Accounts Analysis Tesco

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‘Tesco's has already turned around many of the T&S convenience stores they bought a year ago. …80 of the 450 outlets have been revamped as Teso express stores… average sales are up by 80 percent' The Gaurdian 26/121/03


Teso's 0.25:1
Sainsbury's 0.16:1
M&s 0.28:1

•Gearing is a measure of risk when investing in a company
•Proportion of capital made up of fixed interest borrowing •The effect of the investments in HIT and T&S over the last 5 years can be seen with the gearing for Tesco's increasing in the relevant year but also fallinf afterwards. •Their latest acquisition has increased the gearing level above that of Sainsbuy's, making it on the face of it more lucratinve for in vestors to invest in Sainsbury's. •Considering the performance of the transformed T&S stores, it however becomes clear that the high level of interest payment on the associated gearing should fall in the short run making Tesco's a good buy for investors

Interest Cover

Tesco's 8.49
Sainsbury's 12.12
M&s 17.73

•Interest payments show creditors how secure their payments are by showing how many times profit is greater than interest charges. •Once again the impact of Tesco's acquisitions can be seen with its low current interest cover. •Increases in net profit have been outstripped be the debt level, and the subsequent higher interest charges. •M&s must be regarded as a a very secure debtor from a creditors point of view, however as Tesco's makes use of loan capital more so than other companies their intesrest cover figures have been undewr estimated and should not be seen as a very high risk.

Current Ratio

Tesco's 0.45:1
Sainsbury's 0.87:1
M&s 1.96:1

•Tesco's bad performance is due to the fact that it has fewer current assets. •This is highlighted by their low stock turnover
•M&S impressive figures is merely due to their high level of debtors whilst Sainsbury's have...
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