J Sainsbury Plc
Contents page
Introduction……………………….. Page 3
Ratio analysis…………………….. Page 4,5,6,7,8,9
Conclusion/Recommendation…...Page 10
References……………………….. Page 11,12
Appendix…………………………..Page 13
Introduction The role given for this report is to show a financial analyst acting on behalf of a large institutional investor advising them on their future investment in Sainsbury plc. This report will explore calculations of the financial ratios, such as gross margin which measures the performance of how suitable a company manages its costs (Campbell R.Harvey, 2004a). For Sainsbury’s this report will investigate the ratios within the period of 2008-2010 using the financial statements of Sainsbury’s. To illustrate the findings of the ratios, diagrams and tables will be used. The report will then conclude the overall findings and provide relevant recommendations.
Sainsbury’s PLC was founded in 1869 by John James and Marry Ann Sainsbury. Sainsbury’s grew to be well known for offering customers high quality products at low prices. Since 1869 Sainsbury’s expanded from one shop to currently operating in a total of 890 stores, comprising 547 supermarkets and 343 convenience stores. (Sainsbury, 2011a)
The aims for Sainsbury’s is to focus on being the best for food and health, sourcing with integrity, respect for the environment, making a difference to the community and a pleasant place to work. Sainsbury’s serve over 19 million customers a week and have a market share of over 16 per cent. (Sainsbury, 2011b)
Ratio analysis
Ratio analysis is used in organisations as a way to demonstrate and define the company’s financial accounts, it analyses the strengths and limitations within the business. Businesses should be achieving well in profitability, liquidity, gearing, investment and management. Ratio analysis is used in establishing trends from previous years and used against industry averages in certain sector it operates in. (Cox, Fardon.2008)
Gross
Introduction……………………….. Page 3
Ratio analysis…………………….. Page 4,5,6,7,8,9
Conclusion/Recommendation…...Page 10
References……………………….. Page 11,12
Appendix…………………………..Page 13
Introduction The role given for this report is to show a financial analyst acting on behalf of a large institutional investor advising them on their future investment in Sainsbury plc. This report will explore calculations of the financial ratios, such as gross margin which measures the performance of how suitable a company manages its costs (Campbell R.Harvey, 2004a). For Sainsbury’s this report will investigate the ratios within the period of 2008-2010 using the financial statements of Sainsbury’s. To illustrate the findings of the ratios, diagrams and tables will be used. The report will then conclude the overall findings and provide relevant recommendations.
Sainsbury’s PLC was founded in 1869 by John James and Marry Ann Sainsbury. Sainsbury’s grew to be well known for offering customers high quality products at low prices. Since 1869 Sainsbury’s expanded from one shop to currently operating in a total of 890 stores, comprising 547 supermarkets and 343 convenience stores. (Sainsbury, 2011a)
The aims for Sainsbury’s is to focus on being the best for food and health, sourcing with integrity, respect for the environment, making a difference to the community and a pleasant place to work. Sainsbury’s serve over 19 million customers a week and have a market share of over 16 per cent. (Sainsbury, 2011b)
Ratio analysis
Ratio analysis is used in organisations as a way to demonstrate and define the company’s financial accounts, it analyses the strengths and limitations within the business. Businesses should be achieving well in profitability, liquidity, gearing, investment and management. Ratio analysis is used in establishing trends from previous years and used against industry averages in certain sector it operates in. (Cox, Fardon.2008)
Gross
References: Bizled. (2011). Dividend Yield. Available: http://www.bized.co.uk/compfact/ratios/investor8.htm. Last accessed 11th Feb 2011 Campbell R.Harvey Campbell R.Harvey. (2004b). Liquidity. Available: http://financial-dictionary.thefreedictionary.com/Liquidity+Ratios . Last accessed 14 Feb 2011. Campbell R.Harvey. (2004c). Acid test. Available: http://www.bizwiz.ca/liquidity_ratio_calculation_formulas/acid_test_ratio.html . Last accessed 14 Feb 2011. Cox,Fardon. (2008). Ratio Analysis. In: Cox AS ACCOUNTING FOR AQA. 2nd ed. Malta: Gutenberg Press Limited. 336. Harrison Harrison. (2008b). Ratio analysis. In: Harrison AQA Accounting. Oxfordshire: Allan. p31. Investopedia. (2011). Gearing Ratio. Available: http://www.investopedia.com/terms/g/gearingratio.asp. Last accessed 11th Feb 2011 Investor words Money terms. (2011). Dividend Cover. Available: http://moneyterms.co.uk/dividend_cover/. Last accessed 11th Feb 2011. Orfact, (2011), Sainsbury_logo [ONLINE]. Available at: http://www.orfact.co.uk/uploaded/Sainsburys_logo.jpg[Accessed 14 February 11]. Sainsbury. (2011a). Our goal. Available: http://www.j-sainsbury.co.uk/index.asp?pageid=14. Last accessed 14 Feb 2011. Sainsbury. (2011b). Our history. Available: http://www.j-sainsbury.co.uk/index.asp?pageid=188. Last accessed 14 Feb 2011. Tutor2u. (2011). introduction to financial ratios. Available: http://tutor2u.net/business/accounts/main_ratios.htm. Last accessed 14 Feb 2011 . Gross profit margin | 1002/17837 x 100= 5.62 | 1036/18911 x 100= 5.48 | 1082/19964 x 100= 5.42 | Return on capital employed (ROCE) | 479/(4935+2528)=6.42 | 466/(4376+2738)=6.55 | 733/(4966+3096)=9.09 | Current ratio | 1722/2652= 0.65:1 | 1591/2919= 0.55:1 | 1853/2793= 0.66:1 | Quick ratio | (1722-681)/2652= 0.39:1 | (1591-689)/2919= 0.31:1 | (1853-702)/2793= 0.41:1 |