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Comparison Of Next Plc And Merlin Entertainment

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Interest Coverage Ratio
The ability of the company to pay their interest on debt in timely way is measured through this financial ratio. Interest coverage ratio is used by creditors and investors for understanding the risk and profitability of the company (Brigham & Houston, 2015). The ratio for the two companies is provided below:
Interest Coverage Ratio
Formula Earnings before Interest and Tax (EBIT)/Interest Expense
Companies Next Plc Merlin Entertainment Plc
Years 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
EBIT 529.8 565 598.3 661.2 726.2 198 232 258 290 311
Interest Expense 25.3 23.4 25.2 24.4 25.3 144 128 124 103 64
Interest Coverage Ratio 21 24 24 27 29 1 2 2 3 5

The interest coverage ratio of both Next Plc and Merlin Entertainment is highlighted in the table and graph above. It is observed that interest coverage ratio of Next Plc is much high in comparison to Merlin …show more content…

Companies with higher equity ratio are more favourable as it shows the sustainability of company to the creditors (Khan, 2004).
Equity Ratio
Formula Total Equity\Total Assets
Companies Next Plc Merlin Entertainment Plc
Years 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014
Total Equity 133.6 232.2 222.7 285.7 286.3 505 555 617 944 1063
Total Assets 1693.5 1792.3 1854.2 1893.6 2144.6 2022 2236 2509 2702 2786
Equity Ratio 0.08 0.130 0.12 0.15 0.13 0.25 0.25 0.25 0.35 0.38

It is noticed from the table and graph provided above that Merlin Entertainment is performing as compared to Next Plc in terms of equity ratio as their equity ratio is much higher. This means that Merlin would have positive image in front of their creditors as their higher equity ratio shows the sustainability of the company. Moreover, this ratio as shows that debt service and financing cost of Merlin is lower in comparison to Next Plc.
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