratio is less than 1 in the year 2016 it shows
that Barnes and Nobel Inc. are facing problems to meet there goals that year. The reason they are
facing these problems because the company did not use capital in a profitable way and it had also
borrowed a large sum of money. The company also had an increase in accrued liability and
prepaid expenses in fiscal year of 2016.
Quick Ratio of all the three years 2015, 2016, and 2017 which are 0.05%, 0.12% and 0.07%
respectively they all have value under 1 and have a slight distinction in between there points.
Henceforth we can assess that the Barnes and Noble Inc. depends a lot on stock and different
resources so as to pay its momentary liabilities which is making an issue for the organization.
Stock turnover is additionally the liquidity ratio showing how much the company has sold and
replaced inventory in a given time. The stock turnover of Barnes and Noble Inc. in the year 2015,
2016 and 2017 is the most noteworthy which suggests either solid deals or incapable purchasing
of the things that they sell. Be that as it may, for the most part high stock dimensions are
unfortunate since they speak to a venture with a proportion of zero and furthermore opens the
organization up to inconvenience if the costs start to fall.
By assessing the gearing ratio we can see that in the year 2015, 2016, and 2017 the
value of gearing ratio brings increase in growth by 10%, 11%, and 12% respectively. This
indicates that there is less chances of risk by both lenders and investors and also less chances of
financial risks.
In conclusion after doing research on Barnes and Noble we can conclude that the company was
struggling most of the year, it did had some profits along the way but it faced many challenges in
its spinoff business and its e-readers as well. Ratio analysis did help to validate and disapprove
financial, speculation and working decisions of the organization, it also helps to simplify
accounting statements or more efficient operations. But ratio analysis is not perfect as it may not
provide incorrect information and ignore the qualitative aspects of the firm. Overall Ratio
analysis is very helpful and provide issues that needs attention.

Limitation on the use of Ratio Analysis

Ratio analysis can be defined as a process in which it helps to examine and compare
financial information and helps to understand financial position and cash flow of the
business. However they are drawbacks of the analysis which we are going to discuss. The
first point is that If the business has a change in inflation over the period that means that
the numbers cannot be compared over the period they overlook the changes in price level
[ CITATION acc18 \l 1033 ]. Secondly Ratio analysis is not the solution it does not help
the business to solve any financial problems [ CITATION top \l 1033 ]. And lastly Ratio
analysis uses past results which are released by the company, so the past analysis does
not represent the future of the company performance [ CITATION cor \l 1033 ]

External factors affecting Barnes and Nobles Inc.

Barnes and Noble were once considered to be the world’s largest bookstore and the best
bookstore in United States of America, However because of various external factors the
company suffered a major downfall in the industry. Now it is barely surviving in the
bookstore business. The external factors that is affecting Barnes and Nobles are as
follows. Firstly the company could not keep up with the change in technology and trends.
It tried to introduce new business ideas and new products but it could not keep up with its
competitors and were far behind. Secondly the company introduced their new spin off
business which was known as Barnes and Noble Education which slumped badly and the
sales of their NOOK business was also not doing very well which caused them to
 struggle financially. Barnes and Noble also failed to build a community, it did not tried to
appeal to fans of their liked books and artists [ CITATION Dan18 \l 1033 ].

Appendix

  2015 2016 2017

Gross Profit 1,425,924 1,327,297 1,212,202
Net Sales 4,297,108 4,163,844 3,894,558
Gross Profit Margin 33% 32% 31%
Table 1: Gross Profit Margin

  2015 2016 2017

Net Income 36,596 -24,446 22,023
Average Total Assets 3324940 2562606.5 1972851.5
Return on Total Assets 1% -1% 1%
Table 2: Return on total assets
  2015 2016 2017
Operating Profit 90194 14656 54308
Total Asset 3112431 2012782 1932921
Current Liabilites 1,472,993 1,193,871 1,108,267
Capital Employed 1,639,438 818,911 1639438
Return on Capital
Employed 6% 2% 7%
Table 3: Return on capital employed

  2015 2016 2017

Current Asset 1,612,240 1,178,390 1,128,012
Current Liabilities 1,472,993 1,193,871 1,108,267
Current Ratio 1.09 0.99 1.02
Table 4: Current Ratio

