Manchester United Financial Analysis

One trait that can be found in every competitive business environment is the act of monitoring a
company’s financial performance. This act helps companies to determine their current situation with
respect to their given industry or market and how that situation can either be maintained or improved.

For a renowned football club like Manchester United, financial analysis does not only help to shed light
on its financial situation at a given time but also provides investors with well detailed information on
the general well-being of the club, its economic health status as well as the effort of its management in
making its performance in the nearest future better.
In this article, we’ll be looking at what financial analysis is all about as well as the financial analysis of
Manchester United football club.

What is financial analysis

Financial analysis, also known as accounting analysis or financial statement analysis, involves the
evaluation of businesses, financial related transactions, budgets, projects, etc., in order to determine
how they perform and how suitable they are. It is used to analyze whether a business is profitable,
liquid, solvent or stable enough for monetary investment.

In a standard business organization, financial analysis can either be conducted internally (corporate
financial analysis) or externally (investment financial analysis). When conducted internally, it helps
business managers to keep track of previous successes and make decisions that’ll produce successful
results in future. When conducted externally, financial analysis helps investors to see businesses with
potentials and chose the ones that are worth investing in.

Manchester United financial ratios for analysis

With the year 2023 yet to come to an end, Manchester United’s financial ratios for analysis can only be
judged based on the year 2022. Here’s a rundown of the team’s ratios for analysis from 2020 – 2022.
Financial analysis ratios for 2020:

 Current Ratio – 0.5644
 Long-term Debt/Capital – 0.5969
 Debt/Equity Ratio – 1.4965
 Gross Margin – 100
 Operating Margin – 1.0257
 EBIT Margin – 1.0257
 EBITDA Margin – 25.2139
 Pre-Tax Profit Margin – -4.0897
 Net Profit Margin – -4.5641
 Asset Turnover – 0.3679
 Inventory Turnover Ratio – –
 Receivable Turnover – 4.3346
 Day Sales In Receivables – 84.2071
 Return On Equity – -6.6147
 Return On Tangible Equity – 5.4803
 Return On Assets – -1.6793
 Return On Investment – -2.6667
 Book Value Per Share – 2.69
 Operating Cash Flow Per Share – -1.953
 Free Cash Flow Per Share – -2.0086

Financial analysis ratios for 2021

 Current Ratio – 0.5545
 Long-term Debt/Capital – 0.6305
 Debt/Equity Ratio – 1.9457
 Gross Margin – 100
 Operating Margin – -7.4371
 EBIT Margin – -7.4371
 EBITDA Margin – 19.2363
 Pre-Tax Profit Margin – -4.8626
 Net Profit Margin – -18.6628
 Asset Turnover – 0.3921
 Inventory Turnover Ratio – –
 Receivable Turnover – 9.5136
 Day Sales In Receivables – 38.3662
 Return On Equity – -33.8392
 Return On Tangible Equity – 19.1337
 Return On Assets – -7.3169
 Return On Investment – -12.5028
 Book Value Per Share – 2.2272

 Operating Cash Flow Per Share – 0.9634
 Free Cash Flow Per Share – 1.0753

Financial analysis ratios for 2022

 Current Ratio – 0.4793
 Long-term Debt/Capital – 0.8062
 Debt/Equity Ratio – 4.9889
 Gross Margin – 100
 Operating Margin – -14.9835
 EBIT Margin – -14.9835
 EBITDA Margin – 9.6805
 Pre-Tax Profit Margin – -25.6555
 Net Profit Margin – -19.8062
 Asset Turnover – 0.4508
 Inventory Turnover Ratio – –
 Receivable Turnover – 10.533
 Day Sales In Receivables – 34.653
 Return On Equity – -90.5904
 Return On Tangible Equity – 18.7586
 Return On Assets – -8.9289
 Return On Investment – -17.5581
 Book Value Per Share – 1.0302
 Operating Cash Flow Per Share – -0.1471
 Free Cash Flow Per Share – -0.1635

Manchester United current financial leverage

A company’s financial leverage is seen as the degree to which it uses its equity and fixed-income
securities to finance its projects. This is why companies with high financial leverage are usually believed
to be at financial risk.

Manchester United has a high financial leverage. A high financial leverage attracts high-interests
payments, which in turn reduces Earnings Per Share (EPS). In the case of Manchester United, its
stockholders are faced with risks caused by increase in debt, which is as a result of the degree of its
financial leverage. Although the club reported a debt current of €123.42 million, this figure is considered
stable compared to the one of the previous year.

It is expected that by the end of 2023, Manchester United’s total debt will be slightly above €668.4
million, with its issuance repayment of debt securities rising to about €47.9 million.

Manchester United debt to cash allocation

As at 2022, statistics show that Manchester United had a debt of 84.09% and cash of 15.91%.
Manchester United also had €640.45 million in liabilities with a D/E (Debt to Equity) ratio of 5.02. This
stat shows that the club may struggle to generate enough money needed to satisfy its financial
obligations. Its ratio of 0.47 also shows that it has a negative working capital and may struggle to pay
financial obligations when they are due.

Although debt can assist Manchester United to invest in growth at high rates of return, when this debt
can’t be paid off with new capital or cash flow it becomes a problem, as stakeholders might be left to
walk away with nothing when it’s all said and done.

In a case where the club finds itself in a situation like this, its decision makers will have to decide if the
cash flowing in will be reinvested into its business, paid back to its investors and stakeholders, or kept
for other projects that are beyond the club’s operational needs.

Manchester United total assets financed by debt

Manchester United had a total asset of €1.5 billion in 2017, €1.5 billion in 2018, €1.4 billion in 2019, €1.3
billion in 2020, €1.3 billion in 2021, €1.5 billion in 2022, and €1.6 billion in 2023. With a debt ratio of
42.6%, it appears that the club’s assets are financed through equity.

Usually, companies with high debt-to-asset ratios are believed to be highly financial leveraged. In the
case of Manchester United, the high debt-to-asset ratio shows that the club has a low borrowing
capacity, which will in turn lower its financial flexibility.

Conclusion

In conclusion, Manchester United financial analysis shows that the club has a high financial leverage
which attracts high payments and reduces Earnings Per Share (EPS). Since companies with high financial
leverage are likely to face an increase in debt, it is no surprise that as at the end of 2022, Manchester
United had a debt of 84.09% and cash of just 15.91%.

Manchester United Financial Analysis