Financial Resource Analysis for Tesco

This report presents a comprehensive analysis of Tesco's financial resources, including their ability to pay liabilities and the efficiency of using production goods to generate revenue. The gross profit margin equation is used to calculate gross profit margin, showing that for every £1 earned, approximately 37% was made as profit in 2013. The report also discusses different budgets that can be used by an organization according to their objectives.

Business Resources

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1...........................................................................................................................................1
P1- Recruitment documentation used in TESCO........................................................................1
P2- Employability, personal and communication skills required when applying for a specific
job................................................................................................................................................2
TASK 2............................................................................................................................................2
P3- Physical and technological resources required in operation of TESCO...............................2
TASK 3............................................................................................................................................3
P4- Sources of internal and external finance...............................................................................3
P5- Interpretation of contents of trading, profit & loss account and balance sheet of TESCO. .4
P6- Use of budgets as a means of exercising financial control...................................................5
P7- Illustration of financial state of TESCO...............................................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Fulfilment of needs are essential for any organisation to attain their objectives so it is
required for management to identify which resources can support in to this. Human, financial,
physical, and knowledge factors that provide a firm means to perform its business processes
(Grönroos, 2011). This report is having based TESCO and having details on required recruitment
documents and different communicational skills to apply for a selected job role. Different types
of physical & technological resources, internal and external sources of finance, financial
statements and budgets will be discussed in this report.
TASK 1
P1- Recruitment documentation used in TESCO
Job Title: Customer service manager
Job description: Customer service managers at Tesco are there to ensure that customers are
satisfied with service they are being given, they also need to ensure that other staff are
complying with businesses policy to provide excellent customer service. Customer service
managers will also help develop and implement specifics of organisations customer service
policy, find ways to measure customer satisfaction, improve services, manage a team of
customer services staff and handle enquiries from customers. Requirements of job that Tesco
want customer service employees to have:
Communication skills needs to be sufficient enough to be able to help and inform customers
and instruct colleagues on customer service policies.
Listening skills to understand what customers need and listen to input from other colleagues on
how to improve customer service (Obschonka, Silbereisen and Schmitt‐Rodermund, 2012).
Problem-solving skills be able to address any issues that are bought up from either colleagues or
customers.
Motivational skills helps with ability to lead a team of customer service assistants.
Creative thinking skills gives ability to come up with new improvements to customer service
policies.
Motivational skills helps with ability to lead a team of customer service assistants.
Creative thinking skills gives ability to come up with new improvements to customer service
policies.
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P2- Employability, personal and communication skills required when applying for a specific job
Employability skills can be defined as a skills that a person needs to have in order to get a
job and/or be effective in job role he or she has (Zachary, 2011). Such skills allow employee or
person to have a mutual and friendly relationship with colleagues or manager thus if there are
any problems that arise they will be resolved efficiently. There are many examples of
employability skills that employees or people applying for jobs should possess which include;
qualification and experience that are directly linked to job that is being applied for.
Personal skills Personal skills can be defined as a skills that a person may possess but
doesn’t necessarily need when applying for a specific job role. There are many examples of such
skills which would benefit business including; speaking different languages, trustworthy and
having a sense a humour (Ciabuschi, Perna and Snehota, 2012). It is good if employees or
applicants possess such sills when applying for a job as it will make them more likely to get job
as it shows employer other skills that employee/applicant have that can help business; these skills
are useful for a lot of different jobs.
Communication skills can be defined as a skills that help a person convey information to
another person efficiently and with ease. Managers or employees with good written or verbal
communication skills will benefit business; this is because they will be able to talk and
understand each other properly.
TASK 2
P3- Physical and technological resources required in operation of TESCO
At Tesco building they use is essential towards day to day running of business. In order
for business to provide products and services to its customers they will need different in-house
resources to facilitate smooth running of business (Zott and Amit, 2010). A building on its own
would not be enough for store to be fully operational, they need materials such as; shelves (to
display items), fridges and freezers (to keep cold and frozen items in right condition until they
are sold), tills (so they have a recorded system of what is sold and how much it costs), lighting,
computers (for administration) etc.
