TESCO PLC & SAINSBURY

Tesco plc & Sainsbury

Tesco plc & Sainsbury

Introduction

The analysis of financial statements of companies is highly essential for evaluating the overall performance of the company and ultimately, better investment decisions can be possible. There are various financial tools that are available for making an appropriate analysis of the financial statements of companies. One such financial tool that is highly used in assessing the financial statements is ratio analysis which not only helps in the assessment of performance of a company, but also allows for better comparison of the performance of one company to that of another.

In this report, the main aim has been to compare the performance of two UK based companies known as J Sainsbury Plc and Tesco Supermarkets Plc through the calculation of ratio analysis for both these companies over a period of five years.

Overview of Tesco

Tesco is one of leading food retailer in Ireland and United Kingdom with the 2715 stores in the country. Tesco founded by Jack Cohen in 1919 located at East London. Company's management was moving forward by two key people they are Sir Terry Leahy -Chief Executive and David Reid - Chairman.

Tesco's plc has an ultimate product ranges those are Groceries, Telecoms, Financial service and Consumer good. The total Revenue of the company in 2011 is £ £60,931 million, and operating income was £3,811 million in 2011. Tesco's net income is about £2,655 million; all these figures are of FY2011.

Overview of Sainsbury Plc

Sainsbury is the third largest chain of supermarkets in the United Kingdom. After Tesco the share of Sainsbury in UK supermarket sector of 16.5%. J Sainsbury plc was established in 1869 and today it is one of the leading players in supermarket having 537 supermarkets and 335 convenience stores. It has diversified its business in banking with Lloyds Banking Group and in real estate sector by two joint ventures with Land Securities Group PLC and The British Land Company PLC. Currently, the company operates a total of 890 stores, which comprises 547 supermarkets and 343 convenience stores.

Financial Analysis

As specified, there are various kinds of ratios that are being calculated for TESCO and SAINSBURY. These include profitability ratios, liquidity ratios, efficiency ratios and gearing ratios.

Profitability Analysis

The profitability trend of the TESCO is increasing, hence, over all the company is in positive profitability trend. As compare to Sainsbury, there profitability trend is partially increasing. Tesco, increase situation can attract good investors, in order to maintain this trend company need good financial strategy for the future earning to be in positive trend, as ROA showing an upward trend in 2011 but a huge downfall from 2007 with 48.54% in 2011. Though the company sales are increasing but there are possibilities that company might not be receiving their receivable on time and much of the sales might be on credit.

As far as ROI is concern, TESCO has enhanced their investment due to profit earn in last few years. Increasing the level of this index indicates higher efficiency of capital ...