Comparison of Tesco and Sainsbury’s Financial Performance through Ratio Analysis

Managerial
Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1.................................................................................................................................3
Comparison of performance of Tesco and Sainsbury’s through ratio analysis:..........................3
Interpretation of ratio analysis and chart for the purpose of evaluating financial performance of
business:.......................................................................................................................................5
Recommendations for improvement of financial performance:................................................12
Limitations of reliance on financial ratios for interpretation of performance of company:......13
PORTFOLIO 2...............................................................................................................................14
Usage of appropriate investment appraisal techniques for opting appropriate project:.............14
Limitations of utilizing investment appraisal techniques for decision making of long term:. . .16
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Managerial finance can be described as assessment of financial statements of an
organization for the purpose of determining its performance. Focus of managerial finance is on
managerial application for financial techniques. It helps in improving productivity as well as
profitability of an enterprise (Bhabra and Rooney, 2019). Basis of this report is evaluation of
managerial finance of Tesco and Sainsbury’s. Tesco is a retailing company which was founded
by Jack Cohen in the year 1919. Firm is headquartered in United Kingdom. In relevance to
Sainsbury’s, organization was founded in 1869 and its founder is John James Sainsbury. It serves
in retailing industry. This report consists ratio analysis of both organizations for evaluating their
financial position. Further, investment appraisal techniques are evaluated. Lastly, limitations of
both, ratio analysis and investment appraisal techniques are discussed.
PORTFOLIO 1
Comparison of performance of Tesco and Sainsbury’s through ratio analysis:
Ratio analysis refers to a quantitative method which helps managers in gaining insight
about financial position of an organization which enables determination of liquidity of business,
its operational efficiency as well as profitability factor (Bhatti and Alam, 2018). It enables
measurement and analysis of performance of business as it compares financial data and reveals
its actual position in terms of finance. This technique is useful as it enables managers to
evaluates profitability and efficiency of entity.
Following is ratio analysis of Tesco and Sainsbury’s for the purpose of determining
efficiency of firm in context to investment by comparing their return in longer run and analysing
value of business:
Ratios SAINSBURY'S TESCO
Particulars.. 2 0 1 9 2 0 1 8 2 0 1 9 2 0 1 8
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*100.....
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 earnings ratio
Formula= Share price/ EPS.......
Share price........ 229.9 264.9 255.2 189.55
Earnings per share......... 1.86 2.49 6.14 4.96
Results......... 123.6 106.39 41.56 38.22
Earnings per share
Formula= Total earnings/ Outstanding shares ......
Total earnings........ 219 309 1320 1210
Outstanding shares........ 54 65 215 244