MANAGING FINANCIAL PRINCIPLES AND TECHNIQUES

Managing Financial Principles and Techniques

Table of Contents

Managing Financial Principles and Techniques3

Introduction3

Task 14

Forecasting method4

Sources of funds available to Tesco7

Task 27

Appraisal methods7

Financial information in making strategic investment decisions9

Recommendations on the appropriateness of selected investment project decisions10

Task 310

The use of financial statements to analyze financial viability10

Performance audit of Tesco using internal and external factors12

Recommendations on the strategic portfolio of Tesco14

Conclusion14

References15

Managing Financial Principles and Techniques

Introduction

Tesco is a globally successful retailing company. Tesco is the most successful grocery retailer in the UK and most parts of the world. One reason is that it is further down the road to customized branding than its competitors. By using customer data generated through the Tesco Club card or its loyalty card, Tesco understands its customers better than most, if not all, other retailers. This has provided Tesco with a significant competitive advantage. Tesco states clearly that the reward it gives users of the Tesco Club card is a thank you for sharing information. It is also obvious to the Tesco customers that it is a better store. It may not be obvious to everyone that this is the result of their customer information, but, if asked, Tesco managers can give a straight answer (Morgan 1999).

The Tesco Club card's initial success was based on the program's success as a sales promotion tool. At the time of the launch of the program, Tesco immediately gained market share points. This was due to many factors. It was a new initiative, it was very well introduced, the offers were interesting, etc. The Club card is an interesting example of the mix between short and long term. Most applications of customized branding methods concern established brands or extensions of established brands. Tesco used customer data to launch Tesco personal finance, a new venture as such, but from a brand marketing point of view a range extension; presumably customer data to support the launch plan came from Tesco's retail customers (Nilson 2003).  This paper intends to apply forecasting techniques to Tesco, apply financial appraisal techniques to Tesco and it aims to investment decisions Interpret the company's financial statements. The paper will make use of books and online information to gather relevant data.

 

Task 1

Forecasting method

Three kinds of expenses are incurred with a forecasting model: the cost of developing the model, the cost of accumulating and storing the data used in the model, and the expense involved in actually using the model. A comparison of the estimated costs for various models can be the deciding factor as to which model is ultimately chosen (Hughes 1999). A number of forecasting models require a fairly large amount of data if they are to be used effectively. For example, when multiple regression models are used, at least thirty to forty periods of past data may be needed. ARIMA models can require sixty to seventy periods of past data. In the volatile high-tech industry, firms might have less than two years of sales data available, a condition that restricts greatly the types of models that can ...