Analysis and Evaluation of Business and Financial Performance of Tesco and Sainsbury

''An analysis and evaluation of the business and financial performance of
Tesco as compared to Sainsbury ''

Acknowledgement
I would like to thank my supervisor who has helped in throughout competing this
dissertation. The continuous support from my guide and his/ her efforts helped me in learning,
overwhelming immense knowledge and motivated me. I would also like to thank my family and
friends for their support and faint in me.

ABSTRACT
The measurement of financial performance of business gives a deeper insight into the use
of financial resources by business. The UK retail industry is highly growing and attractive
sector, therefore, investors are willing to invest in retailing organization. The study aims to make
a comparative analysis into the business as well as financial performance of Tesco and
Sainsbury, both are leading retail organization in the UK. A quantitative approach is selected for
the investigation to which a positivism philosophy is adopted. The data for the present study
have been collected from secondary sources including books, journals, articles, research papers
and online stuffs. To assess the financial performance of Tesco and Sainsbury, annual reports
prepared by the both the companies for last 5 years are used to gather financial information.
Ratio analysis is used to carry out the accurate financial analysis in which Sainsbury is found
more efficient as compared to Tesco in terms of financial performance.

Table of Contents
Acknowledgement...........................................................................................................................2
ABSTRACT....................................................................................................................................3
CHAPTER 1- INTRODUCTION....................................................................................................6
1.1 Background............................................................................................................................6
1.2 Rationale of investigation......................................................................................................6
1.3 Aims and objectives...............................................................................................................7
1.4 Significance of the proposed research study.........................................................................7
CHAPTER 2: LITERATURE REVIEW.........................................................................................8
2.1 Introduction............................................................................................................................8
2.2 Significance of the business and financial performance to the stakeholders.........................8
2.3 Ratio Analysis and significance.............................................................................................9
2.4 Classification of the ratios...................................................................................................10
2.5 Limitations of the ratio analysis..........................................................................................10
CHAPTER 3-RESEARCH METHODOLOGY............................................................................12
3.1 Research philosophy............................................................................................................12
3.2 Research approach...............................................................................................................12
3.3 Research design...................................................................................................................12
3.4 Data collection.....................................................................................................................13
3.5 Data Analysis.......................................................................................................................13
3.6 Ethical and accessibility issues............................................................................................13
CHAPTER 4- DATA ANALYSIS................................................................................................15
CHAPTER 5 CONCLUSION AND RECOMMENDATION......................................................24
REFERENCES..............................................................................................................................26
Appendix 1.....................................................................................................................................28
Appendix 1.....................................................................................................................................29

CHAPTER 1- INTRODUCTION
1.1 Background
Financial performance is denoted as a subjective measure of how an organizations is
using or can use assets to generate revenues as well as profitability (Rao, 2011.). The
measurement of financial performance of business gives a deeper insight into the use of financial
resources by business. The stakeholders (both internal and external) seek for assessing the
financial performance of companies so as to make financial decisions such as investments,
expansion. Including this, management of companies keen to know financial health and
performance of the firm to find out smooth business. Ratio analysis is a tool used to easily
understand the financial performance of a corporate entity, further m it helps in measuring the
return which investors will get through investing money in the business operations of respective
organization. In the present competitive scenario, financial performance analysis is used to find
out how competitive the form and in the market and how they can improve their performance to
remain successful. The retail industry of the United Kingdom has become competitive in terms
of sales performance and profit generation, however, it becomes important to compare the
financial performance to assess the effectiveness of retail in firms in generating revenues and
profits (UK Retail Stats and Facts, 2016). The dissertation herewith aims at comparing the
financial performance of two leading retail organization of the UK named as Tesco and
Sainsbury. Through this investigation, a deeper insight to the existing financial position of both
the firms have been quoted.
1.2 Rationale of investigation
The UK retail industry is highly growing and attractive sector, therefore, investors are
willing to invest in retailing organization. Tesco and Sainsbury Plc. both have gained a
significant market image however, a huge competition is witnessed in terms of improved
business practices and financial performance (UK Retail Stats and Facts, 2016). From the
investor’s point of view, financial strong company is a sources from where better returns can be
raised. Sainsbury Plc. is a the major competitor of Tesco , however, the questions is that which
firm is financially strong , hence, the study will attempts to make an analysis and evaluation
into business and financial performance of Tesco and Sainsbury. The rationale behind present
investigation is to analysis the financial information of both the companies so that various

decision makers can be assist with effective insights in financial health to facilitate effective
decision making.
1.3 Aims and objectives
Aim
The study aims to make a comparative analysis into the business as well as financial
performance of Tesco and Sainsbury.
Objective
 To make comparison of the financial health of Tesco with its competitor, Sainsbury
 To provide information to the potential investors about the financial performance of
Tesco and Sainsbury
 To offer valuable information to several stakeholders about return on equity, dividend,
etc.
 To help investors and shareholder in making suitable decision on investments and
provide assistance to them in making effective decisions.
Research questions
Q.1 How efficient Tesco and Sainsbury are in using shareholders’ investment?
Q.2 To which extent, Tesco and Sainsbury stakeholders are open to monetary risk?
Q.3 Which Company is utilizing its financial resources to their optimum level?
Q.4 Will Tesco and Sainsbury are able to attain success in the upcoming years or in future?
1.4 Significance of the proposed research study
The herewith investigation is significant for retailing industry, academicians, researchers
as well as the management of both Tesco and Sainsbury. The academicians are going to get
insights into the use of ratio analysis and its interpretations. The investigation is going to analysis
the financial position of Tesco and Sainsbury in last 5 year (2011-2015) which have hardly done
in previous studies. The information pertaining to financial performance of retail sectors will
allow researchers to identify the significance of ratio analysis and financial performance
companies in retail industry. In addition to that, investors and shareholder are going to be
assisted with effective decision on investments and the findings of this study will provide

assistance to them in making effective decisions. The comparison of the financial performance of
Tesco with its competitor, Sainsbury is going to be carried out in this investigation which will
provide information to the potential investors about the financial performance of Tesco and
Sainsbury so they can make decisions. The management of Tesco and Sainsbury are going to be
recommended with the ways to improve financial performance.

CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
Literature review is the most crucial section of the investigation which carries a review
into academic theories and aspects related to the topic of study (Robson and McCartan, 2016).
The section is important to assess the findings and previous studies which can support the
present investigation. Review of literature includes summary of findings of previous authors
who have conducted range of investigations into the study topic. The section herewith deals with
the secondary information in relation to financial performance analysis which has been carried
by various authors in their studies. To complete the present investigation various themes such as
the significance of the financial performance to the stakeholders, definition and meaning of ratio
analysis along with its significance. Furthermore, this section represent classification of the
ratios, its importance and limitations of the ratio analysis.
2.2 Significance of the business and financial performance to the stakeholders
According to Vogel (2014) financial performance is referred to the degree to which
financial objectives are being or have been attained within an organization. In a border sense,
financial performance is a way to measure how an organization is managing its financial
resources to manage the risk of business. The measurement of financial performance is a major
criteria to assess financial risk management. To the view point of Ahrendsen and Katchova
(2012) financial performance is measured to find the results of a firm's policies and operations in
monetary terms. The measurement of overall financial health of an organization which is given
within a specified period of time is referred as the financial performance. This is further evident
as the most effectual measure which carried a deeper insights into the optimum utilization of
financial resources within a company (Financial Performance - Understanding its Concepts and
Importance, 2016). The performance of company which is judged in a financial terms indicates
profitability as well as liquidity of the same and carries out the ways in which it can be improved
(Fridson and Alvarez, 2011).