Financial Analysis Management & Enterprise Assignment Solution
24 Pages4214 Words19 Views
Added on 2021-02-21
Financial Analysis Management & Enterprise Assignment Solution
Added on 2021-02-21
ShareRelated Documents
Financial AnalysisManagement &Enterprise
Table of ContentsINTRODUCTION...........................................................................................................................3MAIN BODY...................................................................................................................................31. Vertical and horizontal ratio analysis of the financial Statements of two companies........32. Working capital analysis..................................................................................................203. Evaluation of the Cash Flow............................................................................................21CONCLUSION..............................................................................................................................23REFERENCES..............................................................................................................................24
INTRODUCTIONThe financial analysis can be defined as a kind of technique which is related to theassessing and interpreting the financial reports and statements of companies (Langston andLauge-Kristensen, 2013). This is very important for companies to analyse the financialtransactions of organisations so that financial position of organisations can be evaluated. As wellas proper financial analysis leads to effective management of financial situation of company.Herein, the project report Sainsbury's and Tesco company has been chosen. As well as in theproject report, financial performance of both companies is analysed. In this analysis vertical andhorizontal of financial statements of two companies is included . Along with role of analysingthe working capital of both the companies in decision making is mentioned. In the end of projectreport, annual cash flow of above companies is analysed for two years. The aim of project reportis to recommending to Asian food manufacture to choose the Tesco and Sainsburry's company asclient. MAIN BODY1. Vertical and horizontal ratio analysis of the financial Statements of two companies.The ratio analysis can be defined as a kind of technique which is related to the analysingthe financial position of companies with the use of various types of ratio (WANG and WANG,2012). Basically, the ratio analysis consists a wide range of ratios that are being calculated andinterpreted by companies for purpose of decision making. Herein, below some types of ratios ofSainsburry's and Tesco company are mentioned below:Profitability ratio- The profitability ratios can be defined as a kind of ratios which are beingcalculated to provide information about level of profits earned by companies at the end of anyparticular time period. This ratio consists some types of ratios which are as follows:Gross profit ratio- It is a kind of ratio that is being computed by companies to getinformation about profitability of various activities regarding to the production (Pinto,and Garvey, 2016). As well as this ratio is being calculated by this formula: Net sales/Gross profit. Herein, below gross profit ratio of above two companies is mentioned belowfor four years:
GP ratioYear / companiesSainsburyTesco2015-166.19%5.24%2016-176.23%5.19%2017-186.61%5.83%2018-196.92%6.48%Interpretation: As per the above calculation of Sainsbury's gross profit ratio, it can beanalysed that company's gross profit ratio is increasing continuously. Such as in year 2015-16, itwas of 6.19% . Same as in the 2017-18 year their gross profit ratio is of 6.61%. So it can beinterpreted their financial position is better in terms of gross profit (.Annual report ofSainsbury’s, 2015-16).In the aspect of Tesco company, their GP ratio is of 5.24% in year 2015-16 as well as innext year it decreased and became 5.19%. While in year 2017-18, it was of 5.83%, so it can beinterpreted that their gross profit ratio is inconsistent (Annual report of Tesco, 2015-16). Net profit ratio- This can be defined as a kind of ratio which is being calculated bycompanies to get the information about effectiveness of business activities. In this ratio,
net income of companies for a particular year is calculated in terms of net profit ratio.The formula of calculating this ratio is: (Net sales/ Net profit). Herein, below four year'snet profit ratio is mentioned below:NP ratio Year / companiesSainsburyTesco2015-162%0.25%2016-171.44%-0.07%2017-181.09%2.10%2018-190.75%2.07%Interpretation: As per the above net profit ratio of Sainsbury's net profit ratio, it can beanalysed that company's net profit ratio is inconsistent. This is so because in year they weregetting the net profit of 2% in year 2015-16 which was changed in profit and became 1.44 inyear 2016-17. Then in next years in again decreased and became 1.9% in further years. Sooveralll it can be interpreted that their net profit ratio is inconsistent.While in the Tesco company, their was net profit of 0.25% in the year 2015-16 whichchanged and became as loss of 0.07% in the year 2016-17. As well as in year 2017-18 it againincreased and became 2.10% and in year 2018-19 in raised to 2.07%. So it can be interpreted thattheir net profit ratio is inconsistent. Due to more increasing and decreasing in net profits.Liquidity ratio - The liquidity ratio is a kind of ratio which is being calculated to analysis theliquidity position of companies (Michalski, 2013). In other words, with the use of it
organisations can determine about need of liquidity for day to day activities. This ratio consiststwo types of ratios which are current ratio and liquidity ratio that are mentioned below:Current ratio- This is a kind of ratio which presents the relation between the currentassets and liabilities. The ideal current ratio is of 2:1 which means companies shouldhave 200% assets to pay 100% liabilities or debts. Along with this ratio is calculated byformula which is (current assets / current liabilities). Below current ratio of both thecompanies is mentioned Year / companiesSainsburyTesco2015-160.660.752016-170.740.792017-180.760.712018-190.660.61Interpretation: On the basis of above current ratio analysis of Sainsbury company, it isbeing analysed that company's current ratio is not in ideal condition. This is why because in year2015-16 their current ratio was of 0.66 which increased in next years continuously like in year
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Financial analysis and management enterprise (Doc)lg...
|22
|5808
|21
Financial Analysis Management And Enterpirse - Assignmentlg...
|25
|3947
|54
Financial Analysis and Management Enterprise Contentslg...
|31
|3707
|144
Financial Analysis Management & Enterprise: Assignmentlg...
|31
|7584
|54
Financial Analysis Management & Enterprise - FAME TABLE OF CONTENTS INTRODUCTIONlg...
|25
|7371
|302
Financial Analysis and Management Assignment Samplelg...
|18
|4697
|44