Financial Analysis and Company Valuation of Tesco plc

FINANCE

Contents
INTRODUCTION.......................................................................................................................................3
MAIN BODY..............................................................................................................................................3
2.1 Financial analysis..................................................................................................................................3
2.2 Company Valuation...............................................................................................................................9
2.3 Capital structure...................................................................................................................................15
CONCLUSION.........................................................................................................................................17
REFERENCES..........................................................................................................................................18

INTRODUCTION
The financing is a vital function for organizations, since it plays an important part in the
operation of different businesses. Without sufficient funding accessible an organization cannot
imagine maintaining itself in a competitive market (Hiferding, 2019). Thus financing as a whole
is just as critical for corporations as blood for humans. With the aid of financial statements such
as income accounts, cash flow etc, different types of ratios are used in project report to analyzes
Tesco's financial results. In accordance with the financial results of the firm, the issue of
shareholders' is contrasted with the profitable business. In addition, valuation of above plc is also
done by help of prepared financial statements as well as calculations are done in accordance of
given scenario in last part.
MAIN BODY
2.1 Financial analysis
(a) Analysis of financial performance of Tesco by comparing with its competitors.
Ratio analysis- The ratio analyzes are the analysis of line items in a company's financial
statements. Ratio analyzes are used to measure a variety of company challenges, such as their
competitiveness, operating performance, and productivity. This kind of analysis is valuable for
investors beyond a firm since the financial records are the main source of knowledge for an
entity (Fracassi, 2017). Analysis of ties between firms is less helpful because they have greater
access to comprehensive market details regarding the company. In order to sort out issues of
stakeholder, Tesco’s financial ratios are compared with its competitors which are Sainsbury’s
and Morrisons plc. Herein, below comparison among these plc is done below in such manner:
1. Profitability ratio
 Gross profit ratio: Gross profit/net sales*100
Gross profit ratio 2018 2019
Tesco plc 5.8% 6.5%
Sainsbury’s 6.6% 6.9%

Morrisons 3.7% 3.4%
Tesco plc Sainsbury’s Morrisons
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
5.80%
6.60%
3.70%
6.50% 6.90%
3.40% 2018
2019
Analysis- On the basis of above presented graph this can be find out that among three
companies, Sainsbury’s gross profit ratio is better. As their ratio was of 6.6% and 6.9% for year
2018 and 2019. While Tesco plc has ratio of 5.8% and 6.5%, though it’s not huge difference. On
the other hands, Morrisons plc has lower ratio compared to both companies which is of 3.7 and
3.4% for both years.
 Net profit margin: Net profit/net sales*100
Net profit ratio 2018 2019
Tesco plc 2.10 2.07
Sainsbury’s 1.2 0.69
Morrisons 1.80 1.38
Tesco plc Sainsbury’s Morrisons
0
0.5
1
1.5
2
2.5 2.1
1.2
1.8
2.07
0.69
1.38
2018
2019