Managerial Finance: Ratio Analysis of Tesco and Sainsbury

Managerial Finance

Table of Contents
INTRODUCTION...........................................................................................................................3
PORTFOLIO 1................................................................................................................................3
Ratio analysis:..............................................................................................................................4
Interpretation:..............................................................................................................................5
Recommendations:....................................................................................................................11
Limitations for using ratio analysis for knowing firms financial position:...............................11
PORTFOLIO 2..............................................................................................................................12
Investment appraisal techniques for project A and project B:...................................................12
Limitations of using investment appraisal techniques for long term decision-making:............14
CONCLUSION..............................................................................................................................17
REFERENCES..............................................................................................................................18

INTRODUCTION
Managing Finance is primarily a combination of finance/economics and accounting.
Initially, finance officers utilize accounting reports, cashflows reports and other key reports to
plan and allocate the fiscal resources of the firm. In addition, managers use economic principles
as a basis for strategic decision-makings which meets the needs of the business. In simplistic
terms, finances are an aspect of economics driven by financial skills. Because finance and its
related activities add values to the whole enterprise, finance managers are crucial personnel for
the most of organisations (Abor, 2016). Financial managers analyse the sustainability of the
business, comprehend the financial effects, trends, and consider how to manage the company's
assets for long-term success of entity. The study includes the financial review of UK's top retail
chains, notably Tesco plc and Sainsbury, as well as gives suggestions to enterprises. It also
covers practical case study on the investment appraisal strategies and the main shortcomings of
these techniques.
PORTFOLIO 1
Overview of Companies:
Tesco Plc: It's a grocery store chain company. The Organization is active in Online retail and
other operations like Retail Banking business, Insurance Services business. Company also
operates its business throughout United Kingdom, Republic of Ireland, areas of Centre Europe,
which also comprise Czech Republic, Poland, Slovakia, Hungary. Company also operates as
Tesco Banks, which carry financial services, insurance and banking operations in UK.
Corporation's sector consists of United Kingdom, Czech State, United Kingdom. The Company
delivers a series of personal banking product lines and resources, including lending. The
Company delivers a range of personal finance product categories and programmes, comprising
credit cards, credits receivables, personal loans and advances.
Sainsbury Plc: Sainsbury is the top-leading retailer of products across the Uk. The Company
functions in following areas: Retail segment, Financial Activities and Investing. The supermarket
section is active in the operation of grocery stores and grocery stores. The segment on fiscal
product encompasses the operational processes of Sainsbury's Banks. The Commercial property
Investments segment comprises of mutual ventures between the Company and British Property
Corporation, namely Land Securities Company. Sainsbury Bank aims at providing a wide array

of services, such as savings, secured loans, savings and mortgage debt. Sainsbury Bank gives
automobile, home, animal insurance, and health insurance plans. Sainsbury's Power delivers
gasoline and electricity, and also a number of power generators. Sainsbury's
Entertainments offers films and shows, tracks, books, sports and other entertainment media.
Ratio analysis:
Particular Formula Sainsbury
2018 2019
Tesco
2018 2019
Current ratio Current
assets /
Current
liabilities
7857/ 10302 =
0.76
7581 / 11417
= 0.66
13600/ 19233
=0.71
12570/20980
=0.61
Quick ratio Quick assets/
Current
liabilities
6047/ 10302 =
0.59
5652/11417 =
0.50
11336/ 19233
= 0.57
9953/ 20680 =
0.48
Net profit ratio Net profit/
Sales*100
1210/ 57493 =
2.10
1320/ 63911 =
2.07
309/ 28456 =
1.09
219/ 29007 =
0.75
Gross profit
ratio
Gross profit/
Sales *100
1882/28456=
6.61
2007/ 29007 =
6.92
3352/ 57493 =
5.83
4144/ 63911 =
6.48
Gearing ratio Total debt /
Capital
employed
14590/ 7411 =
1.97
15085/ 8456 =
1.78
34404/ 10480
= 3.28
34213 / 14834
= 2.31
P/E ratio Market value
per share/
Earning per
share
264.9/ 2.49
=106.39
229.9 / 1.86 =
123.60
189.55/4.96 =
38.22
255.2/ 6.14 =
41.56
Earning per
share ratio
Net income/
Number of
outstanding
309/ 65 = 4.75 219/ 54 = 4.06 1210/ 244 =
4.96
1320/ 215 =
6.14