Financial Analysis

Financial Reporting Module

Abstract

This assignment is about analyzing the financial positions of two companies from UK. The companies taken for this assignment should specifically be UK listed companies. The main idea of this assignment is to analyze the financial statements of both the companies and to judge the difference in performance with the help of annual financial ratios and other assessments. Moreover, the module classifies the idea of how the financial statement is analyzed.

Financial Reporting Module

For this assignment two companies listed in the UK Stock exchange are selected. The two companies selected for this assignment are as follows:

Sainsbury

Tesco

Introduction

Objective

The major objective of this research paper is to analyze the financial management in the companies, Sainsbury and Tesco. One of the important things which need to be analyzed in this research paper is the capital structure of the companies. As such characterstics of debt and equity would form the initial arguments of the paper. The focus would then shift towards the introduction of the companies and their financial ratio analysis. Key financial ratios would be analyzed, for Tesco and Sainsbury, in order to forecast the true financial position of the selected companies.

Debt and Equity Securities

There are two main ways that a company can obtain additional financial resources to operate or expand. One is the sale of shares and the other is the acquisition of a debt. The sale of shares can be done by selling shares. The preferred shares have characteristics of both debt and action. Debt can be in the form of loans or short and long term through the issuance of bonds.

Risk

Shareholders are at greater risk than debt holders. This is because when you invest in a company, you're joining your fate to the fate of the enterprise. Bondholders do not have this obligation and it only hurt if the company perform badly and is unable to pay its creditors.

Legal Rights in Bankruptcy

In a bankruptcy, the creditors of a debt has first priority over shareholders. This is because people who loaned money to a company has a greater expectation on the return, instead of the people who invested in the company.

Return potential

If a company breaks the expectations and does it very well, shareholders are in a better position with respect to creditors for a debt. This is because debt holders have an agreement with the company on which they will return a certain amount of interest on the loan. Shareholders, on the other hand, have no guaranteed return, but the potential to earn big dividends if the company does well.

Control

Since the action to be taken as a property, it is also accompanied with some control measures.With common stock, it takes the form of the right to vote. Each share carries one vote and this allows shareholders of listed companies to have a say about who is in charge on board. The board of directors is responsible for choosing the Director General and other managers and determine the main direction of the company. The bondholders and other holders of voting shares do not have this option because they are only ...