Financial Analysis Management & Enterprise Solved Assignment (Doc)
Added on 2021-02-19
32 Pages5616 Words25 Views
Calculus and Analysis
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Financial AnalysisManagement & Enterprise
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11. Presenting detailed analysis of vertical, horizontal and financial ratios of Sainsbury andTesco plc......................................................................................................................................12. Explaining importance of working capital analysis of Sainsbury and Tesco........................133. Showing critical analysis of cash flow statements of both companies..................................14CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16APPENDIX ...................................................................................................................................17
INTRODUCTIONA process consisting with analysis of financial performance of the centrepiece and andcomparing it with company's past and budgeted position in order to determine actual financialperformance of the firm (Hasche and et.al., 2018). Further, Financial management is nothing, buta process performed by financial managers of the company in order to formulate strategies andplan various procedures for the firm so that it could achieve its financial goals efficiently. Thepresent report shows report prepared by financial advisor to be submitted to the board ofdirectors of Asian food manufacturer. The report includes a comparison of financial performanceof Sainsbury and Tesco plc. It describes an analysis of vertical and horizontal financialstatements of both the companies along with analysis of their financial ratios as order to evaluatefinancial efficiency of both the companies. Moreover, the report also mentions importance ofworking capital analysis for both Sainsbury and Tesco. In addition, it also presents an indepthanalysis of cashflow position of both businesses. At the end of report, it shows different financialstatements of both companies as an evidence of above mentioned analysis. MAIN BODY1. Presenting detailed analysis of vertical, horizontal and financial ratios of Sainsbury and TescoplcLiquidity ratio analysisQuick ratio YearTescoSainsbury2015-16.61.522016-17.68.532017-18.60.592018-19.49.501
Current ratio YearTescoSainsbury2016.75.662017.79.742018.71.762019.61.66InterpretationsLiquidity ratio derived from the financial data of a company helps in analysing the2
efficiency of a company in maintaining sufficient amount of cash and cash equivalents within thecompany (Suh and Kang, 2019). Companies having liquidity ratios between 1.5 to 3 are beingconsidered as healthy enterprises. By analysing the liquidity position of Sainsbury, it can be evaluated that it's liquidityposition increased from 2015-16 to 2017-18. Company’s efficiency declined at an higher rate in2018-19. Further, its liquidity ratio kept lie between 0.5 to 0.60. Thus, it can be said that it hasbeen failed to maintain healthy liquidity position.In addition, with analysis of Tesco' liquidity position, it can be said that there is afrequent change in the amount of cash and cash equivalents maintained by the firm in order tomaintain repay its creditors.Thus, it can be said that financial statements of both the companies are not showing theirhealthy financial positions.Investment ratiosDividends per share Year TescoSainsbury2015-16-.122016-17-.122017-18.03.12018-19.11.13
Earnings per share Year TescoSainsbury2015-160.05.232016-17(0.01).172017-18.44.132018-19.41.08InterpretationInvestment ratios consists all those ratios derived from the financial statements thatprovides information to the shareholders regarding the risk involved in the investment made bythem into the firm. Along with this, these ratios are also used by the companies in order to helpthe investors in their decision making regarding the company. Earning per share and dividendper share are two major ratios used to provide sufficient information to the shareholders.Company with higher value of investment ratios and increasing trends in these ratios areconsidered as profitable companies as per the views of investors.The investment ratios of Sainsbury shows stability in payment of dividend. On the otherhand, Earning per share of the company is declining over the year. Talking about, investmentratios of Tesco plc, it can be said that till the year 2016-17 company was not paying dividend toits shareholders. After it, company's dividend paying capacity shows increasing trend. Further,earning per share of Tesco reduced in the year 2016-17 to -0.01 which improved in the year4
2017-18 to 0.44. Further, the EPS reduced in the year 2018-19 as well to 0.41. Thus, it can be said that both company's position is not profitable from the point of viewof an investor, as investment ratios of both the companies are showing declining trend. Efficiency ratio analysis 5
InterpretationEfficiency ratios of a company are being calculated by the financial managers in order todetermine the efficiency of the company in generating income from its various resources held byit during the period (Kacker and et.al., 2019). Inventory turnover ratios, total assets turnoverratios are covered under Efficiency ratios of financial analysis. As per the guidelines mentionedin the financial and accounting standards, 50% efficiency ratio of the company should beconsidered as an optimal percentage regarding efficiency of the firm. In addition, inventoryturnover ratio of a company should lie between 4 to 6. In addition, in case of of assets turnoverratio, higher value of ratios of the company shows higher efficiency of the company ingenerating revenue from the fixed assets held by it during the year.With analysis of efficiency ratios of Sainsbury, it can be seen that inventory turnoverratio of the company is having declining position over the year. Whereas, it is showingincreasing trend in case of Tesco Plc. Further, assets turnover ratios of Sainsbury is also havingdeclining trend. On the other hand, in the Tesco, the ratio is increasing with the passage of year.Thus, it can be said that efficiency of financial managers of Sainsbury is declining overthe year. Whereas, Tesco's managers are improving their efficiency of earning maximum profitsfrom different resources held by it. Thus, it can be evaluated that Tesco is more efficientcompany as compare to Sainsbury in context to earning revenues from the assets held by it. Solvency ratios6
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