PESTEL Analysis of China and the UAE

PESTEL Analysis of China and the UAE UAE Economy Introduction The economic development of the UAE and China make these developing nations excellent choices for overseas expansion, globalization and foreign direct investment (FDI). Globalization of developing nations strengthens their economies and global distribution channels. The UAE is now considered one of the wealthiest and fastest developing nations worldwide. China is fast becoming an economic leader and manufacturer in the world, famous for its cheap labor factory workers. The UAE’s wealthy economy has been increasing at a rapid pace due to its real estate boom attracting huge FDI. China has eliminated many of its trade barriers and now has an open free trade economy that appeals to many global nations seeking new target markets and consumers for their products. Both the UAE and China are quickly becoming significant growth economies that attract global FDI from countries all over the world wanting to expand and find new import/export partners for their goods. UAE PEST Analysis (P)olitical The UAE Government is made up of a Federation of the seven Emirates ruled by President, Sheikh Khalifa bin Zayed Al-Nahyan, who is also the ruler of Abu Dhabi. The UAE government is very supportive of their free trade open society and encourages FDI and globalization. The court system is still being established since its rulings are not always enforceable due to the large foreign population. The legal regulations are similar to the western world and becoming stricter each year (Ahmed, 2007, 1-2). (E)conomic The UAE population consists of three million people and 60% of them are in the workforce. The UAE population growth rate is currently 9.4%, with only 13% of UAE Nationals making up the workforce and 87% foreigner expatriates taking over the Emirates market. With such a large expatriate workforce (87%) entering UAE due to the real estate development and investments in the region. The UAE GDP increased by 15% to 450 billion dirhams in 2007, and the economy grew even faster at a pace of 16.7%. Its GDP real growth rate is 10%, and it shows $99 billion in oil revenues, and $121 billion in non-oil revenues. The UAE exports equal $48 billion with partners in Korea, Singapore, India, Thailand and Japan. The oil and gas exports equal $75 billion. The UAE imports equal $30 billion of manufactured goods, transportation equipment, animals and food products from the UK, USA, Europe and Japan. The primary language is English, however, Arabic, Farsi, Hindi, Urdu, Chinese, Tonga and Russian are also common. The dominant religion in the country is Islam, however, there are also many Christians in the nation. The minorities include the local UAE Nationals, Russians, Chinese and westerners, while Indians are the dominant nationality. The minorities’ religious rights are respected by the majority. It is a very multicultural society and Hofesteds cultural dimensions framework can be used to describe the culture of the country. UAE is showing high economic growth that is attracting new foreign investors, which helps to generate more revenues and demand for the real estate sector (20%) (Ahmed, 20 07, 1-3). The level of foreign direct investment (FDI) in the economy is very high, with the majority of it going into real estate development and trade. The primary suppliers of FDI to the country include Europe, the USA, UK and Russia. Globalization has greatly improved the situation in UAE by bringing in thousands of products, services and workers from all over the world which has helped to develop the economy worldwide. The UAE legal system is honest and fair for local citizens. Foreign firms operating in the country do not face any political risk. The UAE belongs to the GCC regional trade bloc and has been a member of the WTO, World Bank and the IMF for almost seven years. The country’s huge wealth has resulted in not needing to borrow funds from the World Bank or the IMF. The UAE has experienced a balance of payments trade surplus in the past year of over 100 billion dirhams, due to the construction and real estate markets. Its official reserves account has increased by over 50 bi llion in the past year. The countrys currency is called dirhams and its value relative to the dollar is 3.67, and 3.98 to the euro. The currencys value has increased a bit in the past five years relative to the dollar and the euro because it is relying on a fixed exchange rate policy. The has no trade barriers to imported goods because they are encouraging all products to be imported and exported from the UAE since it re-exports 75% of its imports for profit (Ahmed, 2007, 1-3). (S)ociocultural UAE citizens have a very high standard of living, western lifestyle, and their financial positions have continuously increased over time. This has allowed for a very materialistic high society with lots of money to purchase houses, cars and other material items. The society is open and free with all types of hotels, restaurants, tourism, recreational activities and sports. The multicultural nature of the country allows for many foreigners to go there to work in well-paying positions. An overall country analysis shows the future trends of development and expansion