Financial Analysis of Sainsbury and Tesco

PORTFOLIO

TABLE OF CONTENTS
PORTFOLIO 1.................................................................................................................................1
a) Calculating the financial ratios of both the companies for year 2018 & 2019. ......................1
b) Analysing the financial performance and position of two companies for year 2018 and
2019. ............................................................................................................................................4
c) Recommendations for improving performance of Sainsbury .................................................7
d) Limitations of financial ratios..................................................................................................7
PORTFOLIO 2.................................................................................................................................8
a) Using appropriate investment appraisal techniques choosing the most beneficial project. ....8
b) Limitations of using the different investment appraisal techniques......................................11
REFERENCES..............................................................................................................................13

PORTFOLIO 1
a) Calculating the financial ratios of both the companies for year 2018 & 2019.
FINANCIAL ANALYSIS
Liquidity ratio
Sainsbury Tesco
2019 2018 2019 2018
Current assets 7589 7857 12570 13600
Current liability 11417 10302 20680 19233
Inventory 1929 1810 2617 2264
Quick Assets 5660 6047 9953 11336
Current ratio
Current assets /
current liabilities 0.66 0.76 0.61 0.71
Quick Ratio
(Current Assets -
Inventory) / Current
Liabilities 0.5 0.59 0.48 0.59
Profitability ratio
Sainsbury Tesco
2019 2018 2019 2018
Employed Capital
(Total Assets -
Current Liabilities) 12124 11699 28269 25502
Operating profit 312 518 2153 1839
Return on capital
employed
Net operating
profit/Employed
Capital 2.57% 4.43% 7.62% 7.21%
Operating profit 312 518 1320 1210
Shareholder's Equity 8456 7411 14858 10502
Return on Equity
Net Income /
Shareholder's Equity 3.69% 6.99% 8.88% 11.52%
Sainsbury Tesco
2019 2018 2019 2018
Cost of Sales 27000 26574 59767 54141
Sales 29007 28456 63911 57493
Gross Margin Total Sales – 6.92% 6.61% 6.48% 5.83%
1

COGS/Total Sales
Net profit 312 518 1320 1210
Sales 29007 28456 63911 57493
Net profit ratio
Operating Income/
Net Sales 1.08% 1.82% 2.07% 2.10%
Efficiency Ratios
Sainsbury Tesco
2019 2018 2019 2018
Trade Payables 4444 4322 9354 8994
Trade Receivables 661 744 1640 1504
Inventory 1929 1810 2617 2264
Net Assets 8456 7411 14858 10502
Cost of Sales 27000 26574 59767 54141
Sales 29007 28456 63911 57493
Inventory turnover
period
(Inventory/ Cost of
Sales)*365 26 25 16 15
Accounts Payable
Days
Accounts payable
/Cost of Sales *365 60 59 57 61
Account receivable
days
Accounts Receivable
/Cost of Sales * 365 9 10 10 10
Gearing Ratios
Sainsbury Tesco
2019 2018 2019 2018
Total Debt 15085 14590 34213 34404
Shareholder's Equity 8456 7411 14858 10502
Gearing ratio Total Debt/ Equity 1.78 1.97 2.30 3.28
Investor Ratios
Sainsbury Tesco
2