Managerial Finance Portfolio: Financial Ratio Analysis and Investment Appraisal

MANAGERIAL FINANCE
PORTFOLIO

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1.................................................................................................................................3
a) Computation of financial ratio of Tesco & Sainsbury.............................................................3
b) Assessment of financial performance, investment portfolio and financial position of
company.......................................................................................................................................7
c) Recommendation regarding with main cause of poor performance of business entity.........10
d) Limitation of financial ratio...................................................................................................10
PORTFOLIO 2...............................................................................................................................11
a)Calculation of capital investment appraisal method...............................................................11
b)Limitations of investment appraisal techniques.....................................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15
INTRODUCTION...........................................................................................................................1

INTRODUCTION
Managerial finance this term define as the tool of managerial application of finance. The
main purpose of using his tool for take decision and run financial business activities in effective
manner. To understand managerial finance, this report has been formulated. It divide into two
portfolio, the first one describe us of ratio for measuring performance of Tesco and its rival
organization Sainsbury. It also describe limitation of ratio analysing and reason of poor
performance of particular business organization. The second portfolio describe how manager
took decision for their future business project by using investment appraisal technique and its
limitation. All these information has been describe in systematic manner.
PORTFOLIO 1
a) Computation of financial ratio of Tesco & Sainsbury.
Ratio: In mathematical terms ratio is the tool of understanding the relation between two
items. In terms of finance, ratio analysis a tool use to measure or compare items of two lines.
Ratio analysis useful to identify the position of organization for particular time period. Most of
business corporation use this tool to recognize or measure their performance with their rival
industries (Alderighi, Cleary and Varanasi, 2019).
Tesco & Sainsbury both run their business in merchandise retail sector. They are
multinational organization which represent UK at international level and help in contributes
towards their rate of GDP. Both are rival industries, by using ration analysis manager could
found which one is beneficial for investment purpose and gives future portfolio profits.
Following are some example of ratio which help in analysing,
Current ratio = Current asset / Current liabilities
Tesco = 2018 = 13600/ 19233 = 0.71
2019 = 1250 / 20980 = 0.61
Sainsbury
2018 = 7857 / 10302 = 0.76
2019 = 7581 / 11417 = 0.66
 Quick ratio
Quick assets/ Current liabilities
Tesco
2018 = 11336/ 19233 = 0.57

2019 =9953/ 20680 = 0.48
Sainsbury
2018 = 6047/ 10302 = 0.59
2019 =5652/11417 = 0.50
 Net profit
Tesco
2018 = 309/ 28456 = 1.09
2019 =219/ 29007 = 0.75
Sainsbury
2018 = 1210/ 57493 = 2.10
2019 = 1320/ 63911 = 2.07
 Gross profit
Tesco
2018 = 3352/ 57493 = 5.83
2019 = 4144/ 63911 = 6.48
Sainsbury
2018 = 1882/28456= 6.61
2019 =2007/ 29007 = 6.92
 Gearing ratio
Tesco
2018 = 34404/ 10480 = 3.28
2019 =34213 / 14834 = 2.31
Sainsbury
2018 = 14590/ 7411 = 1.97
2019 =15085/ 8456 = 1.78
 Price / Earning ratio
Tesco
2018 = 189.55/4.96 = 38.22
2019 = 255.2/ 6.14 = 41.56
Sainsbury
2018 = 264.9/ 2.49 =106.39

2019 = 229.9 / 1.86 = 123.60
 Earning per share
Tesco
2018 = 1210/ 244 = 4.96
2019 = 1320/ 215 = 6.14
Sainsbury
2018 = 309/ 65 = 4.75
2019 = 219/ 54 = 4.06
 Return on capital employed
Tesco
2018 = 1566 / 25502 = 6.14
2019 = 2639 / 28269 = 9.34
Sainsbury
2018 = 518/ 11699 = 4.43
2019 = 601/ 12097 = 4.97
 Average stock turnover
Tesco
2018 = 54141/ 2282 = 23.73
2019 = 59769/ 2440 = 24.50
Sainsbury
2018 = 26574/ 1792.5 = 14.83
2019 = 27000/ 1869.5 = 14.44
 Dividend payout ratio
Tesco
2018 = 82/ 1210 = 6.78
2019 = 357/ 1320 = 27.05
Sainsbury
2018 = 235 / 309 = 76.05
2019 = 247/ 219 = 112.79
Capital employed = Total assets- Total current liabilities

Tesco =
2018 = 44735 – 19233 = 25502
2019 = 48949 – 20680 = 28269
Sainsbury =
2018 = 22001 – 10302 = 11699
2019 = 23514 – 11417 = 12097
Current ratio
Particular 2018 2019
Tesco 0.71 0.61
Sainsbury 0.76 0.66
Quick ratio
Tesco 0.57 0.48
Sainsbury 0.59 0.5
Net profit
Tesco 1.09 0.75
Sainsbury 2.1 2.07
Gross profit
Tesco 5.83 6.48
Sainsbury 6.61 6.92
Gearing ratio
Tesco 3.28 2.31