Comprehensive Financial Analysis of Tesco PLC: A Company Project

This report presents a comprehensive financial analysis of Tesco PLC, a major player in the retail sector. It begins by outlining Tesco's primary commercial activities, including its diversification into various sectors like books, clothing, and financial services. The report then analyzes recent trading data, examining share price fluctuations, trading volumes, and average volumes over a ten-day period. A key section differentiates between executive and non-executive directors, highlighting their respective roles and significance in company governance. The analysis further includes an examination of Tesco's latest consolidated income statement, identifying gross and operating profits, calculating changes in turnover, and discussing unfamiliar financial items like share of joint ventures and finance income. The report concludes by summarizing key findings and emphasizing the importance of financial information for decision-making, while also acknowledging recent share price fluctuations.

COMPANY PROJECT (TESCO)

Table of Contents
INTRODUCTION...........................................................................................................................1
Question 1........................................................................................................................................1
1. Outlining company’s main commercial activities...................................................................1
Question 2........................................................................................................................................2
2. Commenting on 10 recent trades with focusing Variation in prices, Total volume, the
highest volume, the lowest volume and average volume............................................................2
Question 3........................................................................................................................................2
3. Differencing between executive and non-executive directors and incorporating explanation
regarding the significance of such distinction.............................................................................2
Question 4........................................................................................................................................3
4. Uploading company's latest consolidated income statement and report regarding................3
Identifying gross profit................................................................................................................3
Analyzing operating profit and difference between gross and operating profits........................3
Calculating absolute and percentage changes in turnover..........................................................4
Discussing items which are unfamiliar with...............................................................................5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
The financial statements are one of the important documents representing financial health
of company. Present report deals with Tesco PLC engaged in retail sector in UK having multiple
operations. Report will discuss company's main commercial activities, commenting on 10 recent
trades of company will be explained with relation to variation in share prices, total volume,
highest volume, lowest volume and average volume etc. The difference between executive and
non-executive directors will be enumerated. Lastly, company’s latest consolidated income
statement will be analyzed from various perspectives for giving clear picture of firm's profitable
health.
Question 1
1. Outlining company’s main commercial activities
Tesco PLC is a giant involved in the retail sector and is British Multinational firm which
is engaged in groceries and general merchandise retailer with headquarters in England, UK. It is
the third largest company in terms of gross revenues and ninth-largest retailer in terms of
revenues in the world. Since, 1960, Tesco PLC has effectively diversified its business into books
retailing, quality clothing, electronics, furniture, toys. Moreover, its main commercial activities
are also in selling software, financial services, telecommunication, petrol and internet services in
effective manner.
It can be analyzed that Tesco PLC has effectively grown over the years and has become
reputed firm on global scale (Tesco PLC annual report 2018. 2018). Company is listed on
London Stock Exchange and is a constituent of FTSE 100 index. Moreover, it can be analyzed
that firm has a market capitalization of 19,347.05 million pounds which shows that company is
largest among the primary listing on the London Stock Exchange. Firm has more than 6800
shops in various locations as it is conveyed in 2018 financial year. The commercial activities are
located in UK, Ireland, India, Malaysia, Czech Republic, Hungary and Thailand which leads to
attainment of goals. It serves more than 80 million customers every weak showing group sales
amounting to £51 billion as per 2018 annual report. Tesco Mobile is mobile network operator,
while, Tesco Bank is included in banking sector providing financial assistance to customers.
Petrol stations are also present in commercial activities of Tesco PLC which provides clarity that
firm is operated at a large scale in effective manner.
1

REFERENCE
Tesco PLC annual report 2018. 2018 [PDF] Available Through:
<https://www.tescoplc.com/media/474793/tesco_ar_2018.pdf>
Question 2
2. Commenting on 10 recent trades with focusing Variation in prices, Total volume, the highest
volume, the lowest volume and average volume
Share prices movement in last 10 days of Tesco PLC
Date Open High Low Close Volume
3-Dec 200.00 201.60 198.05 198.45 5533115
30-Nov 199.65 201.00 196.35 197.55 46184843
29-Nov 199.00 201.10 195.65 200.00 35649714
28-Nov 199.95 200.90 197.25 197.25 23484896
27-Nov 200.30 201.00 194.05 198.30 31860854
26-Nov 203.40 205.70 200.60 200.60 20530298
23-Nov 201.70 204.30 201.20 202.10 32937115
22-Nov 207.30 207.60 201.00 201.30 35253985
21-Nov 204.40 209.80 204.00 207.20 38229795
20-Nov 204.50 207.10 203.30 204.00 20145759
Total volume 289810374
Average
volume 28981037.4
It can be analyzed that highest volume was on 30-Nov amounting to 46184843. The
Lowest volume is on 3 Dec amounts to 5533115. Average volume of trade is 28981037.4 and
total volume is 289810374 (Tesco PLC (TSCO.L). 2018). Hence, share prices have fallen down
in last 10 days reaching to 200 pounds per share. The share price are fluctuated over the period
of 10 days. It can be interpreted that share price were 204.50 on 20 November which reached to
2