that the UAE is undergoing will lead to an estimated 4.8 million people living there by the year 2010 (Cateora, 2007, 68). (T)echnological The UAE region is composed of a large population of very young professionals who are extremely technologically-knowledgeable. The IT industry relates to the tourism, hotel, computer and IT service sectors. The number of Internet users in the GCC region has increased ten-fold since 1998. The Internet and IT software solutions industries in the Gulf region have doubled the rate of Europe. Estimates of personal computer sales in the GCC show about 12% growth in the quantity of units sold by 2003, compared to the global growth of 8%. The UAE has the most satellite, Internet and mobile phone users in the Middle East (Cateora, 2007, 68-69). China External Environmental Analysis: Pest Analysis (P)olitical The People’s Republic of China’s current political system is Communism, with the capital city being Beijing. There are 23 different provinces (including Taiwan) and five separate regions in China. Their independence day was 221 BC under the Ch’in Dynasty, January 1, 1912 under the Manchu Dynasty, and October 1, 1949 when the People’s Republic was formed, which is their national holiday. The Chinese constitution was created on December 4, 1982, and their legal system involves a very complicated set of cultural statutes and customs for criminal law. The government is trying to upgrade the commercial laws to adapt to the new needs required due to an increase in foreign trade (Forsyth, 2004, 35-38). (E)conomic China’s population is 1.3 billion people, 22.3% aged 0-14, 70.3% aged 15-64, and 7.5 aged 65 and over. China’s GDP is $6.449 trillion, with the GDP real growth rate at 9.1%, and GDP per capita at $5,000. The GDP by sector is 14.8% for agriculture, 52.9% for industry, and 32.2% for services. Investments make up 43.4% of the GDP in China. However, the Chinese population has 10% of its people living in poverty, with the lowest 10% equaling 2.4% of the household income, and the highest 10% equaling 30.4%. The inflation rate is 1.2%, labor force 778.1 million, unemployment rate 101%, and budget for revenues at $265.8 billion, with expenditures at $300.2 billion. The labor force includes 50% in agriculture, 22% in industry, and 28% in services. Over 75% of all toys sold in the US are made in China and it controls almost 25% of the globe’s foreign currency reserves. As for per capita income, China has 6% growth (Fouquin, 1998, 105-108). Agriculture and industry are the major markets in China, especially in larger cities like Hong Kong and Shangai, where there is a lot of foreign investment. The public debt is 30.1% of the GDP. The agriculture products are wheat, rice, peanuts, tea, potatoes, cotton, barley, fish and pork. The industries include coal, textiles and apparel, iron and steel, automobiles, telecommunications, electronics, cement, chemical fertilizers, petroleum, and food processing. The industrial growth rate is 30.4%, with $436.1 billion in exports, and $397.4 billion in imports. Their current export partners include 21.1% USA, 17.4% Hong Kong, 13.6% Japan, 4.6% South Korea, and 4% Germany. Their import partners include 18% Japan, 11.9% Taiwan, 10.4% South Korea, 8.2% USA, and 5.9% Germany. The majority of the Chinese people are not very religious and considered atheist, with only 3%-4% being Christian and 1-2% being Daoist, Muslim or Buddhist. The country is not very culturally homogenous and the majori ty of the people are Chinese. The official Chinese languages include Chinese, Mandarin and Cantonese (Yin, 2007, 1-2). FDI is beneficial to the host country because it brings in foreign business, products and services that would otherwise not be available. However, FDI can also result in small local businesses going bankrupt due to not having competitive advantages over larger companies. FDI is the key to underdeveloped nations improving their economy and strategic alliances. China’s currency is called yen, and its value relative to the US dollar is 100 to 1. Its value relative to the euro is 110 to 1. The currencys value has only changed a small amount in the past 5 years relative to the dollar and the euro? The country uses a fixed exchange rate policy. China experienced a balance of payments trade surplus in the past year of over three billion yen due to increased globalization and FDI. Its official reserves account have changed a lot in the past year, increasing by over 20 million yen. China does not yet belong to any regional trade blocs and has been a member of the WTO, World Bank and th e IMF for 10 years. The country has borrowed billions of dollars from the World Bank and the IMF in the past year, and how has huge debts totaling over 300 billion dollars. (S)ociocultural China still maintains many of its most traditional values and beliefs of Confucianism, which is taught at many schools and academies. Confucianism is a social order and almost considered their religion since most Chinese do not follow any other doctrine. The basis of Confucianism for the Chinese culture involves family organization and many values related to social life. Social harmony is a major rule to this belief, which also includes many cultural rituals and ceremonies that