Ratio Analysis of Tesco and Sainsbury: Managerial Finance

MANAGERIAL
FINANCE

Table of Contents
INTRODUCTION...........................................................................................................................1
PORTFOLIO 1.................................................................................................................................1
Ratio analysis of both company for the year 2018 and 2019 ......................................................1
Recommendation.........................................................................................................................9
Limitation of the ratio analysis ...................................................................................................9
PORTFOLIO 2...............................................................................................................................10
Investment appraisal techniques ...............................................................................................10
Limitations of investment appraisal techniques:........................................................................12
CONCLUSION .............................................................................................................................13
REFERENCES .............................................................................................................................14

INTRODUCTION
Managerial finance means the method use for the collecting the funds and managing
them according to the day to day activities which is used in other department for carry the
regular activities in the finance activity. It is about planning, organising, analysing, monitoring
and controlling the financial techniques for the better utilization of the resources. In simple terms
there is the use of the manager for manage the activities of the entity to accomplishment of the
business objectives and goal. In this report there is two company is selected which are Tesco and
Sinsburry. Tesco is the largest British Multinational retail based company which is found in
1919, their headquarter is located in UK. And second one is Sainsbury which has largest number
of the market chain in the retail sector (Atanasova, Gatev and Shapiro, 2016). It was founded in
1922, in which headquarter is located in London. In this report there are various topics are
covered such as ratio analysis of both company and limitation of the ratio analysis. Apart from
these limitations of the investment appraisal techniques for the given project.
PORTFOLIO 1
Ratio analysis of both company for the year 2018 and 2019
In context to Sainsbury
Basic Formulas Results for 2018 Results for 2019
Current ratio
Current assets / current
liabilities
7857/10302
=0.73:1
7550 /11849
=0.63:1
Liquid / quick ratio
Quick assets / current
liabilities
1933/10302
=0.19
1283 /11849
=0.19
Gross profit Ratio Gross profit / total sales
518/28456
=0.018%
601 /29007
=0.02%
P/E ratio
Market value per share /
Earnings per share
238.80/0.22
=10.85
213.40/46
=4.64
Net profit Ratio Net profit / total sales
309/28456
=0.11%
186/29007
=0.006%
Earnings per share Income available / total 22 46
1

number of shares outstanding
Dividend pay-out ratio Dividend paid / net income
235/309
=0.76
247/186
=1.33
Capital gearing ratio Total debt / total equity 34.44 97.75
Average inventory
turnover period Net sales / average inventory
28456/1792.5
=15.87 days
29007/1869.5
=15.51 days
Return on capital
employed
Operating profit/ capital
employed 4.65 3.84
In Context to Tesco
Basics Formulas Results for 2018
Results for
2019
Current ratio
Current assets / current
liabilities
13,726 / 19,238
= 0.713
12668 / 20680
= 0.612
Liquid / quick ratio
Quick assets / current
liabilities
4379 / 19238
= 0.227
3373 / 20680
= 0.163
Gross profit Ratio Gross profit / total sales
(3350 /
57491)*100
= 5.82%
(4144/63911)*
100
= 6.48%
P/E ratio
Market value per share/
Earnings per share
229 / 9.35
=24.49
213.6/13.65
= 16.97
Net profit Ratio Net profit/ total sales
(1206 /
57491)*100
=2.097%
(1322/63911)*
100
= 2.07%
Earnings per share
Income available / total
number of shares
outstanding 9.35 13.65
Dividend pay-out ratio Dividend paid / net income 82/1206 357/1322
2