Managerial Finance Portfolio: Calculation of Ratios and Assessment of Financial Performance

Managerial Finance
Portfolio

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1.................................................................................................................................3
a) Calculation of ratio..................................................................................................................3
b) Assessment of financial performance, investment portfolio & financial position of
company.......................................................................................................................................8
Recommendation related with main reason of poor performance of organization....................18
d) Disadvantage of ratio.............................................................................................................18
PORTFOLIO 2...............................................................................................................................19
a) Methods of capital investment appraisal...............................................................................19
b)Limitations of investment appraisal techniques.....................................................................21
CONCLUSION..............................................................................................................................22
REFERENCE ................................................................................................................................23

INTRODUCTION
Managerial finance this term is used to assess ways which define how business financial
techniques or tools are used at various level of operations of organization. To understand this
term in systematic way, this report has been formulated. This report divided into two parts, the
first one define relevance of ratio by measuring performance of Tesco and Sainsbury and also
define limitation of this technique as well as main reason of poor performance of business units.
In second part of this report, relevance of capital budgeting technique has been define by
calculating it tools. This report also define limitation of using net present value and pay back
ratio during the process of decision making.
PORTFOLIO 1
a) Calculation of ratio
Ratio: This is part of financial management technique which is used by manager to
recognize number of business issue arises within entity. This includes issue related with
efficiency, profitability, liquidity and effectiveness of business operations. Theses are help in
finding out relation between items of financial statements (Baker, Kumar and Pandey, 2020).
Ratio also use for measure monetary performance of organizations. By using this tool of
financial management manager able to recognize their organizations position in market. Tesco is
groceries retail organization which is take place in top ten revenue trading company on the other
side Sainsbury is established in 1869 and since its incorporation it maintain as third largest retail
supermarket organization within the world. Tesco and Sainsbury are rival industries although
these consider top leading MNC of UK. Investors to recognize whether Tesco is good or
Sainsbury is beneficial for investment use ratio analysis. Following are calculation of different
types of ratio
Current ratio
Particular 2018 2019
Tesco 0.71 0.61

Current ratio
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
Sainsbury 1.97 1.78
Price / Earning ratio
Tesco 38.22 41.56
Sainsbury 106.39 123.6
Earning per share

Current ratio
Tesco 4.06 4.96
Sainsbury 4.75 4.06
Return on capital employed
Tesco 6.14 9.34
Sainsbury 4.43 4.97
Average stock turnover
Tesco 23.73 24.5
Sainsbury 14.83 14.44
Dividend payout ratio
Tesco 6.78 27.05
Sainsbury 76.05 112.79
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