FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

The financial analysis is basically to study a company financially by relying on its books and on economic and financial information about the company or its industry. The analysis which is carried out is very useful in accessing the overall financial health of the company, to check that whether it is sound or not, or to analyze the capital structure of the company. It can also be used to analyze the management and profitability of the company, along with its development Prospects.

The financial study is based on recent financial information that is in the business accounting. This is to "speak" the numbers and understand the reality that lurks around them. These reflect the situation of the company at some point. After conducting a rigorous analysis of accounting records and information obtained from various sources, it becomes possible to make an overall judgment on the company's performance. In this report, we will be conducting a ratios analysis for TESCO Company and them we will be comparing its figures with Sainsbury in order to see the productivity and overall performance of the company in regards to its competitor in the market within the same industry. This will involves the calculation of profitability, efficacy and liquidity ratios.

Company Overview

Tesco is a multinational chain of stores retail with its headquarters in the United Kingdom. In 2008, Tesco became the fourth largest retailer in the world, moving to fifth place at the distributor Metro AG , the first movement of positions among the top five companies in the sector since 2003 . Originally specializing in food and drink, it has diversified into areas such as clothing, electronics, financial services, selling and renting DVDs , compact discs, digital downloads , Internet services ,telecommunications , medical and dental insurance and software .

Tesco is the main English distribution group, with almost 30% of the market share. Its activities are divided among five divisions: - food distribution in the UK: 692 outlets (labels Extras, Superstores, Compact Superstores, Metro and Express stores) covering an area of 2 million m2; - food distribution ( 90 points of sale): textile, cosmetics, culture, pharmaceuticals, information technology, optics, TV / Hi-Fi / Video, appliances, etc..; - virtual supermarket (tesco.com, and tescodirect.com tesco.net): food and no food; - financial services: insurance, loans, savings, credit cards, etc.. Tesco has more than 2 million consumers; - international: 139 supermarkets and hypermarkets located in Hungary (45), Poland (40), Czech Republic (12), Slovakia (10), Thailand (24) South Korea (7 ) and Taiwan (1). The VN is distributed geographically as follows: United Kingdom (77%), rest of Europe (15%) and Asia (8%).

Ratio Analysis

The financial ratios of these two companies are given as follows:

Key Ratios

TESCO

Sainsbury

2011

2012

2011

2012

Gross Profit Margin

18.9

20.3

5.5

5.4

Net Profit Margin

1.86

5.26

3.03

2.68

Return on Equity

1.91

6.85

12.32

10.82

Asset Turnover

0.84

1.02

1.9

1.88

Return on Assets

1.57

5.38

5.75

5.04

Inventory Turnover (Days)

4.6

4.78

5.6

5.8

Debtors Turnover (Days)

61.18

67.84

1.42

1.66

Creditors Turnover (Days)

23.63

36.26

33.11

32.37

Current Ratio

3.09

2.34

0.59

0.65

Quick Ratio

1.86

1.14

0.17

0.24

Debt Asset Ratio (total debt)

17.42

24.84

52.42

54.38

Debt Equity Ratio( total debt)

82.58

75.16

47.58

45.62

However, in this section of the report, we will be categorizing them into four broad categories and will ...