Tesco Financial Analysis

5865 Words24 Pages
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Executive Summary:

This report aims to analyze the financial position of TESCO PLC from the point of view an investor who seeks to evaluate the prospects of buying shares of a company in food and retailing sector. The potential investor has selected TESCO PLC and has asked the author to analyze the investment prospects and present a report on the same.

The analysis shall be based on the most recent annual financial statements available for TESCO and of other companies
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Methodology of Financial Analysis:

The financial strength or weakness of a company is measured against the following basic criteria: • Liquidity, Solvency, Profitability and Financial efficiency.

From an investor point of view, however, after having measured the company’s financial strength through above criteria, the most important step is to evaluate whether investing in the stocks of this company carry the required returns for investment. This shall be done by: • company’s stock performance

The company’s performance on these dimensions shall be measured through financial ratios analysis. As there are many variations of ratios available to measure more or less the same aspect of performance, I have short-listed, in the following table, the key ratios that will be utilized in the analysis:
Performance Aspect Growth and Profitability Measure or Ratio General Growth Profit Margin (%) ROCE (%) ROSF (%) Current Ratio Sh. holders Liq. ratio Solvency ratio (%) Gearing ratio (%) Stock Turnover Collection Period Credit Period P/E Ratio Share Price trend Measure or Ratio Definition

Time growth of Revenue, Operating Profits Profit (loss) before tax / Total Revenue Profit (loss) before tax* / (SH funds+Non cur. liab.) Profit (loss) before tax / Shareholders funds Current Assets / Current Liabilities Shareholders funds / long term Liabilities Shareholder funds/Total assets (Longterm Liabilities + Loans)* / shareholder funds
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