Financial Analysis of Tesco and Sainsbury: A Ratio Analysis

Finance

INTRODUCTION...........................................................................................................................3
PORTFOLIO 1................................................................................................................................3
PORTFOLIO 2................................................................................................................................3
Investment Appraisal Techniques................................................................................................3
Limitation of using Investment Appraisal Techniques in long term decision making................4
REFERENCES................................................................................................................................7

INTRODUCTION
Finance is the establishment of every business and to choose legitimate and sensible
circumstance of money related situation of every business is as significant as bread for a person
(Abdin and Noussan, 2018). In this particular condition, there are various instruments and
strategies those can be used as a technique for choosing the money related circumstance of a
business. This action is basic so ensuing to looking at into money related circumstance of that
firm, successful imperative masterminding should be feasible for future course of action. This
report is disconnected into two portfolios. Starting section is zeroing in on examination of
financial circumstance of Tesco plc and Sainsbury's plc through gadget of extent assessment.
Excess dependence of financial extents is in like manner not a good technique in since a long
time prior run and it is moreover explained in this report. Also, second portfolio is examining
criticalness of adventure assessment techniques which are used to choose and recognize right and
fitting theory decision for an association.
PORTFOLIO 1
Ratio analysis
Tesco plc
Name of ratio Calculation Result
2018 2019
Current ratio Current assets/ current
liabilities
13,726 / 19,238
= 0.713484
12668/2
0680
=
0.61257
3
Quick ratio Quick assets/ current
liabilities
4379/ 19238
= 0.227622
3373/ 20680
= 0.163104
Net profit margin Net profit/ total sales (1206/57491)*100 (1322/63911)*100

=2.097% = 2.068%
Gross profit margin Gross profit/ total sales (3350/57491)*100
= 5.827%
(4144/63911)*100
= 6.484%
Gearing ratio
(Debt to Equity Ratio)
Total debt/ total equity 44862/10480
= 4.280%
49047 / 14858
= 3.301%
P/E ratio Market value per share/
Earnings per share
229/ 9.35
=24.49
213.6/13.65
= 16.97
Earnings per share Income available/ total
number of shares
outstanding
9.35 13.65
Return on capital
employed
Operating profit/
capital employed
5.13 6.86
Average inventories
turnover period
Net sales/ average
inventory
57491/2282.5
= 25.91 days
63911/2240.5
= 28.52 days.
Dividend pay-out ratio Dividend paid/ net
income
82/1206
= 0.68.
357/1322
= 0.27
Sainsbury plc
Name of ratio Calculation Result
2018 2019
Current ratio Current assets/ current
liabilities
7857/10302
=0.73
7550/11849
=0.63
Quick ratio Quick assets/ current
liabilities
1933/10302
=0.19
1283/11849
=0.19
Net profit margin Net profit/ total sales 309/28456
=0.11%
186/29007
=0.006%
Gross profit margin Gross profit/ total sales 518/28456
=0.018%
601/29007
=0.02%
Gearing ratio
(Debt to Equity Ratio)
Total debt/ total equity 34.44 97.75
P/E ratio Market value per share/ 238.80/0.22 213.40/46