University Study

The purpose of this report is to conduct a comparative ratio analysis of the financial statements of J. Sainsbury PLC and Tesco PLC for the year-ending 2013. The financial information that is provided from each company’s annual report and the comparison between them will help possible users of this analysis to understand not only the differences between these two companies but also each company’s weaknesses and strengths. Below, the profiles of the two companies will be referred as well as eight accounting ratios for each

A source of finance used by Tesco is retained earnings. Tesco re-invest a certain percentage of their end of the year profits back into Tesco, so they can improve it. Each year Tesco decide how much money they re-invest, this depends on the profit they make.

In the first place I will begin with concise presentation of the firm I am expounding on. Tesco PLC is a international global general merchandise and grocery stock retailer whose headquater is situated in Cheshunt Hertfordshire, United Kingdom. Tesco offers an extensive variety

To put it simply, in financial terms, to maximize shareholders wealth means to maximize purchasing power. Throughout the years, we have learned that markets are most efficient when the company is able to maximize at the current share price. Every company’s main goal should be to strive to maximize its value to every single one of their shareholders. Common stock represents the value of the market price, and it also gives the shareholder an idea of the different investment, financing, and dividend decisions made by that particular firm.

In this part of my report I am focusing on the Stakeholders of Tesco, These are the people who have an interest in and influence on the business and the way it operates.

In contrast, profit at Sainsbury’s for the period remained relatively level showing a small upward trend of 2.68% resulting in an above average ROCE – thus achieving their financial objective. Relative to Tesco their borrowing and thus long term liabilities is much lower whilst operating profit is up. Tesco’s Profits are clearly trending downwards and as such are reflected in the decline in the gross profit ratio from 8.30% in 2011 to 6.31% in 2013/14 and Operating Profit margin ratios from 6.25% in 2011 to 3.38% in 2013 (with partial recovery in 2014 to 4.14%) with asset turnover remaining relatively consistent however at 1.29% in 2011-2013.

Tesco is a British retail magnate trading at the London Securities Exchange. The company had several capital and quasi-capital transactions with providers of finance during the fiscal year 2008; had the effect of altering their capital structure and changing their Weighted Average Cost of Capital. During this financial year, Tesco was financed by retained profits, long and medium-term debts, capital market issues, commercial papers, bank borrowings and leases (Tesco PLC, 2012). The company generated £2611m cash from operating activities which helped finance their £3bn in capital expenditure, including £1899m profit which contributed towards retained earnings. The firm issued Medium-Term Notes (MTNs) worth £1213m which helped decrease the current MTNs, overdrafts and loans by £108m. Additionally, ordinary shares totaling £156m were released by the firm and entered into the sale-and-lease back leasing arrangements that released £454m from property, along with £650m after the balance sheet date. In addition, the firm returned value to shareholders by paying dividends of £467m and purchasing £490m of their own shares back.

As I have mentioned before, this research paper is being taken exclusively with the aim to evaluate the Tesco’s performance in both financial and business terms over a three years period. Since the financials will be compared with its three year

Tesco Company is UK based company which is a reputed company in the market. It has a huge number of employees. In

Tesco is the leader store in food retail trade in Great Britain and it is ranked the third biggest shop in the worldwide. It opened firstly in London and in the middle of the nineties, Tesco become a common place for all families in the UK. Few years after it brings a new idea to the store which is introducing different areas such as Tesco metro that meet the needs of local customers, gas station and it was the first station in UK, Tesco express, Tesco direct, Tesco bank, Tesco Clubcard which a card for loyal customers, Tesco mobile and many more.

Now, if these figures are compared with the market leader, it will be clearer about the company’s profitable position. In the years 2009, 2008 and 2007 TESCO, who is the market leader for the market Sainsbury’s are operating, also performed very well. TESCO’s revenue also took a steep upward curd in between 2007 and 2009. Their revenue increased by 29.4% to £54327m in 2009 from £42641m in 2007. TESCO’s ROCE was 11.44%, 14.02 and 15.90% in the mentioned years. The gross margin and operating margins

An income statement is part of the three main financial statements (balance sheet and cash flow statement) companies are obliged to produce by law. It is dependent upon by stakeholder to show a true and fair view for decision making. For instance, a potential investor that is willing to invest in a particular company. But, the question arises as to whether an income statement reports the true profit of an entity, and to what extent it can be relied on by its users. On one side, accountants view that ‘profit is an increase in net wealth’ (Mac Neal, 1970). While, an economist might argues that profit should be seen as – ‘terse, obvious, and mathematically demonstrable’ (Mac Neal, 1970) in the accounts.

The maximization of shareholders’ wealth is a function of the value of the firm. The objective of the study

Chapter 1. This chapter discusses how shareholders have become more dominant than the stakeholders in the corporate and industrial businesses. Managers are now focusing on appealing shareholders because study shows that it creates better business, especially when companies are going through an unattractive phase regarding shareholders. Chapter 2. Managing value is discussed throughout the chapter and how it is important in developing business strategies. Three steps which are vital in managing value are recognizing restricting opportunities, acting on these opportunities, and establishing a value creation philosophy in the corporation. Managers must develop strategic plans in order to create value for the business. Chapter 3. Fundamental

Profitability is the total net gains from the business, which exceeds interest on capital at current rates (Marshall, 1998). Profit is regarded as the most common and theoretically plausible objective of business firms to the extent that some firms take it as the only objective (Dwivedi, 2002). As per Lipsy (2006), to an accountant, profit means the difference between total receipts and total costs of producing commodities. To the economic sense, profit means net increase in the wealth which is cash flow plus change in the value of the firm’s assets, (Pandey, 2005).