TABLE OF CONTENT
TESCO’S RATIO ANALYSIS
SUMMARY TESCO’S RATIO
COMPARATIVE ANALYSE – Tesco’s Vs Marks and Spencer’s________________ _______14
CRITICAL ANALYSIS OF TESCO PLC__________________________________________ 21 CONCLUSION
APPENDIX 1 –TESCO’S PLC
APPENDIX 2- MARKS AND SPENCER’S- CONSOLIDATED STATEMENTS
This report will evaluate the financial performance of Tesco’s and comparing it to Marks and Spencer’s has the purpose of evaluating the company's worthiness as investment. As a well knowing company around the world and having an important background in the retail environment Tesco’s is one of the largest supermarkets in the world. Present in 14 countries around Europe, Asia and North America. Tesco’s is always dealing in the financial world, providing also bank and insurance services.
‘Tesco was founded in 1919 by Jack Cohen from a market stall in London’s East End. Over the years our business has grown and we now operate in 14 countries around the world, employ over 500,000 people and serve tens of millions of customers every week. We have always been committed to providing the best shopping experience. Today we continue to focus on doing the right thing for our customers, colleagues and the communities we serve.’ (Tesco 2012).
The first section of this report, which is the main body, will use financial statements from 2010, 2011 and 2012, along with standard financial ratio analysis to develop a clear picture of Tesco’s financial performance comparing to the competitor. The second section includes a comparative analysis of the competitor strategy and also a conclusion on the performance and health of Tesco PLC based on the years 2010, 2011 and 2012. The third section, presents a critical analysis containing the non-financial factors and risks impacting on the future of Tesco PLC.
II-Tesco’s ratio analysis:
Ratio Analysis simplifies the financial statement and helps in future planning. It also helps us to inform the entire story of changes and current performance of the company. Ratios highlight all the different factors linked with successful and unsuccessful business. It is a powerful tool of financial analysis in the company. By using Ratio analysis it is easy to evaluate and understand financial health and trend of the business and possible future forecast of the company.
Currency = £ (000)
The return on capital employed is an important measure of a company's profitability. If ROCE is higher than the company is sound healthy. In 2010 Tesco had 11.52% ROCE which increase steadily in 2011 and 2012 respectively 12.93 and 12.64. So there is a possible reason for this change is that profit increase. It determines management's ability to generate earnings from a company's total pool of capital.
Company’s gross profit margin ratio shows that there is slightly difference between 2010 and 2012 which shows there was no any major change in their prices. In 2011 the company recorded a gross profit margin ratio of 8.30%. The positive trend in this margin shows that the company is on profitability trend and therefore is a good investment option. So there is a possible reason for this change the higher cost of production.
Operating Margin often refer to simply as a company's profit margin, there is no major change during the period from 2010 to 2012. Activity ratio:
1. Assets Turnover: Asset Turnover= Sales revenue/Capital employed During the last three years Tesco has improved gradually returning continuously in 2011 and 2012 turnover was respectively 2.04 and 2.06 .For most companies, their investment in net assets represents the largest component of their total assets. There are no significant changes in asset turnover. Liquidity ratio: Liquidity is a very important ratio for money lenders, suppliers and potential...
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