1. SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
THE DESIGN SCHOOL
Foundation In Natural & Built Environments
Assignment : Financial Ratio Analysis
Company : Pandora Jewelry
Subject : Basic Accounting [FNBE0145]
Group Members : Gan Jet Foong (0315998)
Than Lek Mei (0315538)
Submission Date : 30th May 2014

2. Company's background & recent development
Pandora Jewelry is a Danish company founded in 1982 by two goldsmiths, Per and
Winnie Enevoldson, who are husband and wife. The company's headquarter is located
in Copenhagen, Denmark. The company's goal is to offer female across the world of
high quality and fashionable jewellery products at affordable prices. In 1989, Pandora
started manufacturing in Thailand and now with more factories, each piece of
Pandoras' product is handmade. The company is well known for its customisable
service, which allowed customers to chose among its hundreds of charms and
combine them. The company sells variety of products such as watches, ring, earrings,
pendants and other fashion accessories.
In 2005, Pandora became multibillion-dollar international brand and the third-largest
jewelry company in the world. In 2008 Pandora is listed on the NASDAQ OMX
Copenhagen stock exchange in Denmark. More than one piece of Pandora jewellery
was sold every second in 2011. In year 2013, Pandora's total revenue reached DKK 9
billion. Today, Pandora's products are sold in more than 70 countries on six
continents.

3. Ratio Analysis
Profitability

4. ( Units represented in Danish Krone, DKK millions)
( Units represented in Danish Krone, DKK millions)
Profitability Ratios 2012 2013 Interpretation
Return on Equity (ROE) 1202
5724.5 x100
= 21%
2220
6250 x100
=35.5%
During the 2012-13 period,
the business ROE has
increased from 21% to
35.5%. This means the
owner is getting more return
from his investment.
Net Profit Margin (NPM) 1202
6652 x100
= 18.1%
2220
9010 x100
=24.6%
During the 2012-13 period,
the NPM has increased from
18.1% to 24.6%. This means
the business is getting better
at controlling its overall
expenses.
Gross Profit Margin
(GMP)
4429
6652 x100
= 66.6%
5999
9010 x100
=66.6%
During the 2012-13 period,
the GPM has remained at
66.6%. This means the
business is good at
controlling or maintaining
its COGS.
Selling Expenses Ratio
(SER)
2084
6652 x100
= 31.3%
2397
9010 x100
=26.6%
During the 2012-13 period,
the SER has decreased from
31.3% to 26.6%. This means
the business is getting better
at controlling its selling
expenses.
General Expenses Ratio
(GER)
870
6652 x100
= 13.1%
921
9010 x100
=10.2%
During the 2012-13 period,
the GER has decreased from
13.1% to 10.2%. This means
the business is getting better
at controlling its general
expenses.
Financial Expenses Ratio
(FER)
128
6652 x100
=1.9%
106
9010 x100
=1.2%
During the 2012-13 period,
the business FER has
increased from 1.9% to
1.2%. This means the
business is getting better at
controlling its financial
expenses.
Stability

5. P/E ratio
Stability Ratios 2012 2013 Interpretation
Working Capital
(WCR)
3239
1604
= 1.9:1
3837
2304
=1.66:1
During the 2012-13 period, the
WCR decreased from 1.9:1 to
1.66:1. This means that the
business ability to pay current
liability with current asset is
getting worse. In addition, the
business does not satisfy the
minimum requirement of 2:1.
Total Debt (TDR) 2376
8414 x100
= 28.2%
2813
9275 x100
= 30.3%
During the 2012-13 period, the
TDR increased from 28.2% to
30.3%. This means that the
business total debt has
increased. However, it satisfy
the maximum limit of 50%
Stock Turnover
(STR)
365 days/2223
1463.5
= 240.3 days
365 days/3011
1404
= 170.2 days
During the 2012-13 period, the
STR decreased from 240.3 days
to 170.2 days. This means the
business is selling its inventory
faster.
Debtor Turnover
(DTR)
365 days/ 3326
1259.5
= 138.2days
365 days/4505
1532
=124.1days
During the 2012-13 period, the
DTR increased from 138.2 days
to 124.1 days. This means the
business is collecting its debts
faster.
Interest Coverage
(ICR)
1249
47
=26.6 times
2249
29
=77.6 times
During the 2012-13 period, the
ICR increased from 26.6 times
to 77.6 times . This means the
business ability to pay its
interest is better. In additional,
it satisfy the minimum
requirement of 5 times.

