Analysis of Capital Structure Changes & Financial Debts Advantages

This report critically examines the changes in capital structure over a period, focusing on the advantages and disadvantages of financial debts. It notes a significant increase in revenue over the last 10 years, impacting the tax liability. The organization's average return has decreased, potentially due to increased tax rates or expenditures. The current ratio remains below 1, indicating insufficient current assets to cover obligations, and the liquid ratio is also low. The debt-equity ratio shows increased reliance on long-term debts over equity. Decreased earnings and negative operating income have affected overall profitability. Capital fluctuations are attributed to investor activity. A revenue decrease, coupled with constant sales and increased production costs, has negatively impacted profitability and liquidity. The report also discusses capital structure theories, including pecking order theory and trade-off theory, in the context of Tesco's financial situation. It highlights financial debts as a major source of finance, discussing their advantages, such as protecting shareholder control and reducing tax liabilities, and disadvantages, including compulsory payments and potential credit rating decreases. Desklib provides solved assignments and resources for students.