Financial Analysis Management & Enterprise Solved Assignment
Added on 2021-02-20
32 Pages5554 Words53 Views
Financial Analysis Management &Enterprise
Table of ContentsINTRODUCTION...........................................................................................................................1MAIN BODY...................................................................................................................................11. Vertical, horizontal and ratio analysis of financial statements of Sainsbury and Tesco..........12. Importance of analysing the working capital prior to decision making.................................133. Critical analysis of Cash flow statements..............................................................................14CONCLUSION .............................................................................................................................15REFERENCES..............................................................................................................................17APPENDIXES...............................................................................................................................19Calculations of ratio analysis.....................................................................................................19Balance sheets............................................................................................................................22Cash Flow statements................................................................................................................24
INTRODUCTIONFinancial analysis can be defined as a systematic procedure of evaluating the budgets,processes, projects and other financial aspects of a business enterprise for the purpose ofascertaining the performance of business. In other words, financial analysis is exercised in orderto find out the stability, solvency, profitability and liquidity of a business for assessing thatcompany is in position to pay back the monetary investments of the investors. The presentproject report is about financial analysis of two supermarket chains namely, Sainsbury and Tescofor the purpose of assessing the financial position of these companies (Williams and Dobelman,2017). Both the companies are large organisations in United Kingdom that offers consumerproducts, personal care products, food and beverages.The motive behind such analysis is that Asian food Manufacturer desires of increasingtheir market share for which it is thinking of selling its products to one of these supermarketchain. This analysis will help the manufacturer in knowing who could be its potential client.Further, it will include analysis of cash flow statements of both the companies, importance ofanalysing the working capital for making quality decisions and ratio analysis of both thesupermarket chains for finding out their profitability and stability.MAIN BODY1. Vertical, horizontal and ratio analysis of financial statements of Sainsbury and TescoVertical analysis: It is one of the technique of analysing the financial statements of a company whereineach of the component of profit and loss statement and balance sheet are presented as % of baseamount within the financial statements. In P&L statement, component are listed as % of grosssales while on the other hand, in Balance sheet, component can be presented as % of total assetsor total liabilities (Corbet and et.al., 2019). Below is vertical analysis of both Sainsbury andTesco's financial statements :Sainsbury’s Income Statement1
InterpretationIt can be seen from the above analysis that each of the line item in the comparative tableis presented as % of gross sales. It can be observed that cost of revenue accounts for 93.3% ofgross sales while gross profit is 5.2% of the total sales. When it is compared with 2018, it can besaid that change in % is quite and the gross profits is even showing an increasing trend, however,when net profits are compared it can be said that it is showing downward trends. This is becauseoperating costs of company is increasing year by year. This might have a negative impact ondecision making of Asian Food manufacturer for selecting this food chain as its preferred client.Analysis of Balance Sheet2
Interpretation:It can be observed from the above calculations that percentage change in total currentassets over the years have been stable and has showed a increasing trend till 2018 until in theyear 2019 when it fell by 3.6%. While on the other hand, the current liabilities is showingincreasing trend and % change in increasing year by year that depicts that company's liabilitiesare relatively increasing more as compared to current assets. This will impact the decisionmaking of Asian Food Manufacturer.Vertical analysis of TescoIncome statement 3
Balance Sheet4
Interpretation:From the above vertical analysis of Tesco's financial statements, it can be observed thatchange in cost of revenue for the last four years has been quite stable. Also, gross profit as apercentage of total sales is also showing increasing trend over the years since the figures areincreasing by year which is an impressive thing that could favour the decision of Asian foodmanufacturer towards Tesco. Also, net profit after a significant dip in its earning in 2017, itbecame stable in 2018 and 2019 which is also positive sign for the manufacturer for selling itsproducts to Tesco. The balance sheet shows that percentage change in total current asset is dippingcontinuously over the years which means that company has lesser liquidity as compared toSainsbury.Horizontal analysis:It is technique which compares the components of financial statements with thecorresponding components of company's financial statements. Financial statements for two ormore period are considered for this analysis and older figures are taken as base amounts againstpercentage change in components of p&l and balance sheet is found out (Robinson and et.al.,2015). Below is the vertical analysis of Sainsbury and Tesco:Sainsbury’s Income Statement5
Balance sheet6
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents
Financial Analysis and Management Enterprise Contentslg...
|31
|3707
|144
Financial Analysis Management And Enterpirse - Assignmentlg...
|25
|3947
|54
Financial analysis and management enterprise (Doc)lg...
|22
|5808
|21
Vertical Analysis of Financial Statements MANAGEMENT AND ENTREPRENEURSHIP TABLE OF CONTENTSlg...
|24
|7209
|325
Financial Analysis Management & Enterprise: Assignmentlg...
|31
|7584
|54
Financial Analysis Management & Enterprise Assignment Solutionlg...
|24
|4214
|19