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PART B: Financial Strengths and weaknesses of the company

   

Added on  2020-01-28

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FinancialAccountManagement

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................3PART A: OVERVIEW...................................................................................................................3Background to the company & why reason for which it was selected........................................3Identification of key announcements or events...........................................................................4PART B: FINANCIAL HEALTH...................................................................................................6Computing and analyzing key financial ratios for the company.................................................6PART C..........................................................................................................................................12Financial strengths and weaknesses...........................................................................................12Conclusion and recommendations.............................................................................................13REFERENCES..............................................................................................................................15APPENDIX....................................................................................................................................16

INTRODUCTIONFinancial accounting management refers to the process of effective and efficientmanagement of funds for the purpose of meeting organizational objectives (Brigham andEhrhardt, 2013). This aspect is applied for managing long as well as short term resources for thesuccessful operations of business. Present report is based on Tesco which is a Britishmultinational grocery and general merchandise retailer of UK. This corporation is second largestretailer in the world in accordance with revenue and third largest retailer on the basis of profits.Furthermore, financial trends of company are identified with rationale of change as result ofinternal and external environmental actions. In addition to this, financial ratios of company arecalculated and analyzed in relation to its ability to meet the financial ambitions. Moreover,recommendations have also been provided to prospective investors for business by focusingupon its strengths and weaknesses.PART A: OVERVIEWBackground to the company & reason for which it was selectedCurrent report is based on Tesco which is a British multinational grocery retailer. It is thegrocery market leader in UK with having share around 28.4%. This corporation was found in theyear 1919 by Jack Cohen. However, the first store of Tesco opened in 1929 in Burnt Oak, Barnetwhich was expanded rapidly. During 1990s, Tesco diversified itself into several areas such asretailing, furniture, electronics, clothing as well as financial services. Along with that, telecom,internet services, petrol and software are also included. This organization is listed on LondonStock Exchange and had market capitalization of £18.1 billion on 22nd April 2015. Tescointroduced loyalty card in 1995 for attracting more buyers and persuading them to take quickpurchase decision. It was considered as the most effective strategy of marketing for retainingbuyers for longer time span.Furthermore, in 2013, Tesco purchased the restaurant and cafe china Giraffe for £48.6million and then during 2014, it opened restaurant in some of its stores. However, at present,corporation is facing issue of declining sales. In the current financial year, shares of Tesco werethe biggest faller in FTSE 100. Here, investors were threatened because of uncertain anddeflationary market where discounting stores are outperforming. Owing to this, company iscutting prices and also planning to sell off some of its other side businesses. It shows that firm is

unable to manage its rate of return due to shifting of customers from one to another brand. Forthis purpose, Tesco has been selected as there are variations in its financial performance overrecent years (Financial Times, 2016). Owing to this, Tesco has been selected for the currentreport for assessing its financial performance over the last years.Identification of key announcements or eventsAccording to Chairman, John Allan, year 2015 was challenging for Tesco. However,company remains extremely positive and confident about the future. Tesco proved to be aniconic brand and an enormous employer which has huge responsibilities towards customers,business partners, employees and shareholders as well as suppliers. Tesco is focused towardscorporate governance as it has a solid governance framework which is extremely transparent. Inthe last year, company continued with the range of corporate renewal plans that have providedgreat success to company. The corporate entity puts customers at the heart of business and makesdecisions based on their needs and wants. Recently, firm has sold its Homeplus business inKorea which was a difficult decision, but was important for company to reposition finance of theGroup by generating £3.3bn of funds (Annual Report and Financial Statements, 2016). Thisdecision taken by company strengthened its balance sheet. decision taken for replacing the UKdefined benefit pension scheme with a contribution scheme that was seen as the most importantstep which is taken by company to be competitive and sustainable for business partners in thelong run. Tesco got its images back as an investment grade and paying dividends. Main focus ofcompany is on achieving business goals for the long-term success. Corporate entity is reknownedfor stablepricing, improving services etc. It has simplified every food range on shop floor forimproving customer service which directly affects the financial position of business.In the month of October 2015, Tesco was the first sole retailer within United Kingdom tooffer customers an immediate price along with brand guarantee. Through this, company does notcharge more in case competitors such as Asda, Morrison’s or Sainsbury are offering it with lesserprices. Recently, business entity has launched new fresh food brands which are offered at greatprices. This is the way in which company attracts large number of customers by providing themgreat value for money and fresh food under a roof. Organization has made improvements acrossoffers which have strengthened the market. Along with this, in Europe and Asia, Tesco has builtstrong and positive sales momentum in the last year (Annual Report and Financial Statements,

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