Financial Analysis Management & Enterprise - Assignment
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Added on 2021-02-19
Financial Analysis Management & Enterprise - Assignment
Added on 2021-02-19
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Financial Analysis Management& Enterprise
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11. Financial statement of Sainsbury and Tesco...........................................................................12. Importance of analysing working capital in the organisation ..............................................153. Evaluation of cash flow of last 2 year of the company.........................................................17CONCLUSION..............................................................................................................................17REFERENCES..............................................................................................................................19APPENDIX....................................................................................................................................20
INTRODUCTIONFinancial analysis is the process of analysing and evaluating the budget, project cost andother expenses of transaction related to the finance to find the productivity and sustainability ofthe company in given period. It can be done by visualising the financial report such as incomestatement, cash flow and balance sheet. Sainsbury and Tesco are the two leading company of UKin retail sector. The growth of the company is depended on its productivity and performance inthe market and how often people are loyal to the products and services. The aim of the study is topresent the financial performance of the Sainsbury and Tesco and analyse the result of thecompany. It also focuses on the importance of working capital in the organisation. The reporthighlights the cash flow statement of Sainsbury and Tesco of last two year. MAIN BODY1. Financial statement of Sainsbury and TescoProfitability ratio analysis GP ratioNP ratio 1
InterpretationProfitability ratio is used by the company to evaluate the generated profit in theorganisation in particular time period. The gross profit ratio present the generated profit from theoperating activities of company and net profit ratio help to estimate the profit generate from nonoperating activities. The comparison of gross profit ratio of Sainsbury and Tesco present thatSainsbury improves its performance and generate the higher profit in compare to Tesco but thegrowth ratio of Tesco is Higher than the Sainsbury because in 2015 it bears the losses and in2019 Tesco is able to compete with Sainsbury.The comparison of net profit ratio of Tesco and Sainsbury present that in last 4 yearTesco generate the higher profit. The net profit of Sainsbury is decline from the year 2016 to2019 but the net profit of the tesco is increasing day by day which help them to maintain theposition in the market.Liquidity ratio analysisCurrent ratio Quick ratio 2
InterpretationLiquidity ratio is used determine the liquidity of the company or ascertain its financialposition. It provides the information to determine the ability of the debtor to pay the debt of thecompany within the debt period. The current ratio of Sainsbury and tesco is increasing in theinitial year but in 2019 it declines. But the current ratio of both company is below to the idealcurrent ratio which is 2:1.The quick ratio of Sainsbury and Tesco is declining. In initial year the ratio of thecompany is increasing but in late year it start to decline. It presents that the company is able topay the debt of the organisation. But from the comparison of the company financial position itcan be found that the decline ratio of Tesco is below to the Sainsbury. The quick ratio ofSainsbury is decline with higher rate.The liquidity ratio of the company is declining which present that the managers has tocontrol the activity and increase the cash level to paying the debt of the company. They also haveto manage the liability and collect the debt from the debtors to maintain the current assets.Solvency ratio analysis Debt-equity ratio Year / companiesSainsburyTesco20150.441.492016.351.233
2017.311.452018.200.672019.12.38InterpretationThe solvency ratio of the company is used to determine that the company is able to paythe long term or short debt or not. It was also used by the lenders and investors to take thedecision of investment in the company by estimating its cash level in the company. The debtequity ratio of Sainsbury and Tesco is declining from the year 2015 to 2019 which present thatthe company is able to manage its debt by its equity. From the above comparison it can be concluded that the declining ratio of Sainsbury isquite higher to the Tesco which indicate that Tesco is performed better in market in compare toSainsbury performance. The declining ratio of company indicate that manager has to manage thedebt and prepare the various plan and strategies to increase the equity of the firm by attractingthe investors and lenders. They also have to reduce the debt of the company by collecting themfrom the debtors and regulate the period of paying debt.Efficiency ratio analysis Inventory turnover ratio Year / companiesSainsburyTesco201522.6321.78201622.4419.15201717.9322.41201814.8323.73201914.4424.49Total assets turnover ratio Year / companiesSainsburyTesco20151.441.4120161.401.2420171.431.2520181.361.2720191.271.364
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