Tesco Financial Analysis

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The following report contains a financial analysis of Tesco PLC and its current trading position for the financial year ending February 2010. The data that has been analysed will be compared with the previous year’s finances. It will include information such as performance, the businesses liquidity, and Tesco’s efficiency. It will also show the extent to which Tesco may or may not appeal to potential investors after the past financial year. In the current economic situation facing the country it’s natural to expect that there has been a downturn in performance due to most people feeling the effect of the recession for most of the year, therefore having less disposable income. The data that has been collected and used will be shown…show more content…
This shows a slight negative compared with the previous year, as being to obtain cash quicker means the business is more liquid and therefore has a better cash flow. The current ratio is a financial ratio that measures whether a firm has enough resources to pay its debts over the next 12 months. It compares a firm 's current assets to its current liabilities. The businesses current ratio showed the same figure of 0.7:1 in 2009 as well as 2010. This won’t be a concern to Tesco with them selling food products they will not hold onto stock for very long due to the fact it will go off. So this low figure just represents the sort of market Tesco operates in. Gearing Gearing represents the percentage of a business that has been financed from borrowing money rather than from investors or shareholders. In 2009 Tesco’s gearing was 74% but this was reduced significantly in 2010 to 54%. Being highly geared is often seen as being a problem so the figure seen in 2009 can be viewed as a negative. However in 2009 Tesco underwent a huge expansion process into different countries which is a large venture and would therefore require a lot of financial backing for it to actually work. This point shows why the figure in 2009 was so high as borrowing money would be a good way of providing the financial backing needed to get up and running in the various different places. In 2010 the figure falls to 54% a significant decrease which shows during that year Tesco must
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