Managerial Finance: Ratio Analysis and Investment Appraisal Techniques

Managerial Finance

Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1................................................................................................................................3
Ratio analysis...............................................................................................................................3
Analysis of financial performance, position and investment potential of both companies.........5
Recommendations on improving financial performance of poorly performing business.........11
Limitations of relying on financial ratios..................................................................................11
PORTFOLIO 2..............................................................................................................................13
Investment Appraisal techniques...............................................................................................13
Limitations of using investment appraisal techniques in long term decision making...............14
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................17

INTRODUCTION
Finance is the backbone of solid management, profitability, and development in a firm,
therefore business decision is important. It entails making prudent judgments about the capital
structure and condition. This study examines two firms' business decision from the perspective
of investors, as well as investing assessment methodologies from the perspective of management.
It's split into two halves (Salehi, Daemi and Akbari, 2020). The first portfolio uses ratio analysis
to examine Sainsbury PLC and Tesco PLC's profitability, positioning, and future value. Ratio
analysis' shortcomings in assessing a company's success are also highlighted. There are also
suggestions for enhancing the competitiveness of underperforming firms. The second portfolio
examines capital investment assessment methodologies and their limits in establishing long -
term business decisions.
PORTFOLIO 1
Ratio analysis
One of the earliest components of data reporting information is ratio analysis. It was
created by commercial lenders to assist them in deciding between rival firms requesting loans. It
might be tough to distinguish 2 pairs of financial statements. The effects of time, being in various
sectors, and creating separate ways of conducting things may make it nearly hard to determine
whether firm a superior asset.
Ratio 2018 2019
Tesco Plc Sainsbury Tesco Plc Sainsbury
Current Ratio
= Current Assets/ Current
Liabilities
= 13749/
19233)
= 0.71
= 7866/
10302)
= 0.76
= 12668/
20680
= 0.61
= 7589/ 11417
= 0.66
Quick Ratio
= Quick Assets/ Current
Liabilities
= 9752/
19233)
= 0.51
= 6136/
10302)
= 0.60
= 9690/
20680)
= 0.47
= 6486/
11417)
= 0.56