Financial and Management Accounting

Financial and Management Accounting

Introduction

This paper presents an analysis of two companies that operate in the same industry and with their Head Offices in the same country. Companies that have been selected for this assignment are Sainsbury Plc and Tesco Plc. This part of the report presents a financial analysis of both companies using different types and ratios and approaches of both companies towards financial management.

Company Overview

J Sainsbury is a UK-based public limited company. It was founded in 1869, with the founding family retaining a great deal of power and influence over the company. Lord Sainsbury of Preston Candover is president of the company for life, and many other members of the Sainsbury family are on the company's board. J Sainsbury Plc jointly owns Sainsbury's Bank with Lloyds Banking Group. The company also has two property joint ventures, with Land Securities Group Plc and The British Land Company Plc (Sainsbury Plc, 2012c).

J Sainsbury is primarily a grocery retailer; however, like the other leading players in supermarkets, it also offers an extensive non-food offering. This includes clothing, petrol, pharmacy goods and services, financial services, telecommunications, electrical goods and books, as well as in-store consumer foodservice (Sainsbury Plc, 2012a). The company's network is said to serve over 18 million customers a week, whilst its internet retailing site offers home delivery on groceries to 88% of all UK households. The company plans to extend this coverage in order to cover most of the UK. The company's regional share of grocery sales varies, however, with a 25% value share in London, and just a 6% share of sales in Scotland in 2009 (Sainsbury Plc, 2012b).

Tesco Plc is a public company headquartered in the UK. The company is the leading retailer in the UK, with over 4,800 stores. The company operates supermarkets, convenience stores, forecourt retailers, hypermarkets and internet retailing, and even financial services (Tesco Plc, 2012a). In the UK, the company operates Fresh & Easy, a supermarket, Tesco Stores (Supermarkets and hypermarkets). These stores are located in nearly all major cities of the country. The company had originally planned to grow to 1,000 outlets by 2013, but as a result of the UK economic recession, expansion plans have been scaled back, and Tesco's new CEO, Philip Clarke, who took over from former CEO Terry Leahy in March 2011, then announced a revised plan of 300 stores operating by February 2013 (Tesco Plc, 2012c).

Task 1)

(a)Performance Ratios

J. Sainsbury PLC

Profitability Ratios

2012

2011

2010

2009

2008

ROA % (Net)

4.69

5.77

5.62

2.88

3.35

ROE % (Net)

10.82

12.35

12.56

6.22

7.11

ROI % (Operating)

6.8

9.78

9.71

8.92

7.19

In August 2009 J Sainsbury launched a service offering non-food products online, providing consumers with a range of Sainsbury's private label and branded non-food products. Sainsbury's embarked on a multi-million pound re-launch of its private label Taste the Difference in September 2010. This resulted in increasing the ROA of Sainsbury from 2.88 to 5.77 in the year 2011. Futhermore, this trend in 2012 was reduced to 4.69 which was due to the reduction in utilization of assets. Taste the Difference adds ...