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Accounting Coursework Assignment - Tesco Plc and LMU Plc

   

Added on  2020-10-05

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ACCOUNTINGCOURSEWORK
Accounting Coursework Assignment - Tesco Plc and LMU Plc_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1Analysis and interpretation of accounting Ratios of Tesco Plc (2015 – 2017)...........................1Limitations of Accounting ratio..................................................................................................4Factors affecting Tesco in 2017..................................................................................................4TASK 2............................................................................................................................................4(a) Report to senior management................................................................................................7(b) Recommendation on basis of techniques to LMU Plc..........................................................7CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
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INTRODUCTIONAccounting framework plays a vital role in every business entity. The present report isabout Tesco Plc and LMU Plc. In this report accounting ratios are used for attaining financialhealth. In the same series, investment appraisal techniques are considered for LMU Plc.TASK 1Analysis and interpretation of accounting Ratios of Tesco Plc (2015 – 2017)Performance RatiosGross Profit margin: It indicates amount of profit which Tesco is creating after repayingits cost of sales. Generally, it measures organization's efficiency with application oflabour and raw material in process of production. In year 2015 it was -3.59 because ofhuge cost of sales against revenue, so Tesco had provided good control on its COGS forgenerating positive gross profit and successfully they had provided 5.24 GP ratio in 2016.In the same series, its gross margin ratio was approximate stable in year 2017 byproducing more sales (Deng and et. al., 2018).Return on total assets: In year 2015 it reflected negative return on its total assets as itstotal expenses were huge as compared to 2016. By utilising its assets for purpose ofgenerating earnings prior to contractual obligations as 0.37. It had maintained similarsituation in 2017 with 0.32 but it has presence of minor differences which could betracked.1
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Return on capital employed: In year 2016 it was giving negative return of 26.13 due toless capital employed. By observing this negative position, it had employed capital insuch way it had generated ratio as 0.67 and in 2017 it was 0.55.Liquidity RatiosCurrent Ratio: The ideal ratio is of 2: 1 as it measures liquidity of organization. Theabove graph is depicting 0.6 in 2015 which is not suitable to industry standards, so Tescois working hard to improve. It could be reflected from above ratio of 2016 and 2017 as0.75 and 0.79 respectively (Alper and et. al., 2018).Liquidity ratio: In year 2015 it was 0.45 as its ideal ratio is of 1. For improving Tescohad generated 0.63 in 2016 but due to huge current liability, it decreased to 0.45 in year2017.2
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