FINANCIAL REPORTING

Advanced Financial Reporting

Executive Summary

The report is composed of two sections. Firstly, it provides a financial comparison of J Sainsbury plc and Wm Morrison Supermarkets plc, companies from the UK retail industry. Financial ratios are used as the key measure to analyze financial performance of the two companies on individual scale (past performance comparison) and relative (between the two competitors) scale of financial status and business performance during 2012. The paper also takes into account various financial and non-financial factors that may affect the business performance and organizational capabilities of the two companies.

The second part of the report is dedicated to the concept of segment reporting. The report sketches an argumentative essay in favour and against the use of segmental reporting to attract key stakeholders towards a particular business, and how it may affect the overall business performance.

Key Words: Financial ratios, financial performance, financial and non-financial factors, segment reporting

Advanced Financial Reporting

Question # 1: Financial Comparison between J Sainsbury plc and Wm Morrison Supermarkets plc

Introduction

The report attempts advanced financial reporting by undertaking a comparative study of financial performance of two selected companies, which are listed on the London Stock Exchange. Keeping in view the perspective of key stakeholders, the report compares and contrasts financial status and business performance of the two companies in a given frame of time. Financial performance of the selected companies is done on individual and relative performance level through financial ratios.

Furthermore, the report provides arguments against and for the technique of segmental reporting and how it can help to attract the key stakeholders by summarizing the key financial highlights. A quick introduction of the selected companies and their business operations is as follows:

Overview of J Sainsbury plc

Since its foundation in 1869, Sainsbury's has become one of the leading retailers of the UK superstore market. At present, the company is holding 16.6% share of the Kantar market. Business strategy of Sainsbury's is centred on five focused areas (figure 1), which are driven by its corporate culture and business values. The company operates a customer driven business by placing the customer at the heart of its business operations (Sainsbury, 2012, p. iii).

Figure 1: Focused Areas of Business Strategy (Sainsbury, 2012, p. iii)

Markets and Products

The company operates in the grocery and related retailing across the UK. It is offering a wide range of food items, complementary non-food products and services mainly through TU home and Sainsbury's brand names (Annual Reports, 2011, p. n.d.). The organization is divided into three leading segments of financial services, property investments and retailing in the UK (Reuters, n.d., p. n.d.). Additionally, the company is offering credit cards, travel money, insurance products and banking services to its customers.

Key Business Operations

Sainsbury's key business operations are comprised of an online grocery store, a chain of 487 convenience stores and 576supermarkets, and general merchandise operations (figure 2). The company share two property ventures with The British Land Company PLC and Land Securities Group PLC. Moreover, the company also owns a bank named Sainsbury's Bank in joining hands with Lloyds ...