Question three

Qualitative factors are the decision that cannot be measured. The company has introduced

a new employee share scheme during the FY17. The company has further introduced incentives

and bonus scheme for the workforce. Over £180m in bonuses and awards have been given out to

employees. This has ensured that employees are well compensated and encouraged to deliver

high personal performance. The committee has been committed to rewarding its loyal and large

employees appropriately. This will help increase the morale and productivity of the employees.

The company has strengthened its ties with other brand partners. For example, the

relationship of Sports direct international PLC and Adidas has continued to grow with successful

initiatives in football such as Red Limit and Blue Blast boot launches. Other campaigns aimed to

expand on football include the Cloud form and Neo footwear. Through such dedicated teamwork

and improved integrated business planning process, sales growth has significantly increased with

the Adidas brand in FY17. Throughout the FY18, Adidas has invested heavily in Sports direct in

important marketing campaigns to increase sales at both online and in-store point of sale. Under

armor is working with Sports direct to increase their brand presence in Europe.

The chairman should effectively communicate with shareholders and ensure that the

board understands the views of major shareholders and investors and can provide support and

advice to the executive team members. By using the performance table and graph, we compared

company performance measured by the Total shareholder return with the FTSE 100 and FTSE

250 index. The committee considered the above base of comparison as appropriate in comparing

the performance of the company. They are accepted and includes those that investors will likely

to consider. Investors are expected to visit the Group website for more information. The

company has opted in using cheaper products component.

 Question four.

Factors that will influence me to form an opinion on the financial statements of the group

for the year 2017 include provisions for defective, slow-moving and obsolete inventories. Certain

judgments and estimates have been employed in analyzing the level of provisions for the

inventory. They include local economic conditions, core stock and cost of stock (devaluation of a

pound). The appropriate level of provision is applied to the various categories of inventories

using factors such as management industry knowledge and experience. Additional cost for re-

pricing is considered in determining the correct percentage of provision. The operating expenses

such as administrative, selling and general costs as a percentage of sales increased from 35.18%

to 38.69%. This formed a major component in the reduction of the net revenue despite increasing

revenues.

Other determining factors include credit risk policy and its exposure which should be

monitored on an ongoing basis. All customers requiring credit of a certain amount should be

subjected to credit evaluations process. The Group doesn’t require collaterals in its financial

assets, and hence exposure to credit risk is determined by the carrying amount of the financial

assets in the statement of financial position. Investments of the derivative instruments cash

surplus and borrowings should be made through companies and banks which must adhere to the

investment criteria and credit rating approved by the Board.

From year to year, Sports direct international PLC has had its net income declining by

-17.13% from 277.42million to 229.90 million. However, during the same period, the revenues

increased from 2.90billion to 3.25billion. The amount of debt to total capital ratio is

approximately 31.777% which is an increase from previous years 19.44% in 2016. The growth in

earnings per share reduced significantly by -15.74%.

 The presence of adequate cash resources is controlled by the group through utilization of

the available credit facilities in combination with equity and retained profits. This has allowed

the company to achieve continuity of funding and short-term flexibility. For example, the cash

reserves for Sports direct international PLC reduced by 98.5million. Earnings from its operations

were 193.90million resulting in a cash flow margin of 5.97%. Furthermore, the company paid

128.7m in financing its cash flow and used 163.7million in investing in its major activities.