are thousands of years old and still practiced by the older generation today. However, many of the younger generation are less strict in their Confucianism beliefs, due to modernization of the country and influences by other cultures like America (Redinger, 2003, 1-2). (T)echnological China has 263 million main line telephones, 269 million mobile phones, 160,421 Internet hosts, and 94 million Internet users (which is good for e-commerce and online vendor ordering, shipping and tracking for Sharjah companies). China is undergoing many new technology changes, especially in their banking sector, which still concerns its leaders due to its effect on the stability of the economy. As China learns how to integrate new IT methods into its different sectors, they are still trying to upgrade the skills and knowledge of their workers to meet the technology needs (Rashtchy, 2004, 1-3). Hofstede’s Cultural Dimensions Hofstede’s cultural dimensions can be applied as a framework for understanding the cultural society of both the UAE and China: Power Distance: the extent to which people accept unequal distribution of power. In higher power cultures, there is a wider gap between the powerful and the powerless (both nations). Uncertainty avoidance: the extent to which the culture tolerates ambiguity and uncertainty. High uncertainty avoidance leads to low tolerance for uncertainty and to a search for absolute truths (China). Individualism: The extent to which individuals or closely-knit social structures such as the extended family (collectivism) are the basis for social systems. Individualism leads to the reliance on self and focus on individual achievement (both nations). Masculinity: The extent to which assertiveness and independence from others is valued. High masculinity leads to high sex-role differentiation, focus on independence, ambition, and material goods (UAE) (Gibson, 2003, 55-58, 303-306). Necessity for MNC CSR FDI Multinational Corporations (MNCs) have a definite duty to practice corporate social responsibility (CSR), especially during globalization into developing nations like China and the UAE. Corporations today are impelled to conduct their global business with integrity and social consciousness to improve their images with the international public. The potential benefits of FDI include helping transfer technology and skills, providing management and training of local workers, aiding in the creation of original skills in administration, marketing and other business techniques, and contributing to the growth of local entrepreneurship. FDI also improves competitive markets, provides access to international markets, contributes to tax revenues and helps input foreign exchange problems. FDI produces employment opportunities for developing nations’ citizens, and raises the rate of domestic wages (Kobrin, 1997, 7-10) (Hay, 1995, 59-63). Conclusion The UAE economy has a free trade policy which allows for all products to be globally traded to increase profitability opportunities. However, China has a strategic trade policy that allows for most products to be traded, yet restricts the main goods that the Chinese manufacturers produce from being imported to reduce global competition. Both the UAE and China are very attractive for FDI, however, for different reasons. The UAE is a famous tourist and hospitality destination, with huge profit potential as a real estate and construction investment. China is famous for its cheap manufacturing labor, raw materials and supplies. China recently opened up its trade market allowing FDI and global trade, which attracts international producers wanting new target markets. Both these nations have very appealing societies that foreign investors and MNCs are focusing on to increase their globalization potential. References Alon, I. (2003). Chinese culture, organizational behavior and international business management. London: Praeger. Brahm, L. (1996). The Business Guide to China. Singapore: Butterworth-Heinemann Asia. Brewer, J. (2004). Foreign business chiefs must learn the art of Guanxi to enter China. Industrial Correspondence. Cateora, P. (2007). International Marketing. Boston: McGraw Hill Irwin. Claasen, L. (2004). Master the culture and business in China pays off. Economy, Business Finance. Forsyth, I. (2004). China seen as a key driver of global economy. Aberneen Press and Journal. Fouquin, M. (1998). The Chinese economy. Geneva: Economica. Gibson, J. (2003). Organizations. Boston: McGraw-Hill. Griffin, R. W. and Pustay, M. W. (2006) International Business: A Managerial Perspective. London: Prentice Hall. Hay, R. (1995). Chinese-American Electronics Industry. Annual Survey. Kenna, P. (1994). Business China. Chicago: Passport Books. Kobrin, S. (1997). Foreign Direct Investment, Industrialization and Social change. MA: Jai Press. Robertson, C. (2002). The Benefits of FDI in China. Asia Monitor: China North East Monitor, Vol. 9, Issue 11. Wang, Y. (1998). Business Culture in China. Singapore: Butterworth-Heinemann Asia. Gopal, A. (2005). Research and Markets: Doing business in Shanghai. M2 Presswire. http://www.researchandmarkets.com/ Yin, C. (2007). China. World Factbook. http://www.cia.gov/cia/publications Ahmed, M. (2007). UAE. World Factbook. http://www.cia.gov/cia/publications Rashtchy, S. (2004). China Internet market. China Analyst, Vol. 1, No. 18. http://www.piperjaffray.com Redinger, T. (2003). Chinese Culture. Traditional Society and Culture. http://countrystudies.us/china/ Chang, L. (2004). China. Business Travel Guides. www.china-business-travel.com/travelguide Schumacher, W. (2003). National Guidelines in China. http://www.ilo.org/public/

