Managerial Finance: Analysis of Tesco and Sainsbury's Financial Ratios

Managerial finance

Contents
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
A. Calculating ten ratios that are very important from the firm’s prospective which are related
with the financial aspect of the companies that are discussed above for the years that are 2018
and 2019.......................................................................................................................................1
B. Detailed identification and examination of the facts and figures that are analysed above so
as to see a true and fair view of the financial position and their potential to invest in the market
.....................................................................................................................................................3
C. Necessary recommendations after evaluating the above facts and figures and their
interpretation................................................................................................................................9
D. Identification and examination of the limitations of relying on to ratios which are calculated
above and are related with the financial part of the company...................................................10
TASK 2..........................................................................................................................................10
A. Calculation and examination of investment appraisal techniques........................................10
B. Examination of the limitations of the investment appraisal techniques that are mentioned
above with context to decisions that are of long term in nature................................................13
CONCLUSION..............................................................................................................................14
REFERENCES..............................................................................................................................15

INTRODUCTION
Financial management is a crucial as well as one of the most critical aspect as it is related
with the most valuable factor that is funds that a business possesses in the market in which it is
operational (Ascioglu and Maloney, 2019). In this decisions regarding appropriate allocation of
the available resources are taken so as to make the firm grow and prosper in the long run so that
it can earn profits by increased sales and can sustain in the market for a much longer period of
time as compared to its competitors that are prevalent in the similar environment. This report
covers an elaborated discussion about two big firms that are Tesco Plc and Sainsbury which are
operational in the UK and mainly deals in grocery sector and thus both has captured a
considerable amount of share in the industry. Apart from that this report also covers a brief
examination and evaluation of the facts and figures of both the companies which possess a lot of
importance in the current market scenario. Further in this report some ratios are calculated and
interpreted that are beneficial for the firm and capital investment appraisal techniques are also
analysed and evaluated in detail with context to both the above mentioned firm.
TASK 1
A. Calculating ten ratios that are very important from the firm’s prospective which are related
with the financial aspect of the companies that are discussed above for the years that are
2018 and 2019
(Amounts are in GBP thousand except
ratios)
Tesco PLC Sainsbury PLC
Year 2018 Year 2019 Year 2018 Year 2019
Current Ratio
Current Assets 13726000 12668000 7857000 7550000
Current Liabilities 19238000 20680000 10302000 11849000
Current Ratio = Current Assets / Current
Liabilities
0.713484 0.612573 0.762667443 0.637185
Quick Ratio
Quick Asset 11463000 10051000 7857000 7550000
Current Liabilities 19238000 20680000 10302000 11849000