certain fall on 21 November to 204.40. Moreover, it increased to 207.30 on 22 November and it
increased to 201.70 on 23 November. It finally reached to 200 at 3rd December. Hence, it can be
said that share prices of Tesco PLC are highly fluctuating one in recent time period.
REFERENCE
Tesco PLC (TSCO.L). 2018 [Online] Available Through:
<https://in.finance.yahoo.com/quote/TSCO.L/history?p=TSCO.L>
Question 3
3. Differencing between executive and non-executive directors and incorporating explanation
regarding the significance of such distinction
Executive Director Non-executive Director
The main responsibility of executive director is
to encourage others to join board and suggest
for the strategy to be created.
He has the responsibility for ensuring that
employees are receiving professional
development on continued basis.
They have the responsibility for making
strategic goals and activities for the
organisation for up scaling operations.
They are responsible for analysing
effectiveness of management and also
examining financial statements and risks.
Job responsibility of executive director is to
prepare budget in order to reinforce priorities
and values.
Job responsibility of non-executive director is
to sit on subcommittees for gaining sense of
broaden company base and needs of workers
are ascertained.
Main job of executive director in organisation
is to be knowledgeable of current and fresh
developments in the industry in order to get
competitive advantage over the rivalries
(Adams, 2017).
Main job of non-executive director is to make
sure that information contained in financial
statements are true, then during meetings, they
suggest for incorporating new values and
advise for removing old ones.
The importance of such distinction is that both directors are entitled for up scaling
business operations so that efficiency can be enhanced in a better manner. Executive directors
handles day-to-day activities with a view to make strategies so that goals may be accomplished.
3

On the other hand, non-executive directors have responsibilities for assessing financial
information reflecting true and fair view of financial health (García‐Sánchez and Martínez‐
Ferrero, 2017). Moreover, needs of employees are also carried out by them so that employees
may accelerate their productivity to best of their capabilities. Hence, both types of directors are
required in the company and have their own significance.
REFERENCES
Adams, C., 2017. Understanding integrated reporting: the concise guide to integrated thinking
and the future of corporate reporting. Routledge.
García‐Sánchez, I. M. and Martínez‐Ferrero, J., 2017. Independent directors and CSR
disclosures: The moderating effects of proprietary costs. Corporate Social Responsibility
and Environmental Management. 24(1). pp.28-43.
Question 4
4. Uploading company's latest consolidated income statement and report regarding
Identifying gross profit
It can be assessed that Tesco PLC had gross profit 2902 in 2017 which increased to 3350
in 2018. Gross profit is attained by subtracting cost of goods manufactured from sales revenue.
Analyzing operating profit and difference between gross and operating profits
The operating profit is termed as profit which is left after reducing all operating expenses
of company. Tesco PLC had operating profit of 1017 in 2017 which increased to 1837 in 2018.
Gross Profit Operating Profit
It provides rough prediction with regards to
firm's profitability.
It provides how well firm is allocating its
scarce resources on expenditures.
It is helpful in initiating control over its costs. It is beneficial for eradicating unnecessary
operational expenditures.
The income left over paying out direct
expenses.
The income left after making payment of
operating expenses.
4

Calculating absolute and percentage changes in turnover
Changes in Tesco PLC (Consolidated Income Statement)
Particulars 2018 2017
Absolute
change Percentage change
Sales Revenue 57491 55917 1574 0.03
Cost of goods
manufactured 54141 53015 1126 0.02
Gross profit 3350 2902 448 0.15
Administrative
expenses 1633 1995 -362 -0.18
Profits/(losses)
property-related
items 120 110 10 0.09
Operating profit 1837 1017 820 0.81
Share of joint
ventures and
associates 6 107 -101 -0.94
Finance income 98 109 -11 -0.10
Finance charges 631 874 -243 -0.28
Profit Before Tax 1298 145 1153 7.95
Tax 306 87 219 2.52
Profit from
continuing
operations 992 58 934 16.10
Profit/ (loss) from
discontinued
operations 216 -112 328 -2.93
5

Net Profit 1208 -54 1262 -23.37
Discussing items which are unfamiliar with
The items that are unfamiliar but are significant are as follows-
1. Share of joint ventures and associates-
The associate is termed as an entity over which shareholder has influence and has the
power for participating in financial and operating policy decisions of investee (Libby, 2017). On
the other hand, joint ventures are entered into for getting out single purpose such as production
or research activities. It is significant for accounting for as they have share in participating in
management, profits, losses in accordance to the contract.
2. Finance income-
It is the bottom line of income statement before calculating for Profit Before Tax
(MacLeod, 2018). This income is not aligned with taxable income and not reported in income tax
returns. It is significant for incorporating for calculating correct profit else it will present wrong
information to users of it.
REFERENCES
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
MacLeod, J., 2018. Ain't no makin'it: Aspirations and attainment in a low-income neighborhood.
Routledge.
CONCLUSION
Hereby it can be concluded that financial information provides useful information to
users for making decisions quite effectually. Tesco PLC is making good amount of profits as
reflected by latest consolidated income statement. However, in recent 10 days, share prices are
gone down from 204 to 198.45. It is required to enhance overall position of company so that firm
may be able to increase its share prices in the market.
6

REFERENCES
Books and Journals
Adams, C., 2017. Understanding integrated reporting: the concise guide to integrated thinking
and the future of corporate reporting. Routledge.
García‐Sánchez, I. M. and Martínez‐Ferrero, J., 2017. Independent directors and CSR
disclosures: The moderating effects of proprietary costs. Corporate Social Responsibility
and Environmental Management. 24(1). pp.28-43.
Libby, R., 2017. Accounting and human information processing. In The Routledge Companion
to Behavioural Accounting Research (pp. 42-54). Routledge.
MacLeod, J., 2018. Ain't no makin'it: Aspirations and attainment in a low-income neighborhood.
Routledge.
ONLINE
Tesco PLC (TSCO.L). 2018 [Online] Available Through:
<https://in.finance.yahoo.com/quote/TSCO.L/history?p=TSCO.L>
Tesco PLC annual report 2018. 2018 [PDF] Available Through:
<https://www.tescoplc.com/media/474793/tesco_ar_2018.pdf>
7