Impact of Electric Vehicles Essays -- Environment, Energy, Global Clim

Today, energy security and global climate change are two major problems affecting people and the environment worldwide (IEA, 2010). These problems are highly integrated with each other and mitigating global climate change without affecting the energy security is becoming a significant challenge for many governments and policy makers in the twenty-first century (Brown & Sovacool, 2011). In recent years, energy security has become a major concern in many jurisdictions with increasing energy demand, rising energy costs, and energy production and supply issues (IEA, 2010). According to the International Energy Agency (IEA), Energy security can be described as, â€Å"the uninterrupted physical availability at a price which is affordable, while respecting environment concerns† (IEA, 2011). The global demand for energy is rapidly growing with increasing human population, urbanization and modernization across the world (Asif & Muneer, 2008). In the past two decades, the global primary energy consumption had increased by 45 %, and it is expected to continue to grow by 39 % over the next two decades (BP, 2011). Today, fossil fuels – notably oil, gas and coal, are the major sources of primary energy to meet the world energy requirements. In 2008, nearly 81% of the global primary energy needs were met by fossil fuels, representing oil - 33.2 %; coal - 27%, and natural gas - 21.1% [ref]. The fossil fuels accounted for the greatest share of global primary energy supply and the rest is met by hydro, nuclear, biomass, geothermal, wind and solar. According to the World Energy Outlook (WEO) 2011 Golden Age of Gas (GAS) scenario, fossil fuel supplies will continue to be the dominant energy sources and account for more than half of the increase of ... ...ain consistency of the analysis. †¢ Equal allocation: In this approach, it is assumed that the generated wind electricity is equally allocated to all the EVs regardless of individual requirements. †¢ Demand allocation: In this approach, it is assumed that the generated wind electricity is allocated to each EV based on its respective demand, such that charging the EVs with higher demand is preferred to charging the EVs with lower demand. This research also considers the effect of introducing electric vehicles for weekday commuting purposes in passenger transportation and discusses the overall carbon impact of commuting; the results are extrapolated for various commuting distances. This research work used Prince Edward Island, specifically the city of Summerside, as a case study, but the general approach can be applied to other cities, provinces or regions.

Security challenges faced

Cyber-crimes are described as crimes either created by the internet or aided by the internet. The danger posed by cyber crime to Australia and global community is discussed.Security challenges faced in the future are predicted using the ‘Law of accelerating returns’ where technological expansion rate is exponential. This renders long-term predictions of cyber-related developments difficult to make. With technological advancements, young people continue to integrate their personal life into widespread computer networks.This is aided by social networking sites which are used by cyber criminals to collect personal information and the lack of vigilance displayed by these young generation. They continue to be reckless despite better awareness.Tracking the trends of cyber crime is not well coordinated but available information indicates an increase in cyber crime which is interestingly linked more to the human element than technological advances. This indicates that people con tinue to make poor choices with regards to risk.Cyber crime is set to increase in the next five years as organized criminal groups consolidate. Most of these groups are based mainly in Eastern Europe but will probably spread to Asia. With the target of making criminal profit there has been the creation of almost undetectable infiltration software.The use of sophisticated software to perpetrate crime like the botnet where compromised computers are organized into a network and used by criminals.Botnets present a high risk for online fraud in the future. Phishing, where an unsuspecting user is tricked to think they are communicating with their bank to obtain their password is likely to continue. Denial of Service (DoS) attacks which flood an internet site to take the site offline will continue and be used to hold at ransom companies and disturb activities of response teams.In a recent cyber attack in Australia during Cyber Storm 2 cyberwar-game event demonstrated major weaknesses that led to successful attacks in all areas of business. All indicators are that in the next years, not much improvement would have been made in response to cyber attacks.