6. ( Units represented in Danish Krone, DKK)
404.20
= 19.40
= 20.84
Investment Recommendation
According to the analysis, the company is not suitable for investing.
In the profitability ratios, the company shows good profitability from
2012-2013. The company had great increased in the Return on Equity
(ROE) from 21% to 35.5% so the owner is getting more return from his
investment.
In the stability ratios, the company also demonstrated a strong stability
from 2012-2013. The company had great improvement in Interest
Coverage (IE) from 26.6 times to 77.6 times, this means that the
company's ability to pay back interest is better.
However, based on the calculation above, it shows that the P/E ratio is
20.84, this means that the investor has to wait for 20 years to claim back
the original investment. The company's shares are available at an
expensive price. A conservative investor will normally pay no more than
P/E of 15 for a share that he likes. In conclusion, this company is not
suitable for investment.
Appendix
CONSOLIDATED

7. INCOME STATEMENT
1 JANUARY - 31 DECEMBER
DKK million 2012 2011
Revenue 6,652 6,658
Cost of sales -2,223 -1,798
Gross profit 4,429 4,860
Distribution expenses -2,084 -2,053
Administrative expenses -870 -749
Operating profit 1,475 2,058
Financial income 132 660
Financial expenses -128 -349
Profit before tax 1,479 2,369
Income tax expenses -277 -332
Net profit for the year 1,202 2,037
Attributable to:
Equity holders of PANDORA A/S 1,202 2,037
Total 1,202 2,037
Earnings per share and dividend
Profit for the year attributable to ordinary equity holders of the parent, basic 9.2 15.7
Profit for the year attributable to ordinary equity holders of the parent, diluted 9.2 15.7
COMPREHENSIVE INCOME STATEMENT
Net profit for the year 1,202 2,037
Exchange rate differences on translation of foreign subsidiaries -65 247
Commodity hedging instruments
Realised in financial income and expense 8 -127
Realised in Cost of sales 167 -173
Realised in inventory end of year -48 -231
Value adjustment 7 38
Interest rate hedging instruments
Realised in financial income and expense 1 -
Value adjustment - -3
Foreign exchange hedging instruments
Realised in financial income and expense 101 5
Value adjustment -33 -60
Income tax on other comprehensive income -18 13
Other comprehensive income, net of tax 120 -291
Total comprehensive income for the year 1,322 1,746
Attributable to:
Equity holders of PANDORA A/S 1,322 1,746
Total 1,322 1,746
40 Pandora annual report 2012

8. CONSOLIDATED
BALANCE SHEET
AT 31 DECEMBER
DKK million notes 2012 2011
ASSETS
Non-current assets
Goodwill 12, 13 1,922 1,928
Brand 12, 13 1,053 1,053
Distribution network 12 331 336
Distribution rights 12, 13 1,045 1,064
Other intangible assets 12 136 95
Property, plant and equipment 14 472 429
Deferred tax assets 15 190 209
Other non-current financial assets 26 34
Total non-current assets 5,175 5,148
Current assets
Inventories 16 1,318 1,609
Trade receivables 17,18 940 900
Other receivables 18 502 177
Tax receivables 138 41
Cash and short-term deposits 18 341 176
Total current assets 3,239 2,903
Total assets 8,414 8,051
EQUITY AND LIABILITIES
Shareholders’ equity 20
Share capital 130 130
Share premium 1,248 1,248
Treasury shares -38 -38
Foreign currency translation reserve 703 768
Hedge reserve -51 -236
Other reserves - 88
Proposed dividend for the year 715 715
Retained earnings 3,331 2,736
Total shareholders’ equity 6,038 5,411
Non-current liabilities
Interest-bearing loans and borrowings 18 151 375
Provisions 21 7 64
Deferred tax liabilities 15 552 552
Other long-term liabilities 18 2 2

9. Total non-current liabilities 712 993
Current liabilities
Interest-bearing loans and borrowings 18 7 10
Provisions 21 463 230
Trade payables 18 219 288
Income tax payables 283 344
Other payables 18,19 692 775
Total current liabilities 1,664 1,647
Total liabilities 2,376 2,640
Total equity and liabilities 8,414 8,051
group accounts 41

10. CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
1 JANUARY - 31 DECEMBER
DKK million Notes 2013 2012
CONSOLIDATED INCOME STATEMENT
Revenue 2.1, 2.2 9,010 6,652
Cost of sales 2.3 -3,011 -2,223
Gross profit 5,999 4,429
Sales, distribution and marketing expenses 2.3 -2,397 -2,084
Administrative expenses 2.3 -921 -870
Operating profit 2.2 2,681 1,475
Finance income 4.6 167 132
Finance expenses 4.6 -106 -128
Profit before tax 2,742 1,479
Income tax expense 2.5 -522 -277
Net profit for the year 2,220 1,202
Attributable to:
Equity holders of PANDORA A/S 2,220 1,202
Net profit for the year 2,220 1,202
Earnings per share 4.2
Earnings per share, basic (DKK) 17.2 9.2
Earnings per share, diluted (DKK) 17.0 9.2
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Net profit for the year 2,220 1,202
Items that may be reclassified to profit (loss) for the period:
Exchange rate differences on translation of foreign subsidiaries -355 -65
- Commodity hedging instruments:
Realised in finance income - 8
Realised in inventory 268 119
Value adjustment -341 7
- Interest rate hedging instruments:
Realised in finance income - 1
- Foreign exchange hedging instruments:
Realised in finance income -9 101
Value adjustment -16 -33
Income tax on other comprehensive income 2.5 6 -18
Other comprehensive income, net of tax -447 120

11. Total comprehensive income for the year 1,773 1,322
Attributable to:
Equity holders of PANDORA A/S 1,773 1,322
Total comprehensive income for the year 1,773 1,322
42 PANDORA ANNUAL REPORT 2013
CONSOLIDATED
BALANCE SHEET
AT 31 DECEMBER
DKK million Notes 2013 2012
ASSETS
Goodwill 1,904 1,922
Brand 1,053 1,053
Distribution network 300 331
Distribution rights 1,042 1,045
Other intangible assets 318 136
Total intangible assets 3.1 4,617 4,487
Property, plant and equipment 3.2 497 472
Deferred tax assets 2.5 276 190
Other non-current financial assets 48 26
Total non-current assets 5,438 5,175
Inventories 3.3 1,490 1,318
Financial instruments 4.5 - 4
Trade receivables 3.4 895 940
Tax receivables 35 138
Other receivables 731 498
Cash 4.3 686 341
Total current assets 3,837 3,239

12. Total assets 9,275 8,414
EQUITY AND LIABILITIES
Share capital 4.1 130 130
Share premium 1,248 1,248
Treasury shares -738 -38
Reserves 205 652
Proposed dividend 823 715
Retained earnings 4,794 3,331
Total shareholders’ equity 6,462 6,038
Provisions 3.5 35 7
Loans and borrowings 4.3 - 151
Deferred tax liabilities 2.5 471 552
Other long-term liabilities 3 2
Total non-current liabilities 509 712
Provisions 3.5 471 463
Loans and borrowings 4.3 49 7
Financial instruments 4.5 148 47
Trade payables 539 219
Income tax payables 546 283
Other payables 551 645
Total current liabilities 2,304 1,664
Total liabilities 2,813 2,376
Total equity and liabilities 9,275 8,414
GROUP ACCOUNTS 43

14. Reference list
Ani, R. (2009, May 3) Unforgettable Moments. Retrieved on 26 May 2014, from
http://pandoragroup.com/Media/Pandora_In_Brief/pandora-milestones
Mary, T. B. (2014. January 22) how pandora jewellery grew to become a mega global
brand. Francise Focus. Retrieved on 26 May 2014, from
http://business.financialpost.com/2014/01/22/how-pandora-jewellery-grew-to-become-a-
mega-global-brand/
Natalia, R. (2011, December 6) A Danish Fairy Tale Gone Awry. Retrieved on 26 May
2014, from http://www.nytimes.com/2011/12/07/fashion/07iht-ACAJ-PANDORA07.html
Unknown, (2014). Pandora Jewelry Basic Info. Retrieved on 26 May 2014, from
https://www.facebook.com/pandorajewelry/info
Unknown, (2014). The Pandora Story. Retrieved on 26 May 2014, from
http://www.pandora.net/en-us/pandora-company/about-pandora/the-pandora-story
Varens, H. (2012, June 13). Fashion & Style. Retrieve on 26 May 2014, from
http://pandoraaddict.wordpress.com/faqs/what-is-pandora/