Essay on Financial Analysis of Ahold and Tesco
This report provides an analysis and evaluation of the profitability and liquidity of Ahold and Tesco. Methods of analysis include using Porter’s five forces to identify economic characteristics of retail industry, identifying strategies of two companies, assessing the quality of the balance sheets and income statements and analyzing profitability and risk ratios.
Results of data analyzed show that the ROA, ROCE, asset turnover, current ratio, liabilities to shareholder’s equity ratio and inventory turnover of Ahold performed better than those of Tesco during 2009 to 2011.
The report finds that compared to Tesco, Ahold has a better ability to earn profits and a lower probability to face risk with a stronger solvency …show more content…
2) Identify the main strategies of the two companies. * Ahold:
Ahold sold food, grocery, and drug products, primarily in its 3008 retail stores in the Netherlands and the United States and employed over 218,000 full time employees.
For the five years prior to 2011, Ahold’s strategy focused on an effort to lower its cost base, which allowed the company to invest in lowering certain price points, creating value, and being able to offer value added products and service offered to customers. Ahold’s business was geographically concentrated. As of FY 2011, 94% of total net sales were driven by operations in the Netherlands and the U.S. The business had grown faster in the most recent year, at 6.6% year over year versus 4.2% in the Netherlands. Despite this, margins were higher in the Netherlands with 6.3% vs. 4.8% overall. Ahold had improved margins by strictly controlling costs and the cost cutting program was planned to continue through 2014.
In 2011, Ahold revised its strategic plan to focus on growth in what it called its “Reshaping Retail” strategy. The strategy included three pillars to support growth: increasing customer loyalty, broadening Ahold’s offering, expanding geographic reach, and three pillars to enable growth: simplicity, responsible retailing, and a focus on