Profitability Analysis And Comparison Finance Essay - Free Essay Example

Sample details Pages: 12 Words: 3544 Downloads: 7 Date added: 2017/06/26 Category Finance Essay Type Research paper Did you like this example? ROCE is a comprehensive profitability indicator because it measures managements ability to generate earnings from a companys total pool of capital. It should always be higher than the rateÂÂ  at whichÂÂ  the company borrows; otherwise any increase in borrowing will reduce shareholders earnings. The ratio at the start of the period is 16.9% and at the end of 2012 it reaches to 19% as compare to 129% that ends up 71%. In this area next plc looks very strong. Though there is decrease in the ratio but it is at advantage here. Return on Share holders Funds (ROSF) Return on Shareholders Fund (ROSF) is the amount of net income returned as a percentage of shareholders equity. It reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. The return ranges from 16% to 19% except a sudden increase to abnormal event as compare to -371% that represent loss and ends up 195% positive. Next also has advantage here as company has recovered it losses in 2009. Although if industry average is available then this ratio can be interpreted in a much good way but from the data available it is safe to say that the Next Plc is in way better position. Don’t waste time! Our writers will create an original "Profitability Analysis And Comparison Finance Essay" essay for you Create order Gross Margin Percentage The Gross Margin Percentage is one of the most widely used profitability ratios. It represents how much of sales revenue is spent on providing the goods or services sold. The result of the Gross Profit Percentage indicates what is left from sales revenue for operating costs and profit. Generally, the higher the figure, the better it is. The ratio at the start is 14.55 % and after four years it is 13.56 % as compare to NEXTs 28.51% to 30.38%. NEXT has advantage over the Debenhams in this area. Further there is decreasing trends of Debenhams compare with increasing one of NEXTs. Net Profit Margin Percentage The net profit percentage is the ratio of after-tax profits to net sales. It reveals the remaining profit after all costs of production and administration expenses have been deducted from sales, and income taxes recognized. In the early year it is 4.19 % and after 4 years it reached to 5.62 % as compare to NEXT which has 14.96% that reached to 16.84% at the end of 2012. Both the companies have increasing trend but overall position of NEXT is better. Further gross profit and operating profit of Debenhams has decreasing trend and it is surprising that company have increasing net profit margin. Possible causes could be non-operating income which is non-reoccurring nature Earnings per share The portion of a companys profit allocated to each outstanding share of common stock.ÂÂ  Earnings per shareÂÂ  serve as an indicator ofÂÂ  a companys profitability. Earnings per share are generally considered to be the single mostÂÂ  important variable in determining a shares price. The higher the ratio the better it is. Debenhams ratio at start is 0.09 and after the end of four years it is 0.10. Company ratio is consistent over the period and shows a good performance in that area despite the variation in the profit and increase in the expenses. The ratio is almost in two digits over the period. On the other hand Next start with 1.69 and ends with 2.55 which is way better so it is safe to say that NEXT take a lead here. Efficiency Analysis and Comparison of both companies Stock Turnover Period This ratio shows how many days a companys inventory is hold and replaced over a period of time. If the ratio is low it means cycle of purchasing raw material and turn to finished goods is very short and low investment in inventory and vice versa. The ratio start with 56 days and with changes during the period it ends with 62 days as compare to NEXTs 46 days at start and ends with 56 days . Debtors Turnover Period An accounting measure used to quantify a firms effectiveness in extending credit to its customers. By maintaining accounts receivable, firms are indirectly extending interest-free loans to their clients. So lower the ratio the better it is. Debenhams ratio at the start is just 4 days and at the end with a light change it reached to 3.6 days that is very good. Low ratio as in this case suggests that either major sale of the company is on cash or debtors management is extraordinary efficient. In either the case company is handling its debtors remarkably. On other hand NEXT has 52 days at start and ends up 60 days which is very high than Debenhams. Although industry average would help it better to analyses the concerned area but from the available data it would be safe to say that the NEXTs management regarding inventory is more efficient. Creditors Payment Period This is an estimate of the average time period taken for a Company to pay off its trade creditors. By maintaining creditors, company is indirectly taking interest free loans so the higher the ratio the better it is. The ratio at the start is 58 days and at the end of the period it changes to 57 compared with NEXTs 27 days at the start and ends up 30 days. Debenhams is managing its creditors better than NEXT. Further as compare to debtors it should be higher which is right in the case of Debenhams. Cash Conversion Cycle The cash conversion cycle is the length of time between a Companys purchase of inventory and the receipt of cash