  2015 2016 2017

Cash+Short Term Investment+ Accounts
recievable 74911 138,755 79,287
Current Liabilities 1,472,993 1,193,871 1,108,267
Quick Ratio 0.05 0.12 0.07
Table 5: Quick Ratio
  2015 2016 2017
Cost of Goods sold 2,871,184 2,836,547 2,682,356
Inventories of current year 995,738 933,723 946,909
Inventories of previous
year 1,234,635 995,738 933,723
Stock Turnover 2.57 2.94 2.85
Turnover Days 141.77 124.14 127.95
Table 6: Stock Turnover

  2015 2016 2017

Long term Liabilities 254,021 215,401 250,343
Share Capital 1927997 1738034 1741380
Reserves 35712 24349 46425
Gearing Ratio 10% 11% 12%
Table 7: Gearing Ratio
 Techniques
Firstly we are going to start by ARR which is also known as accounting rate of return.
Accounting rate of return can be defined as a formula which is used to measure the profit or
earnings which it is expected to make [ CITATION mya \l 1033 ]. ARR is also a capital
budgeting metric which is very useful for the calculation of profitability [ CITATION CHR19 \l
1033 ]. By looking at the graph of ARR of super is better than deluxe by around 4%. ARR can
also be used when there is a need of deciding in investment. It is also useful in knowing the
annual percentage rate of return of projects. ARR is basically very useful in business but it also
has various disadvantages, this method disregards time factor and it isn’t helpful where venture
is made at two or more various occasion. It also doesn’t take cash flow into consideration which
is important than accounting profits. Now secondly we are going to discuss about payback
period. The amount of time to recover the cost of investment is known as payback period. The
payback period is very simple to understand and calculated and it also focuses on how to quickly
return the money from investment [ CITATION acc181 \l 1033 ] and it is also useful for quick
solutions. However, the method also has its drawbacks it ignores the time value of money, it is
also not realistic as it does not think about typical business situations, and it doesn’t cover all the
cash flows. In the graph the payback period of super which is at 4 years is seen to be better than
the payback period of deluxe which is at 5 years because if there is less payback period the better
it will get. Net present value is the estimation of all positive and negative future money over the
existence of the investment. Net present value helps the business and the investors to know
whether the investment will create value for them or not and it also takes consideration on the
cost of capital and risks in the future business[ CITATION foo \l 1033 ]. But is not useful when
comparing two different sized projects and it also can’t determine the opportunity costs. In the
graph we can notice that net present value of super which is 55528.96 is more greater than net
present value of deluxe at 29166.00. Now continuing with IRR which is known as internal rate of
returns. Internal rate of return is the markdown rate that makes the net present value of a project
zero [ CITATION cor1 \l 1033 ]. One of the advantages of IRR is that it gives the accurate rate
of return for each venture and IRR also measures the future earning capability of money but it
completely ignores the economies of scale and different projects are also not considered by IRR.
By observing the graph IRR of super better than IRR of deluxe 16.33% and 10.29% respectively.
This indicates that the machine of super has more value of investment of return than machine of
deluxe.
In conclusion all the ratios are important for the company to know about the specific details.
Each ratios does have their own advantages and disadvantages but nevertheless each ratios is
better for the investors and the company.

LMU Plc Machine Recommendations

In LMU Plc there are two machines in which we have to choose one those are Super machine
and Deluxe machine. We have to select the machine which is best for the business to work
smoothly and efficiently and overall have good performance to grow the business. In my opinion
the senior management of LMU Plc should choose the Super machine. The super machine
compared to deluxe machine is rather cheap. The Accounting Rate of Return (ARR) of super
machine which is 17.31% is better than Deluxe machine 12.50% by 4%. The payback period of
super machine is also less (4 years) which makes it better whereas in deluxe it is 5 years which
means that the cost can be covered quickly. Further moving on the Net present value of super
machine is 55528.96 and the Net present value of deluxe machine is 29166.00 which means
super machine is better and also adds more value in the long term. Now lastly we are going to
compare Internal Rate of Return (IRR) to super machine and Deluxe machine. It is obvious that
super machine is better than deluxe machine by 6.04% which can indicate that the business can
earn better revenues.

References
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barnesandnobleinc. (2018, january 27). Retrieved from barnesandnobleinc:
http://www.barnesandnobleinc.com/about-bn/
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