J Sainsbury Plc

2738 Words11 Pages
Contents page Introduction……………………….. Page 3 Ratio analysis…………………….. Page 4,5,6,7,8,9 Conclusion/Recommendation…...Page 10 References……………………….. Page 11,12 Appendix…………………………..Page 13 Introduction The role given for this report is to show a financial analyst acting on behalf of a large institutional investor advising them on their future investment in Sainsbury plc. This report will explore calculations of the financial ratios, such as gross margin which measures the performance of how suitable a company manages its costs (Campbell R.Harvey, 2004a). For Sainsbury’s this report will investigate the ratios within the period of 2008-2010 using the financial statements of Sainsbury’s. To illustrate the findings of…show more content…
Sainsbury’s needs to ensure that they maintain this high figure, and utilize their resources further to perhaps increase this figure in the upcoming future. This could be achieved by cutting down costs by getting their supply’s locally in the U.K instead of abroad saving them transportation costs, or changing their suppliers to get a better value for money. Liquidity ratios Liquidity ratios measure a company’s capability in achieving their short-term financial debts, for example current assets ratio and quick ratio. (Campbell R.Harvey, 2004b) Current ratio Current ratio is calculated by dividing current assets by current liabilities. Both variables are illustrated on the balance sheet. (Campbell R.Harvey, 2004c) Current assets Current liabilities | 2008 | 2009 | 2010 | Current ratio | 0.65:1 | 0:55:1 | 0:66:1 | Quick ratio | 0:39:1 | 0:31:1 | 0:41:1 | The following current ratios given above illustrates that Sainsbury’s had a ratio of 0.65:1 in 2008, for every one pound of liability that Sainsbury’s have they have 0.65p to cover it. In 2009 the ratio decreases to 0.55:1 which indicates that for every £1 of liability Sainsbury’s have 0.55p to cover it , however in comparison to 2008 they have decreased by 0.10p which indicates that Sainsbury’s may have debtors that owe them money. Through the ratios given for Sainsbury’s, it could be recommended that Sainsbury’s should ensure that they have enough cash for when then
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