from accounts receivable. It is the time required for a business to turn purchases into cash receipts from customers. CCC represents the number of days a firms cash remains tied up within the operations of the business. A cash flow analysis using CCC also reveals in, an overall manner, how efficiently the company is managing its working capital. The lower the ratio the better it is. Company maintains a very efficient cash conversion cycle during the last five year. Debenhams ratio starts with 1.6 and it ends 8.1, although the increase is a negative impact but that is very slight. The company is managing its financial resources very well by restricting the cash flow conversion period to single digit. On the other hand NEXTs ratio start with 71 days and ends up with 87 days which comparatively very high. The main difference is due to the debtors turnover period. Financial Position Simply stating, financial position means the value of assets and liabilities of a company. In other words the overall financial health of a company in terms of its assets, liability and the capital. When the business is growing it becomes very vital to prepare monitor some key indicators of corporate financial position on consistent basis and to compare them with prior periods to ensure timely and appropriate corporate decisions. Lack of precise and timely information can result in severe consequences. Some of the important KPIs that should be monitored include the following: Current Ratio Current ratio measures a companys ability to pay its short-term obligations through its short term assets. Debenhams starts with 0.54 and with changes it ends up 0.63 compare with NEXTs 1.1 in start and 1.54 at the end, which means that for every 1 GBP of current liabilities the companies have 0.54 or at the end 0.63 and 1.1 and 1.54 respectively worth of current assets. Debenhams is facing liquidity issues as it has very low current ratio over the last five years. Quick Ratio The quick ratio is stricter test of liquidity as it measures a companys ability to meet its short-term obligations using its most liquid assets. If the acid-test ratio is much lower than the working capital ratio, it means current assets are highly dependent on inventory as in this case. This is not an ideal situation for a company to maintain such a low ratio. Debenhams starts with 0.17 and after five year it ends with 0.17compare with NEXTs 0.65 to 0.91. The ratio depicts that for every 1GBP there is 0.17 worth of liquid asset and NEXT has 0.91. Gearing Ratio It is used mainly for analyzing a companys capital structure and thus assessing the companys financial position in the long run. During the earlier years Debenhams ratio is very high which represents that company is under high debts which leads to high interest and low profit available to the shareholders. Company managed its debt effectively during the last three years and financial health has been improved a lot. In the start it is almost 88% and after the end of fifth year it decrease to just 27% that is very significant. On the other hand Next has same trend as Debenhams but NEXTs ratio is very high as compare to Debenhams. Interest Cover Ratio The interest cover ratio measures the amount of profit available to cover the interest payable by the company. The lower the level of interest cover the greater the risk to lenders that interest payments will not be met. If interest payments and capital repayments are not paid when they fall due there can be serious consequences for a company. The ratio of both companies is low during the earlier period which tells that interest cost is high during the said periods and there is not much available to the shareholders. The ratio afterwards improved a lot. Debenhams ratio in the start is 0.5 and with the passage of time it increases to almost 10% as compare to NEXTs 12.77% that increase to 25.99% which is very significant and appreciable. Dividend Yield The dividend yield compares the amount of dividend per share with the market price of a share, and provides a direct measure of the return on investment in the shares of a company. Debenhams has not declared any dividend in the last couple of years but the ratio is consistent. The distribution of the dividend depletes the retained earnings of the company. On the other hand NEXT has been declared dividend regularly which is positive sign and advantage over the Debenhams. Market price per share Market price is an indicator of the stake-holders view about the worth of the company. It just not shows the net worth of the company and the future expectation from the company. As it shows the intentions of the general public and determine through the forces of supply and demand. Market value of the companys share is 0.48 and after the four years it reached to 1.02 that is a significant improvement. It shows that net worth of the company is increasing. Next start with1.29 and ends with 2.77 which is multiple times greater than Debenhams. Vertical analysis of Balance Sheets Debenhams vertical analysis of current asset shows that there are ample resources available in the form of cash short term investment during 2009 and 2010. These resources can be managed to minimize the interest cost. Account receivable of both the companies has been increased over the period but managed well. Inventory also has been increased over the period of time in both companies but Debenhams inventory increased more than the NEXTs. Debenhams prepaid expenses have been comparatively increased. Overall both the