Managerial Finance: Ratio Analysis for Tesco and Sainsbury

Managerial Finance

Table of Contents
INTRODUCTION...........................................................................................................................1
PORTFOLIO 1.................................................................................................................................1
Ratio analysis for Tesco and Sainsburry for the year 2018 and 2019:........................................1
Interpretation:...............................................................................................................................3
Recommendation:......................................................................................................................10
Limitations of ratio analysis:.....................................................................................................10
PORTFOLIO 2...............................................................................................................................11
Investment appraisal techniques for the project A and project B:.............................................11
Limitations for investment appraisal techniques:......................................................................12
CONCLUSION..............................................................................................................................14
REFERENCES................................................................................................................................1

INTRODUCTION
Managerial finance could be delineated as a branch of finance which engrosses itself to
manage execution of finance methods and techniques. In an organisation, sound financial
management is essential as it develops values and agility by properly allocating scare resources
in almost competing opportunities (Al-Malkawi and Javaid, 2018). It is associated to analyse
impacts of executing financial techniques including income statement, analysis of trends addition
to comparative financial statements on management of business. The concept is interdisciplinary
as well as borrowing from corporate finance along with managerial accounting. Main purpose of
financial management is to ensure that all generated revenues are used in profitable manner. For
understanding managerial finance, two companies including Tesco Plc and Sainsbury Plc are
taken into consideration. These entities operates in retail industry and are popular as largest chain
of supermarkets within UK.
The report involves calculation of various financial rations including Quick ratios,
dividend pay out ratio, net profit margin, P/E ratio, gearing ratios, Current rations and many
more for two years. It further analyses performance, investment potential together with financial
position of the two entities (Iqbal, Tauni and Jebran, 2017). Various recommendations of the
ways to improve poor performance of companies and limitations associated to dependence of
financial ratios in order to interpret organisational performances are discussed in the report.
PORTFOLIO 1
Ratio analysis for Tesco and Sainsburry for the year 2018 and 2019:
For the Tesco:
Basics Formulas Results for 2019 Results for 2018
Current ratio Current assets / current
liabilities
12668 / 20680
= 0.612
13,726 / 19,238
= 0.713
Liquid / quick ratio Quick assets / current
liabilities
3373 / 20680
= 0.163
4379 / 19238
= 0.227
Gross profit Ratio Gross profit / total (4144/63911)*100 (3350 / 57491)*100
1