Business Decision Making: Analysis of Tesco's Accounting Ratios, Limitations, and Factors Affecting Performance in 2019

Business decision
making

Table of Contents
INTRODUCTION...........................................................................................................................1
Main Body.......................................................................................................................................1
Question 2a..................................................................................................................................1
Question 2b. Five (5) limitations in the use of accounting ratios ..............................................3
Question 2c. Three (3) factors affecting Tesco in 2019..............................................................4
CONCLUSION................................................................................................................................5
References:.......................................................................................................................................6

INTRODUCTION
In a business organisation to make the right financial decision there is requirement of the
adequate amount of right economic information. The right amount of correct financial
information of an organisation helps the managers of the company in determining the
performance, liquidity and financial health of the company. In order to analyse the company's
performance, profits, liquidity etc. (Greenberg and Hershfield, 2019) . the measurement and
analysis of the ratios is the best technique that company can use. The present report is based on
Tesco plc- a British multinational supermarket chain that has largest market share in UK. The
report will highlight Tesco Plc performance and position using the accounting ratios. Further the
limitation of the accounting ratios are analysed and evaluated for three years. In the end three
factors affecting Tesco plc performance in 2019 are discussed.
Main Body
Question 2a
The financial statements focuses on catering the financial information about the business
in order to make best financial and other decisions related to the company. The accounting ratio's
are the part of the financial statements and are considered as the crucial tool to analyse the worth
of company's operations through its financial statements. Tesco plc is one of the most well
known multinational supermarket store. The financial ratio or accounting ratios of the company
for the period of three years is analysed and evaluated below:
The gross profit margin is the financial metric that indicates the efficiency of the Tesco
plc in managing its daily and production operations (Greenberg and Hershfield, 2019) . By
comparing the gross profit margin of Tesco plc of three years it is recognised that in year 2019
company has higher efficiency and proficiency in managing its production process compared to
the year 2018 and 2017. In year 2017 and 2019 the there is the reduced gross profit which
signifies that Tesco plc is not producing their product with efficiency in the last two years
compared to year 2019 and this is due to reduction in sales of the company and due to poor
pricing techniques. The Return on total asset ratio calculates the net income generated by the
Tesco from its assets. By comparing Return on total assets ratio of the three years of Tesco plc it
is recognised that the company in 2017 has very low return on total assets as Tesco was not able
to utilize its assets or resources optimally due to which profits where lower but in upcoming
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