Financial Analysis of Sainsbury and Tesco

MANAGERIAL FINANCE

TABLE OF CONTENTS
PORTFOLIO 1.................................................................................................................................3
a) Financial Ratios of Sainsbury and Tesco for the year ending 2018 & 2019...........................3
b) Analysis of performance, financial position and the investment potential of Sainsbury and
Tesco............................................................................................................................................5
c. Recommendation on improving the financial performance of company.................................8
d. Limitation of relying over financial ratios in interpreting performance of company..............9
PORTOFOLIO 2..............................................................................................................................9
a. Use of appropriate investment appraisal techniques for project A and project B....................9
b. Limitation of using the investment appraisal techniques in long term decision making.......13
REFERENCES..............................................................................................................................15

PORTFOLIO 1
a) Financial Ratios of Sainsbury and Tesco for the year ending 2018 & 2019
FINANCIAL ANALYSIS
Liquidity ratio
Sainsbury Tesco
2019 2018 2019 2018
Current assets 7589 7857 12570 13600
Current liability 11417 10302 20680 19233
Inventory 1929 1810 2617 2264
Quick Assets 5660 6047 9953 11336
Current ratio
Current
assets /
current
liabilities 0.66 0.76 0.61 0.71
Quick Ratio
(Current
Assets -
Inventory) /
Current
Liabilities 0.5 0.59 0.48 0.59
Profitability ratio
Sainsbury Tesco
2019 2018 2019 2018
Employed Capital
(Total
Assets -
Current
Liabilities) 12124 11699 28269 25502
Net profit 219 309 1320 1210
Return on capital employed
Net
operating
profit/Empl
oyed
Capital 1.81% 2.64% 4.67% 4.74%
Operating profit 312 518 1320 1210
3

Shareholder's Equity 8456 7411 14858 10502
Return on Equity
Net Income
/
Shareholder
's Equity 2.57% 4.43% 7.62% 7.21%
Sainsbury Tesco
2019 2018 2019 2018
Cost of Sales 27000 26574 59767 54141
Sales 29007 28456 63911 57493
Gross Margin
Total Sales –
COGS/Total
Sales 6.92% 6.61% 6.48% 5.83%
Net profit 219 309 1320 1210
Sales 29007 28456 63911 57493
Net profit ratio
Operating
Income/ Net
Sales 0.75% 1.09% 2.07% 2.10%
Efficiency Ratios
Sainsbury Tesco
2019 2018 2019 2018
Trade Payables 4444 4322 9354 8994
Trade Receivables 661 744 1640 1504
Net Assets 8456 7411 14858 10502
Cost of Sales 27000 26574 59767 54141
Sales 29007 28456 63911 57493
Inventory turnover ratio
Inventory/
Cost of
Sales *365 26 25 16 15
Accounts Payable Days
Accounts
payable
/Cost of
Sales *365 60 59 57 61
Account receivable days
Accounts
Receivable /
Cost of Sales
* 365 9 10 10 10
Gearing Ratios
Sainsbury Tesco
4