Analysis of Financial Ratios and Performance of Tesco and Sainsbury

PORTFOLIO

Table of Contents
INTRODUCTION...........................................................................................................................4
Portfolio 1........................................................................................................................................4
Calculation of financial ratios......................................................................................................4
Analysis financial position of companies....................................................................................8
Analysis of business performance improvement.........................................................................9
Limitations of Company relying on financial ratios..................................................................10
Portfolio 2......................................................................................................................................12
Capital Investment Appraisal.....................................................................................................12
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

INTRODUCTION
This report has been created with the purpose of various suggestions and
recommendations to managers in their day to day business decision making activity, so that the
accurate decision can be taken by the managers in the company. Managerial finance is concerned
with the various financial activities done by the managers in carrying out their duties. It involves
financial management of the company where financial techniques for minimising cost and
maximising profit has been applied by the management in the course of business affairs. It takes
into account how a profitable opportunity for business enterprise can be exploited with the scarce
resources of the business. In this report evaluation from both side, that is, first from investors
perspective regarding where to invest by deciding on the basis of company's financial
performance and the second one from managers perspective regarding which opportunity or
project to be invested in.
Portfolio 1
Calculation of financial ratios
Current ratio
Tesco Company
Ratio Formula 2019 2020
Current ratio Current asset / current
liability
12480
(2617+6432+3373) /
20973
12879
(2433+5676+4686) /
17927
0.6 0.72
Sainsbury
Ratio Formula 2019 2020
Current ratio Current asset / current
liability
7550(1929+4268+128
3) / 11849
7582(1732+4762+105
5) / 12047
0.64 0.63
Quick ratio

Tesco Company
Ratio Formula 2019 2020
Quick ratio Current asset -
Inventory/ current
liability
9863 (12480-2617) /
20973
10446 (12879-2433) /
17927
0.47 0.58
Sainsbury
Ratio Formula 2019 2020
Quick ratio Current asset -
Inventory/ current
liability
5621(7550-1929) /
11849
5850(7582-1732) /
12047
0.47 0.49
Net profit margin
Tesco Company
Ratio Formula 2019 2020
Net profit margin Net profit / sales *100 1270/63911*100 935/64760*100
1.99% 1.44%
Sainsbury
Ratio Formula 2019 2020
Net profit margin Net profit / sales *100 186/29007*100 152/28993*100
0.64% 0.52%
Gross profit margin
Tesco Company
Ratio Formula 2019 2020