Assessing the Limitations of NPV in Long-Term Decision-Making
Added on 2019-12-18
19 Pages3560 Words162 Views
|
|
|
Managerial Finance
Table of ContentsIntroduction......................................................................................................................................2Ratio Analysis..................................................................................................................................2Profitability ratios........................................................................................................................2The Return on Capital Employed (ROCE)..............................................................................3Net Profit Margin.....................................................................................................................4Gross Profit Margin.................................................................................................................4Liquidity Ratio.............................................................................................................................5Current Ratio...........................................................................................................................5Acid Test Ratio........................................................................................................................6Efficiency Ratio...........................................................................................................................6Inventories turnover.................................................................................................................7Assets Turnover.......................................................................................................................7Gearing Ratio...............................................................................................................................8Interest Cover...........................................................................................................................8Earnings per share....................................................................................................................9
Recommendations of how the financial performance of the poorly performing business can be improved..........................................................................................................................................9Liquidity ratios...........................................................................................................................10Efficiency ratios.........................................................................................................................10Profitability ratios......................................................................................................................10Leverage ratios...........................................................................................................................11The limitations of relying on financial ratios to interpret firm performance.................................11Portfolio 2; Capital Investment Appraisal.....................................................................................13The limitations of using investment appraisal techniques to aid long term decision-making.......14Bibliography..................................................................................................................................16
Portfolio 1Comparative analysis between Tesco limited and Sainsbury limitedIntroductionThe report focus on examine the financial performance for two famous company (Sainsbury and Tesco) in the retail market in UK. The report permits the comparison of the ratio analysis, in which the profitability, liquidity, efficiency and gearing ratio is examined and recommendation provided for the best companies from the examination of the ratio analysis for the financial period 2014/15. Tesco is the global third largest retail company after Wal-Mart and Carrefour as evaluated in term of income (2015). The company is the UK leading home supermarket chain. The company has 2306 stores with more than 31% shareholding in UK market. Sainsbury is the 3rd biggest retail firm in the UK supermarket industry with it holding of more than 17% of UK market shares.Ratio AnalysisProfitability ratiosProfitability ratio indicates the profitability of the firm. The ratio covers the return on capital employed, the net profit margin, and the gross profit margin as depicted in the table below.TESCOSainsbury'sPROFITABILTY RATIOS2014201520142015Return on Capital Employed (%)4.65-23.549.3-1Net Profit Margin (%)1.53-9.222.99-0.7
End of preview
Want to access all the pages? Upload your documents or become a member.
Related Documents