companies managed their current asset very well except cash and short term investments by Debenhams. Both companies do not made any major investments in the property plant and equipment during the periods. Debenhams Intangible has been increase a lot, more than double over the period and on the other hand NEXTs intangibles have been decreased consistently. Debenhams long term investment has been decreased a lot; liquated almost all long term investment. On the other hand NEXTs investments have been increased. Overall current liabilities of Debenhams have slight changes and nothing important variation except the current portion of the long term loans but in case of NEXT it has been decreased over the period. Non-current liabilities analysis of Debenhams shows that long term loans has been almost paid in 2010 and then again raised in 2011 but the raised amount is much less than the amount paid during the period. NEXTs long term loans has been increased over the period. Other non-current liabilities have grown by 75% over four year in case of Debenhams and decreased by 24% in case of NEXTs. Over all non-current liabilities has no major variation except long term loans. Corporate Governance Corporate governance refers to the set of systems, principles and processes by which a company is governed. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value of the company and is also beneficial for all stakeholders in the long term. Stakeholders in this case would include everyone ranging from the board of directors, management, shareholders to customers, employees and society. The management of the company hence assumes the role of a trustee for all the others. The financial reporting council formulated and implemented the UK Code of Corporate Governance in 1992. The code of corporate governance not only helps to monitor the companies performance but also is responsible to attract investments, since the code applicable in UK is of the highest standard. The companies listed on stock exchanges of the country are liable to comply with the requirements of the code and are required to report on how they have applied the main principles of the code and in case of any deviation to disclose the same in their annual report. Hence it is explained on comply or explain The code of corporate governance sets out the standards on the composition and effectiveness of the board, risk management, committees, shareholders relations internal controls. The board (trustee) is responsible to shareholders for the overall direction and control of its company and specifically reserves certain matters for its consideration. In order to ensure the compliance with the principles of corporate governance the Composition of board represents executive and sufficient independent non-executive directors to evaluate the performance of the company. The principle board committee consists of following three committees: Audit committee Nomination committee Remuneration committee To ensure continuing compliance the board undertakes formal evaluation of its own performance and that of its committees and individual directors. The directors complete appraisals on matters relevant to the board, committee and director performance. A report is presented to and reviewed by the board. Consecutive board meetings are being held to evaluate the performance of the management independently from time to time. Further independent evaluation has been performed by the auditors of the company. Findings of the evaluation are being presented to the board and afterward to the shareholders. Compliance by Debenhams plc The board of Debenhams plc acknowledges its responsibility for the long term success of the company, groups strategy risk management. The board discloses its composition and any changes therein that might have occurred during the period. The board held five meeting during the period which were attended by all the directors and other relevant personnel Specific matters including the Companys business model and strategy, approval of financials, major investments decisions and other matters as required by the code to be undertaken by the board, were considered by the board. Operational decisions were delegated to the committees. The board confirms that there are clear divisions of responsibilities between the Chairman and the Chief Executive. Debenhams plc recognises that the non-executive directors have other business interests outside of the Company and that other directorships bring benefits to the board. The board states that In 2011 the performance evaluation was facilitated by Lint stock Ltd. This year an evaluation of the performance of the board, its committees, the individual directors and the Chairman was conducted internally. The board also identifies the fact that the board is responsible for ensuring that the Company maintains a satisfactory dialogue with shareholders. Compliance by NEXT plc NEXT plc identifies the fact that Effective corporate governance is essential to the success of business and states that the Group complied throughout the year under review with the provisions set out in the UK Corporate Governance Code. The Board includes four independent non-executive directors and the Chairman who bring considerable knowledge, judgement and experience to the Group. The board took major policy decisions whilst delegating more detailed matters to its committees and officers including the Chief Executive. The Board also ensured system of internal control and for monitoring implementation of its policies