Managerial Finance: Ratio Analysis and Recommendations for Tesco and Sainsbury

Managerial Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1................................................................................................................................3
Ratio analysis:..............................................................................................................................4
Interpretation:..............................................................................................................................5
Recommendations:....................................................................................................................11
Limitations for using ratio analysis for knowing firms financial position:...............................11
PORTFOLIO 2..............................................................................................................................12
Investment appraisal techniques for project A and project B:...................................................12
Limitations of using investment appraisal techniques for long term decision-making:............14
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Managerial Finance basically a mixture of economics/finance and accounting. Firstly, financial
managers used accounting records, free cash-flows etc. for preparing and utilisation of finance
wealth of the organisation. Furthermore, administrators using economic values as a framework
for financial decision-makings that serves interest of the enterprise. In simple terms, finance
is field of economics which is assisted by financial information (Roloff, 2017). As finance
represents what brings value to entire organisation, finance administrators are essential people
for majority of companies. Financial administrators assess the growth of the corporation,
recognise the financial implications, patterns and suggest how to leverage assets of the
corporation for well-being and long-term success of the corporation. The study-assessment
covers financial analysis of leading supermarket chains of UK namely Tesco and Sainsbury and
provides recommendations to corporations. Moreover, it contains investment appraisal-
techniques and key limitations of this such approaches.
PORTFOLIO 1
Overview of Companies:
Tesco Plc: Tesco is supermarket retailer chain. The Group is immersed in Retailing and Affiliate
Operations (Retail) including Retail Banking Insurance Services sector. The divisions of the
Business include United Kingdom as well as Republic of Ireland, regions of Central Europe, that
involves Czech Republic, the Hungary, Poland, the Slovakia but also Tesco Bank, that involves
retail banking insurance coverage across United Kingdom. The Corporation's market comprises
the United Kingdom, the Czech Empire, the United Kingdom, the United Kingdom, Czech
Republic, the United Kingdom (Dunn) and the United Kingdom. The Organization provides a
variety of personal financing items and services, including credit cards receivables, private
current accounts and loans.
Sainsbury Plc: Sainsbury is leading retailer of merchandise throughout United Kingdom. The
Corporation operates across the following sections: Retailing, Financial Products and Real Estate
investment. The retailing division is involved in the service of groceries and convenience
retailing outlets. The Financial Products section covers the activities of Sainsbury Bank plc.
Real estate Investments division comprises joint partnerships between the Corporation as well as
British Land Corporation PLC including the Land Securities Group. The Sainsbury's Bank offers

a variety of services, namely insurance, personal loans, deposits and mortgages. Sainsbury Bank
provides car, house, pet including life insurance policies. Sainsbury's Energy provides gas and
power, as well as a variety of furnaces. Sainsbury's Entertainment sells films, songs, comics,
gaming as well as other entertainment items (Blanco-Oliver and Irimia-Diéguez, 2019).
Ratio analysis:
Particular Formula Sainsbury
2018 2019
Tesco
2018 2019
Current ratio Current
assets /
Current
liabilities
7857/ 10302 =
0.76
7581 / 11417
= 0.66
13600/ 19233
=0.71
12570/20980
=0.61
Quick ratio Quick assets/
Current
liabilities
6047/ 10302 =
0.59
5652/11417 =
0.50
11336/ 19233
= 0.57
9953/ 20680 =
0.48
Net profit ratio Net profit/
Sales*100
1210/ 57493 =
2.10
1320/ 63911 =
2.07
309/ 28456 =
1.09
219/ 29007 =
0.75
Gross profit
ratio
Gross profit/
Sales *100
1882/28456=
6.61
2007/ 29007 =
6.92
3352/ 57493 =
5.83
4144/ 63911 =
6.48
Gearing ratio Total debt /
Capital
employed
14590/ 7411 =
1.97
15085/ 8456 =
1.78
34404/ 10480
= 3.28
34213 / 14834
= 2.31
P/E ratio Market value
per share/
Earning per
share
264.9/ 2.49
=106.39
229.9 / 1.86 =
123.60
189.55/4.96 =
38.22
255.2/ 6.14 =
41.56
Earning per
share ratio
Net income/
Number of
outstanding
309/ 65 = 4.75 219/ 54 = 4.06 1210/ 244 =
4.96
1320/ 215 =
6.14