Another physical resource that is required for operation of business is insurance, some
insurances are required by law for businesses to have this includes employers’ liability insurance
which provides insurance in case anything happens to employees as a result of business, Tesco
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also pays for public liability insurance that covers any injuries to public that are caused by
negligence. Building and contents insurance is also necessary to ensure that store will not lose
too much money if store is ever damaged, vandalised or stolen from.
Security can be an issue for big companies like Tesco, this is because people find it easier
to steal from big corporations than little independent shops, most Tesco shops are open 24/7 so
they hire security staff that are there around clock, Tesco also uses security cameras and security
tags (on expensive or commonly stolen items) to facilitate work of security guards (Baxter,
2012). Organisations are required to have policies and provisions for what should happen if an
emergency within building occurs. If an emergency was to happen all employees will know
exactly what to do, organisations must also have equipment within building ready to use if
necessary.
Technological resources: Tesco uses software that is loaded on to all their technology. software
is programme that tells technological items, like tills, what to do, it is loaded with all barcodes of
items store sells which means employees can quickly and easily scan items and tills will add it
up with least human labour possible, Tesco would not be able to operate well if it didn’t have
specific software because software keeps everything in check with what’s coming in and what’s
coming out.
 Experience and skills are necessary for Tesco to work as a business, skills are required
for higher up jobs in business such as management.
 Intellectual property needs to be kept secret as it is required for Tesco to ensure that
new ideas they come up with to improve store will not be stolen and used in other
competing stores.
TASK 3
P4- Sources of internal and external finance
Internal Sources:
Retained Profit can be defined as amount of money that is left over when all overhead
and costs of business have been deducted. Retained profit could be used by a business to pay
shareholders as a dividend or to invest in new equipment (Osterwalder and Pigneur, 2010). This
is a good source of finance for TESCO to use as it is there for them to use and they don’t need to
go to bank or any other organisation to borrow money /loan which can be a lengthy process as
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they will be looking at financial side of business to see whether they would be able to pay loan
back. Also by using profit they won’t owe any interest to bank.
External Sources
Shareholders can be defined as people who have bought a share/stake within business.
Shareholders may be used by a business like TESCO to invest in new produce or stock for
business like new food products (Zikmund and et. al., 2013). This is a good source of finance for
TESCO to use as they would not have to get a bank loan and so would not have to pay interest
back. shareholders could also then help owner with running of restaurant.
P5- Interpretation of contents of trading, profit & loss account and balance sheet of TESCO
A Trading, Profit and Loss account (Income Statement) can be defined as an account that
highlights a business’s financial performance over a given period of 1 year which includes sales
revenue, Cost of sales, Gross profit, expenses and Net profit of organisation or business. purpose
of Trading, Profit, and Loss account is to show business whether or not it has made a profit or
made a loss over that 1 year period thus giving a better insight to business owners to see whether
business venture is successful or not and if it’s worthwhile for them to trade. If an owner sees
that he/she are making a huge loss then they may decide to stop trading as business venture will
be deemed unsuccessful as business will be losing a lot of money due to making a loss.
Turnover can be defined as amount of revenue or money generated from sales by a
business or organisation over a period of 1 year. Opening stock can be defined as amount of
stock that business has at beginning of financial year. Purchases can be defined as amount of
goods or stock that have been bought by business (Montgomery, 2011). Closing Stock can be
defined as amount of stock a business has at end of financial year. Cost of Sales can be defined
as direct costs incurred by business when producing goods that they sell; in order to calculate
costs of sales you have to carry out following formula which is opening stock + ( purchases &
expenses ) – Closing stock which give business its cost of sales.
Gross Profit can be defined as profit after deducting cost of goods sold from business total
revenue of financial year; in order to calculate gross profit you have to carry out following
formula which is Total Revenue – Cost of goods Sold which give business its Gross Profit
figure.
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P6- Use of budgets as a means of exercising financial control
There are two ways of budgeting, businesses either budget by using a zero budget or by
allocating a budget. A zero-based budget isn’t like a traditional budget in sense that a set amount
of money is given to different departments depending on their needs instead when an employee
needs money to spend they have to go to their manager and justify their reasoning for needing
money; money will be released from business on a case-by-case basis (Chaffey and White,
2010). An allocated budget it opposite to a zero-based budget, an allocated budget is what Tesco
uses, it is figured out by deciding upon amount of money that is budget and then using analyst
figures of forecasted costs, revenues and resources, budget is then divided up into different
departments whilst taking into account number of employees working within it.
