Analysis Of Stilsim

The relevance of evaluating both the financial performance as well as position of Tesco PLC cannot be overstated. This is more so the case given the need to determine the stability and viability of the company going forward. This text seeks to evaluate the financial performance as well as position of Tesco PLC by amongst other things analyzing the entity's financial statements. In this case, the evaluation will be based on the company's recently published annual accounts.

SUMMARY OF STUDY OBJECTIVES 1Identify the sections of a classified balance sheet. In a classified balance sheet, companies classify assets as current assets; long-term investments; property, plant, and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders' equity section shows common stock and retained earnings. 2Identify and compute ratios for analyzing a company's profitability. Profitability ratios, such as earnings per share (EPS), measure aspects of the operating success of a company for a given period of time. 3Explain the relationship between a retained earnings statement

Liquidity is important for any firm as it is an assessment of the ability to pay its' liabilities in the short term. There are two main liquidity ratios: the current and the quick ratio. The current ratios divides the current assets by the current liabilities to assess how many times the current assets can pay the current liabilities (Elliott and Elliott, 2011). Traditional ratios are usually in the region of 1.5, but this may vary depending on the industry and nature of the business (Elliott and Elliott, 2011). The current ratio is shown in table 1.

The profitability ratio shows the ability for a company to generate profits. Ratios that are used calculating profitability of a company are return on assets and return on equity. The return on assets calculates the ability of a company to effectively use assets to generate income, the percentages per quarter in year one are; 76%, 22%, 34%, 37%. This shows profit during each quarter. In years two, three, and four the percentages are; 68%, 54%, 49%, 38%. These ratios show a slight decline but still a solid profit. The return on equity shows the amount of money earned per dollar investing into the company by shareholders. By quarter, year one return on equity is .81 .61 .28 .29, years two, three and four are all .32. These numbers show an above average return, the average return in the United States is between .10-.15, and over .20 is considered above average (Kennon, 2011.)

To analyze firm performance we are going to focus in no four key areas: financial, position, profitability, market performance, and organizational health. To identify position for a public company we are going to use the total debt/equity metric. The company has a debt/equity of 40.4 which is more than First American Financial at 21.72. From a profitability standpoint we will focus on the net profit margin ROE, and relative return on assets. Fidelity’s net profit margin at twelve months is trailing at 8.73% trending above First American Financial, one of its direct competitors at 5.66%, which puts them in the top 3 companies in its industry. (“Yahoo” 2015). When looking at the return on assets they are slightly ahead of First American Financial with a 4.92% versus their 3.84%. As we take a look at ROE we see that Fidelity did just a bit better than FAF with 11.48%. We can conclude that Fidelity fared well on profitability. Comparing First American Financial to Fidelity in regards to market performance fidelity is trending up with a 1.26% change, while FAF is on a downtrend of 1.68%. Lastly, we look at organizational health. Employees have ranked Fidelity at 3.7 out of 5 stars, which put them at a good grade in this category (“Glassdoor” 2015).

These ratios are computed to judge the short term liquidity of the business. Two most important liquidity ratios are current ratio and quick ratio. These ratios determine the ability of firm to meets its current liabilities out of its current/quick assets.

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

Liquidity ratios measure the short term ability of a company to pay its obligations and meet their needs for maintaining cash. According to Cagle, Campbell & Jones (2013), “A good assessment of a company’s liquidity is important because a decline in liquidity leads to a greater risk of bankruptcy” (p. 44). Creditors, investors and analysts alike are all interested in a company’s liquidity. After computing liquidity

Liquidity ratios measure the ability of a firm to meet its short-term obligations. A company that is not able

These ratios help company in determining its capability to pay short-term debts. Liquidity ratios inform about, how quickly a firm can obtain cash by liquidating its current assets in order to pay its liabilities. General liquidity ratios are: current ratio and quick ratio. Current ration can be obtain by dividing company’s current assets by its’ current liabilities. Generally a current ratio of two is considered as good (Cleverley et al., 2011). Quick ratio also known as acid test determines company’s liabilities that need to be fulfilled on urgent basis. Quick ratio can be obtained by dividing quick assets by current liabilities. Quick ratio is considered as stricter because it excludes inventories from current assets. Generally a quick ratio of 1:1 is considered as good for the company. Higher quick

Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.

Profitability (performance) ratios are used to assess a company’s ability to create equity as compared to its debt and other appropriate expenses created during a particular time frame. A favorable analysis of profitability ratios will reveal that a company’s value is higher than a competitor’s value.

Through indicating the profit margin, return on assets and return on equity to measure sales, assets and other factors, shareholders also can know the global profit performance of the firm and indicate that how the condition of company is.

Table 1, below, will show financial ratios of PepsiCo Inc. The table consists of 5 major elements. Profitability refers to how much income was generated by PepsiCo Inc. Then, asset management refers to how effectively the invested assets were used in the business by PepsiCo’s management team. Liquidity and solvency are the related conception of analyzing financial risk. Liquidity refers to the ability of PepsiCo Inc. to generate cash and is often considered a good indication of the company’s ability to pay its short-term obligations; while, solvency generally refers to the ability of company to repay its outstanding long-term obligation. Lastly, ROE Model Framework is the return on equity and reveals that a firm’s ROE can be decomposed into the three component ratios of return on sales, asset turnover, and financial leverage which will be used for sustainable growth rate later.

Our choices led to a constant increase in net income over the three years. Short term debt increase by approximately 100% percent but steadily reduced over the next three years. We were happy with the positive growth of the company and the fact that we were able to pay off most of the initial short term funding required by the increase in working capital requirement. Overall the current situation of the company in 2018 is good, although the total value created is less than 20% of that created in phase 1. From this we learned that the value of the firm can be significantly increased more through a reduction in working capital requirement than through increasing the firm’s sales and net income.