Financial Performance of Tesco UK plc

Financial Performance of
Tesco UK plc

TABLE OF CONTENTS
A. Discussion of financial performance of Tesco over the years...............................................1
B. Critically reviewing the growth and business strategy of corporate......................................2
REFERENCES................................................................................................................................4

A. Discussion of financial performance of Tesco over the years
Ratios
Particulars 2013 2014 2015 2016 2017 2018
Gross profit
margin (%) 6.3 6.3 -3.4 5.2 5.2 5.8
Net profit
margin (%) 0.19 1.53 -9.22 0.25 -0.07 2.1
Current ratio 0.69 0.73 0.6 0.75 0.79 0.71
Debt equity
ratio 0.6 0.63 1.51 1.24 1.47 0.68
Inventory
turnover
ratio 16.55 16.27 19.71 19.15 22.41 23.73
Interpretation- The above analysis shows that gross profit margin over the 3 years is
declining but after 2015 it shows an increasing trend which means that the performance of Tesco
has become better with passage of the years as its profits and sales value increases (Financial
performance of Tesco, 2018). Over the years net profit of the company decreases as well as
increases and sometimes negative results are also generated which reflects that profits and
revenue in the year 2015 and 2017 resulted as negative. However, currently the financial
performance of an entity is showing better results as compared to previous years. Main reason
behind decline or low profitability is that Tesco is facing huge competition from the rivals and
due to this reason charging less margin on profit. Further, practices like bulk purchase strategy
prove lose making tactic for the firm. Hence, top management need to prepare plan of cost
cutting in the business. The liquidity position is good and stable as current ratio of Tesco is
resulting an increasing trend which means that company is capable in meeting its short-term
obligations effectively. Stability in liquidity ratio in case of reduced profit or declined revenue is
strange and it means that now firm is not making big investment of cash in its business. Hence,
even profit decline reserve of previous year remains in the business which lead to high liquidity
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