A budget is an estimate of costs, revenues and resources that are going to be needed in future
over a set period of time. Tesco uses an allocated budget to:
 Get all facts business needs to ensure that money they have is going to right place to
ensure that company grows as quickly and efficiently as possible.
 Limit expenditures that are unnecessary.
 Create a “financial roadmap”.
 Plan for future growth as using a budget means that money that was being “wasted” in
one area can now be used to invest in future business opportunities.
 Establishing attainable targets.
P7- Illustration of financial state of TESCO
Current Ratio equation to work out current ratio is ‘Current Assets/Current Liabilities’. 2013:
2052 / 2585 ≈ 0.79 2012: 1940 / 2389 ≈ 0.81 ratios for both years are less than 1.0-1.5 so this
might suggest that TESCO is not well placed to pay debts as their current liabilities are greater
than current assets (Grönroos, 2011). company might require to raise extra finance or extend
time to pay its creditors or pay dividends to shareholders.
Acid Test Ratio equation to calculate acid test ratio is ‘(Current assets – stock)/ Current
liabilities’.
2013: (2052-528) / 2585 ≈ 0.59
2012: (1940-487) / 2389 ≈ 0.61
An acid test ratio less than 1 is bad for organisation, this shows that TESCO cannot pay their
current liabilities and their current assets are highly dependent on their inventory.
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PROFITABILITY
Gross Profit Margin equation to calculate gross profit margin is ‘(Gross Profit / Turnover) *
100’.
2013: (1983 / 5298) * 100 ≈ 37%
2012: (1930 / 4960) * 100 ≈ 39%
This shows how efficient TESCO is using its production goods to generate a revenue. percentage
shows that for every £1 that TESCO earns, percentage is what they will actually make as a profit
e.g. 2013: 37% so £0.37 is made as profit from £1 earned.
CONCLUSION
The above presented report has been concluded about resources where a company can
full fill their requirements. An organisation is having a need of human resources and finance so
their own resources like: HR department and different financial sources. Financial accounts are
having many terms which are having a huge value for organisation like: gross profit, net loss etc.
which indicates company's position and progress. Different budgets can be used by an
organisation according to their objectives.
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REFERENCES
Books and Journals
Baxter, R., 2012. How can business buyers attract sellers' resources?: Empirical evidence for
preferred customer treatment from suppliers. Industrial Marketing Management. 41(8).
pp.1249-1258.
Chaffey, D. and White, G., 2010. Business information management: Improving performance
using information systems. Pearson Education.
Ciabuschi, F., Perna, A. and Snehota, I., 2012. Assembling resources when forming a new
business. Journal of Business Research. 65(2). pp.220-229.
Grönroos, C., 2011. A service perspective on business relationships: The value creation,
interaction and marketing interface. Industrial marketing management. 40(2) pp.240-
247.
Montgomery, C. A. ed., 2011. Resource-based and evolutionary theories of the firm: towards a
synthesis. Springer Science & Business Media.
Obschonka, M., Silbereisen, R.K. and Schmitt‐Rodermund, E., 2012. Explaining entrepreneurial
behavior: Dispositional personality traits, growth of personal entrepreneurial resources,
and business idea generation. The Career Development Quarterly. 60(2). pp.178-190.
Osterwalder, A. and Pigneur, Y., 2010. Business model generation: a handbook for visionaries,
game changers, and challengers. John Wiley & Sons.
Zachary, R.K., 2011. The importance of the family system in family business. Journal of Family
Business Management. 1(1). pp.26-36.
Zikmund, W. G. and et. al., 2013. Business research methods. Cengage Learning.
Zott, C. and Amit, R., 2010. Business model design: an activity system perspective. Long range
planning. 43(2). pp.216-226.
Online
5 Types of Budgets for Businesses. 2017. [Online]. Availabile Through:
<https://www.fool.com/knowledge-center/5-types-of-budgets-for-businesses.aspx>.
[Accessed On 14 July 2017].
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