Comparison of Financial Ratios: Tesco vs Sainsbury's

MANAGERIAL
FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Comparison of the financial ratio of two company.....................................................................1
Analysis of the financial performance and position of the both the companies on the basis of
the charts and interpretation ........................................................................................................3
Recommendation on the poor performance...............................................................................12
Limitation for financial ratios....................................................................................................13
PORFOLIO 2.................................................................................................................................13
Use of the capital budgeting techniques to advice the senior management for the adoption of
the two alternatives....................................................................................................................13
Discussion of the limitations for using the investment appraisal techniques in mking long term
decisions ....................................................................................................................................16
CONCLUSION..............................................................................................................................16
REFERENCES .............................................................................................................................17

INTRODUCTION
Managerial finance means evaluation of the financial techniques for the assessment of the
financial statements for the measurement and determine the significance of the data, figures
information of the financial data. It helps in improved the financial technique which is used to
help prevent losses and improve the bottom part of the company. It is the combination of both
corporate finance and managerial accounting, it help in maintaining the business strategies for
monitor their effectiveness. In simple terms, it means use of the financial techniques at the
different level of company (Biktimirov, 2016). This report is based on the retail sector company
TESCO AND SAINSBURY'S which is the fourth largest chain of supermarkets in the United
Kingdom. Their headquarter is located in Bradford, England. It is found by William Morrison in
1899. in 2019 they employed 110,000 and served around 1.1 million customer each week. In this
report finance executive of the retail company wants to purchase ratio of the two company Tesco
and Sainsbury's by the ratio analysis. There is also the limitations of the financial ratio for
interpret the performance. There is the use of the Net present value and payback period for
determine the project which is acceptable or which is rejected. There is the limitations of the
investment techniques is also discussed.
TASK 1
Comparison of the financial ratio of two company
Ratio analysis means analysing the performance of the company in the market, through
this investor is able to get liquidity, efficiency and profitability position of the organization. It s
very important for the evaluation of the financial statements. It is useful to the analyst for
deciding that it is profitable for the long run or not. It is very useful for the corporate insiders for
the detailed operation in the organization.
There is the analysis of the two company Tesco and Sainsbury's for determine their
position in the market which is better for the investor and which give high returns in long run to
their clients.
1

Ratios sainsbury TESCO
PARTICULARS 2019 2018 2019 2018
CURRENT RATIO
Formula= Current assets/current liability
Current assets 7581 7857 12570 13600
Current liabilities 11417 10302 20680 19233
Results 0.66 0.76 0.61 0.71
QUICK RATIO
Formula= quick assets/ current liability
Quick assets 5652 6047 9953 11336
Current liabilities 11417 10302 20680 19233
Results 0.5 0.59 0.48 0.59
Net profit margin
Formula= net profit/ revenue*
Net profit 219 309 1320 1210
Revenues 29007 28456 63911 57493
Results 0.75 1.09 2.07 2.1
Gross profit margin
Formula= Gross profit/ revenue *100
Gross profit 2007 1882 4144 3352
Revenues 29007 28456 63911 57493
Results 6.92 6.61 6.48 5.83
Gearing ratio
formula= Debts/ equity
Debts 15085 14590 34213 34404
Equity 8456 7411 14834 10480
Results 1.78 1.97 2.31 3.28
Price earning ratio
2