Financial Performance Analysis of Tesco and Sainsbury

PORTFOLIOS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
Portfolio 1........................................................................................................................................3
Financial ratios.............................................................................................................................3
Performance of both the companies..........................................................................................11
Recommendations on financial performance of the poorly performing business.....................14
Limitations on relying financial ratios to interpret company’s performance............................15
PORTFOLIO 2..............................................................................................................................16
Investment appraisal techniques................................................................................................16
Limitation in long term decisions..............................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

INTRODUCTION
Financial management is denoted as management of company’s financial resources. This
project would analysis different financial perspectives in regards to different companies.
Henceforth, this project would comparatively analysis two companies with the support of
different financial ratios of organisation. Analysis in respect to financial position of both the
companies will be done to identify which company contain better financial position. With the
support of comparative analysis in between both these companies suitable recommendations will
provide over improving the performance of poorly performed organisation. Dependency on
relying over the financial ratios will also do in this project. Furthermore, this project will also
analysis the suitable investment based on different investment appraisal techniques. Limitations
will also state in respect to utilising the suitable investment appraisal technique in long run.
Portfolio 1
Financial ratios
Ratios Formula Tesco Sainsbury
2018 2019 2018 2019
Current Ratio Current Asset
/ Current
Liability
.69(13511 /
19584)
.59(12480
/ 20973)
.76(7857 /
10302)
.64(7550 /
11849)
Current Asset (2018)
Sainsbury = Stock + Debtor + Cash and Securities
= 1810 + 4104 + 1933
= 7857
Tesco = Stock + Debtor + Cash and Securities
= 2264 + 6052 + 5156
= 13511
Current Liability (2018)
Sainsbury = 10302
Tesco = 19584
Current Asset (2019)
Sainsbury = Stock + Debtor + Cash and Securities
3

= 1929 + 4268 + 1283
= 7550
Tesco = Stock + Debtor + Cash and Securities
= 2617 + 6432 + 3373
= 12480
Current Liability (2019)
Sainsbury = 11849
Tesco = 20973
Quick Ratio
Ratio Formula Tesco Sainsbury
2018 2019 2018 2019
Quick Ratio Quick Asset /
Current
Liability
.57(11247 /
19584)
.47(9863 /
20973)
.59(6047 /
10302)
.47(5621 /
11849)
Quick Asset (2018)
Tesco = Current Asset – Inventory
= 13511 – 2264
= 11247
Sainsbury = Current Asset – Inventory
= 7857 – 1810
= 6047
Current Liability (2018)
Tesco = 19584
Sainsbury = 10302
Quick Asset (2019)
Tesco = Current Asset – Inventory
= 9863(12480 - 2617)
Sainsbury = Current Asset – Inventory
= 5621 (7550 - 1929)
Current Liability (2019)
4

Tesco = 20973
Sainsbury = 11849
Net Profit Margin
Ratios Formula Tesco Sainsbury
2018 2019 2018 2019
Net Profit
Ratio (NPR)
Net Profit /
Sales * 100
1.73% (994 /
57493 * 100)
1.99%
(1270 /
63911 *
100)
1.09% (309 /
28456 * 100)
.64% (186 /
29007 * 100)
Tesco (2018)
Net Profit = 994
Sales = 57493
Tesco (2019)
Net Profit = 1270
Sales = 63911
Sainsbury (2018)
Net Profit = 309
Sales = 28456
Sainsbury (2019)
Net Profit = 186
Sales = 29007
Gross Profit Margin
Ratios Formula Tesco Sainsbury
2018 2019 2018 2019
Gross Profit
Margin
Gross Profit /
Sales * 100
2.72% (1566
/ 57493 *
100)
4.13%
(2639 /
63911 *
100)
1.82% (518 /
28456 * 100)
2.072% (601
/ 29007 *
100)
5

Tesco (2018)
Gross Profit = Turnover - Expenses
= 1566 (57493 - 55927)
Sales = 57493
Tesco (2019)
Gross Profit = Turnover - Expenses
= 2639 (63911 - 61272)
Sales = 63911
Sainsbury (2018)
Gross Profit = Turnover - Expenses
= 518 (28456 - 27938)
Sales = 28456
Sainsbury (2019)
Gross Profit = Turnover - Expenses
= 601(29007 - 28406)
Sales = 29007
Gearing Ratio
Ratios Formula Tesco Sainsbury
2018 2019 2018 2019
Gearing Ratio Debt / (Debt
+ Equity)
204.92 131.15 34.44 97.75
Price earning ratio
Ratios Formula Tesco Sainsbury
2018 2019 2018 2019
Price earning
ratio
Market value
per share /
earning per
26.39 16.94 27.13 22.75
6