Financial Report
Ratio Analysis
Selected Companies: Tesco plc. & Sainsbury plc.
Country: United Kingdom
Table of Contents
1 Introduction 2
2 Analysis of Financial Performance of the Two Companies 4
2.1 Profitability 5
2.1.1 Gross Profit margin 5
2.1.2 Operating Profit margin 5
2.1.3 Net Profit margin 5
2.2 Liquidity 5
2.2.1 Current ratio 5
2.2.2 Quick/Acid test ratio 6
2.3 Efficiency 6
2.3.1 Asset Turnover 6
2.3.2 Receivables Collection Period 6
2.3.3 Payables Payment Period 6
2.3.4 Inventory Turnover Period 6
2.4 Gearing Ratio 6
2.4.1 Interest Cover 6
2.4.2 Financial / Equity Gearing 7
2.5 Comparative Comments on Financial position 7
3 Purposes of Calculating Financial Ratios 7
4 Weaknesses of Ratios Analysis 8
Recommendation 9 …show more content…
At Tesco the ratio was pretty fine in 2012 but fell tremendously in 2013, it rose in 2014 but still, it is lower than Sainsbury. It reveals that Sainsbury has proportionally more earning to stand against debt as compared to Tesco.
2.4.2 Financial / Equity Gearing
The gearing of both companies is inacceptable range as it is below 1. However, Sainsbury is having more lucrative gearing ratio as its lower than Tesco. In this case, Tesco is having the higher degree of leverage, thus it is considered to be riskier as compared to Sainsbury. Consequently, both companies are having an appropriate proportion of debt to equity and are able to pay off debt, even if the sales decreases tremendously.
2.5 Comparative Comments on Financial position
Looking at Sainsbury and Tesco it is found that income of the Tesco is higher than the Sainsbury. However the Sainsbury is nearly unpredictable then Tesco and consequently a speculator need to organize on the off chance that he needs to put resources into an organization with higher profit yet unstable or despite what might be expected in an organization with low productivity yet with steady …show more content…
By looking at them both it is found that Tesco offers higher profits yet Sainsbury shows consistency which thus reflects better money related wellbeing. Contrasting both it is found that liquidity of Tesco is higher and shows better budgetary wellbeing in this respects Tesco is all the more productively dealing with its stock when contrasted with Sainsbury. Sainsbury needs to be conscious about its ratio. This would be possible by enhancing sales and utilizing speedier stock administration strategy, for example, Just-in-Time stock framework.
Here, Tesco is more productive when contrasted with Sainsbury. The receivable ratio of Tesco is altogether higher than Sainsbury which thus mirrors that Sainsbury is more effective in deals recuperation. The bank ratio demonstrates that Sainsbury is more positive for suppliers then Tesco. This likewise coordinates with the patterns in liquidity ratios of both organizations. Tesco demonstrates high consistency in its pattern and in this way it is more appealing for the investors.
3 Purposes of Calculating Financial
Ratio Analysis
Selected Companies: Tesco plc. & Sainsbury plc.
Country: United Kingdom
Table of Contents
1 Introduction 2
2 Analysis of Financial Performance of the Two Companies 4
2.1 Profitability 5
2.1.1 Gross Profit margin 5
2.1.2 Operating Profit margin 5
2.1.3 Net Profit margin 5
2.2 Liquidity 5
2.2.1 Current ratio 5
2.2.2 Quick/Acid test ratio 6
2.3 Efficiency 6
2.3.1 Asset Turnover 6
2.3.2 Receivables Collection Period 6
2.3.3 Payables Payment Period 6
2.3.4 Inventory Turnover Period 6
2.4 Gearing Ratio 6
2.4.1 Interest Cover 6
2.4.2 Financial / Equity Gearing 7
2.5 Comparative Comments on Financial position 7
3 Purposes of Calculating Financial Ratios 7
4 Weaknesses of Ratios Analysis 8
Recommendation 9 …show more content…
At Tesco the ratio was pretty fine in 2012 but fell tremendously in 2013, it rose in 2014 but still, it is lower than Sainsbury. It reveals that Sainsbury has proportionally more earning to stand against debt as compared to Tesco.
2.4.2 Financial / Equity Gearing
The gearing of both companies is inacceptable range as it is below 1. However, Sainsbury is having more lucrative gearing ratio as its lower than Tesco. In this case, Tesco is having the higher degree of leverage, thus it is considered to be riskier as compared to Sainsbury. Consequently, both companies are having an appropriate proportion of debt to equity and are able to pay off debt, even if the sales decreases tremendously.
2.5 Comparative Comments on Financial position
Looking at Sainsbury and Tesco it is found that income of the Tesco is higher than the Sainsbury. However the Sainsbury is nearly unpredictable then Tesco and consequently a speculator need to organize on the off chance that he needs to put resources into an organization with higher profit yet unstable or despite what might be expected in an organization with low productivity yet with steady …show more content…
By looking at them both it is found that Tesco offers higher profits yet Sainsbury shows consistency which thus reflects better money related wellbeing. Contrasting both it is found that liquidity of Tesco is higher and shows better budgetary wellbeing in this respects Tesco is all the more productively dealing with its stock when contrasted with Sainsbury. Sainsbury needs to be conscious about its ratio. This would be possible by enhancing sales and utilizing speedier stock administration strategy, for example, Just-in-Time stock framework.
Here, Tesco is more productive when contrasted with Sainsbury. The receivable ratio of Tesco is altogether higher than Sainsbury which thus mirrors that Sainsbury is more effective in deals recuperation. The bank ratio demonstrates that Sainsbury is more positive for suppliers then Tesco. This likewise coordinates with the patterns in liquidity ratios of both organizations. Tesco demonstrates high consistency in its pattern and in this way it is more appealing for the investors.
3 Purposes of Calculating Financial