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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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  • Number of pages: 2

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The multinational tobacco is a British company with its headquarters in the London United Kingdom. It is top five of the largest tobacco companies in the world where it is a market leader in over 50 countries, and there around 180 countries, it has operations in and its top selling brands include Dunhill, Lucky Strike, Kent and Pall Mall other brands. The company on the London Stock Exchange has a primary listing and makes up the 100 FTSE Index. In the Nairobi Stock Exchange and the Johannesburg Stock Exchange, the company has the secondary listing. The company establishment was 1902 through a joint venture between UK's Imperial Tobacco Company and the U.S's American Tobacco Company, and together they created the British-American Tobacco Company Ltd. The companies came to an agreement where they decided that they would not trade in each other's territories domestically and assign trademarks, business exportation, and subsidiaries overseas to the joint venture. The company's then chairman was James Buchanan Duke, and the first operations include countries such as Canada, China, South Africa, New Zealand, Australia and Germany surprising not in their national territories (British American Tobacco, 2013).

Significance of BAT

The company is an excellent choice for analysis because of it significant market share as currently it has over 200 markets and has employed over 57,000 people with over 200 brands where they sell cigarette to adult smokers around the world who constitute eight billion. The company is big on adhering to standard in principles of marketing where in most countries where it operates it's the top employer. In the year 2014 the company market share growth was over 40 bps across the key markets and the companies global brands grew by 8.5% and increased adjusted operating profit at 4% constant rates of exchange. The company's strong report currently is to decrease harm, sustain agriculture and the livelihood of farmers' improvement and corporate behavior. The company is substantially becoming a market leader in not only in America and Britain but in all other countries it has branches in, for instance, the African market is huge where it is a leader in countries like Kenya, South Africa and Nigeria having a listing in their stock exchange. The company rich history and stability over the years makes it a company worth looking into to understand the dynamics and the strategies applied to maintain such high levels of growth. The Analysis is crucial in such a company facing so many different regulations from its branches in foreign markets and helps to understand the ways to overcome the barriers and perform. The analysis will allow seeing how the company is doing overall despite the red tapes that hinder their operations efficiency. The inclusion in the London Stock Exchange in the 100 FTSE companies helps us understand the levels of profitability, the structures of capital and stock market performance that allow for such inclusion (British American Tobacco, 2013). To better understand the company lets\' look into the implementation of the budget for the last five years.

Ratio Analysis

Liquidity

Table 1. Liquidity ratios

    Year

Ratio

2012

2013

2014

2015

2016

Current Ratio

1.12

1.12

1.04

1.08

1.04

Quick Acid Ratio

0.63

0.64

0.57

0.62

0.55

Cash Ratio

0.30

0.28

0.26

0.66

.22

The last five years saw the company able to maintain a steady current ratio, but it was in the year 2012 and 2013 that the firm was able to meet the Industrial ratio of 1.12, but the rate dropped to 1.04 which is very low for the industry. However, in 2015 the company saw the increase in the rate to 1.08 but in 2016 fell to 1.04. In regards to Quick Acid Ratio, the industry standard is 0.68, and the company has not reached the industrial expectation. In 2013 the company was almost there reporting 0.64 but 2016 the company went as low as 0.55. About cash ratio, the company is running on a small, but in 2015 the company made significant improvements moving on a high of 0.66. Overall the company liquidity levels are okay as it can quickly meet is short term obligations as it has an excellent coverage of liquid assets to short-term liabilities thus indicating that the company can pay debts that are coming due shortly and still funds its ongoing operations (Drake).Further, the company is managing liquidity risk by maximizing financial flexibility and hence minimizing the refinancing risk by using debt with the range of maturities. The company has a target average which allows the management of debt maturity with no more than 20% for at least five years.

In 2015 the company the centrally managed debt average was 7.9 years, 2014 was 6.8 years but the highest being the centrally managed proportion of debt maturity in a single rolling year was 15.0% for 2015 and 18.7% for 2014.  The company is currently creating a backing for its short-term sources of funds such as the commercial papers by backing them with undrawn committed lines of credit and cash.  In 2015, the company commercial papers stood at $ 505 million, and in 2014 the company commercial papers were worth $ 160 million both of which

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