by the Chief Executive. A clear division of responsibilities between the offices of Chairman and Chief Executive as agreed by the board was set out in writing. The board has placed a formal system so as to disclose the interest of the directors in any matter. The performance of the Board, its non-executive directors and committees was formally evaluated during th e year. The evaluation was conducted by directors completing a detailed questionnaire, the results of which were compiled by the Company Secretary for review by the Chairman and the Board as a whole. Ratings given by the independent institute (CSRHUB) are 66 to NEXT plc and 58 to Debenhams plc. Corporate Social and Environmental Reporting The corporate social responsibility may be defined as the commitment of business to contribute to the sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of lives. Corporate social responsibility is a concept that the organizations have a responsibility to consider the interests of the customers, the suppliers, shareholders, communities and the ecological considerations in all of their operations. It means the rights of the employees, suppliers, investors; other stake holders should be protected. The activities of the company should not harm the environment in the form of pollution. Every country has enforced such laws so as to ensure that the companies do not deviate from these moral and ethical principals so as to increase their wealth. Both the Companies are taking proper measures to ensure the corporate social and environment issues. There is number of agreements and commitments made to f ulfil the duties towards the people and planet and to make it a better place for living. Following are the major areas (i) Supplier code of conduct is designed to be ethical, achievable, auditable, and universal to promote the ongoing development of companies sources of supply. Such code ensures the timely, efficient and required quantity of raw material delivery and the supplier satisfaction and commitment owing to timely payments (ii) Legal Requirements were duly considered while building the code. (iii) Employment issues are properly handled like: (a) Appropriate employees and management training programs were held so as to acquaint them to the latest practices and procedures Employees compensation is fixed at an appropriate level so as to ensure employee are retained for a long period of time. Working hours are appropriate and are not excessive enough so as to deviate from the labour laws. (b) Employment of children is considered to be illegal (c) D isciplinary practices are implemented to ensure a professional and corporate culture. (d) No gender discrimination is practiced at all the work places (e) Providing a working environment in which our employees can develop to achieve their full potential and have opportunities for both professional and personal development. (f) Safety measures in consultation of professional organizations are implemented so as to ensure the lowest possible work place accidents (g) Employee group insurance is being provided so as to ensure relief in case of any accident. (iv) Appropriate steps are taken to ensure: (a) Customer Service Department incorporates effective procedures in place, for both Retail and Directory customers, for customers to contact through telephone calls, letters and email correspondence, to resolve enquiries and issues in relation to products, operation, policies or the service provide (b) Market research and direct customer approach practices are adopted t o have an insight into the customers perspective (c) For the satisfaction of the customers it is ensured that the quality of products is 100%. That product is safe and fit for their intended purpose. Products fully comply with all legislation and standards (iv) Environment issues are considered like controlling the pollution (v) Charity work has been supported a lot. NEXT Plc approached and delivered financial support to 350 charity organizations during the year and paid over three million pounds for the these activities. NEXT has also diverted its excess stock, that previously was dumped, to the charities which makes use of it for their benefit. NEXT Plc is also supporting scrap stores UK. NEXT has worked in partnership to support the work of Doncaster Refurnish for over 3 years. NEXT has also been engaged in collaboration with Oxfam Gmbt to support the social development activities. (vi) Workers representation should be sufficient (vii) Monitoring, Inspection and as sessment is made on regular basis Rating given by independent institutions Good Guide has given Debenhams rating of 5.7 out of 10for social responsibility as compare to 6.1 of next plc. Good Guide has given Debenhams rating of 6.4 out of 10 for Environment responsible as compare to 6.4 of next plc. CSRHUB has given Debenhams rating of 52 out of 100 for Basic corporate social responsibility as compare to 58 of next plc. Conclusion Recommendation: A prospective investor has to assess financial aspects of a company before he makes any investment decision. The fact that the non financial factors are also too important is not deniable. Based on our previous detailed analysis, I recommend the investor to invest in the shares of NEXT PLC over Debenhams PLC for the following reasons. (i) Better profit margins over the periods. (ii) Better liquidity position. (iii) Better return on investment (iv) Better financial position (v) Better corporate governance rating (v) Better Corporate, social and environmental rating