Financial Analysis of Tesco

3707 Words15 Pages
Managing Financial Principles

TESCO Ltd.

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Zahid Iqbal

ID: 8531

Abstract:

This paper highlights different financial aspects of TESCO Ltd. Company. It identifies different sources of finance for the company. An overview of different financial ratios which represent liquidity, profitability and performance of the company. Then an investment appraisal has been developed for TESCO for further growth, development and expansion of the business.

Table of Contents

Abstract: 2

Introduction: 4

Sources of Finance: 5

Internal Resources: 5 External Sources: 6 Recommendations: 8
INVESTMENT APPRAISAL: 10

Post Completion Review (PCR): 10 Methods of Investment Appraisal 11
Ratio Analysis: 13
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Trade Credit:

“Trade credit is an arrangement between businesses to buy goods or services on account, that is, without making immediate cash payment” (Atrill and McLaney 1995). It is the easiest and quickest way to delay the payment without any type of interest. Trade credit is the basic and foremost need of every business.

Loans:

Loan the amount of money which is borrowed from the financial institution to start a new business or initiate some new projects or products in the existing business. Usually after paying the interest on loan, tax is paid, so some organizations prefer to take loan instead of utilizing the retained earnings for the business requirements. Before issuing loan the financial institution always check the balance sheet of the organization to evaluate the stability and credibility of the business. This is usually done by business analysts.

Debentures:

“A debenture is an unsecured bond. Essentially, it is a bond that is not backed by a physical asset or collateral” (Ennew and Waite 2007).

Debentures may be convertible or non-convertible. Convertible debentures allow the holder to exchange the debenture for the company’s shares whereas non convertible debentures can never be converted into company’s stock. Normally the interest rate of non convertible debentures is higher than convertible debentures.

Preference shares:

There are two main characteristics of preference shares which make them different

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