Report on Managing Financial Resources: Tesco PLC Financial Analysis

This report delves into the management of financial resources within medium to large organizations, specifically highlighting the sources and applications of finance, with Tesco PLC as a primary case study. It examines both short-term and long-term financing options, including internal and external sources like retained earnings, loans, and equity financing. The report explores the implications of various financial decisions on business growth, cost management, and investment strategies. It also covers the evaluation of financial sources, cost analysis of different financing methods (bank loans, leasing, etc.), and the importance of financial planning for achieving organizational goals. Furthermore, the report assesses the role of financial information in decision-making processes and analyzes financial statements to provide insights into the company's financial performance. The report concludes with recommendations for effective financial resource management, emphasizing the importance of strategic planning and informed decision-making in the context of the UK retail industry.

MANAGING FINANCIAL
RESOURCES

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 various source of finance of the business..............................................................................1
1.2 Implication of various sources of finance.............................................................................2
1.3 Proper evaluation of the source of business finance.............................................................3
2.1 Cost of different sources of finance......................................................................................4
2.2 Importance of financial planning ........................................................................................4
2.3 Information require in the assess of decision making...........................................................5
3.1 Effect on the finance in the financial statements..................................................................6
3.2 Budget analysis and make decision......................................................................................8
3.3 Investment techniques with with recommendation and conclusion ....................................9
TASK 2..........................................................................................................................................10
4.1 Financial statement its objective ,purpose and uses of J. sainsbury plc..............................10
4.2 comparison of the format of different company financial statement..................................11
4.3 Different ratios of the financial statements ........................................................................14
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
The project report is about the financial resources of the businesses are managed in the
medium or large size organisation. Under which the source of finance and the uses of it in the
business are highlighted and one of the leading company TESCO PLC of England which is the
retail company(Ahlstrom,Chen and Yeh, 2010) . How they are managing its financial resource
for the development of the company. The source of fund availability to manage the expenses and
the paid the liabilities and show the growth through achieving the goals of the organisation. It
also contain the implication of the finance to the company and the decision related with the
financial perspectives of the business operation ,so that the desire outcome for the company can
be generated. The main objective of this report is to show the impact of finance in the business
and critical evaluation of the financial information which affect the different company of
England. The major source of data collection is from the various references of the books and
journal which give the idea about the financial management.
TASK 1
1.1 various source of finance of the business
Finance : It refers to the money which is in the liquid resources of the individual , group
and the government or any other business enterprises. funds are the important part of the
business without which an organisation can not survive for the long period(Altenburg and
Pegels, 2012) .there are two sources of finance available to the TESCO PLC
▪ Short term : These are said to be the shortest finance which are available to the
businesses entity that must be paid within the one year time limit.
▪ Long term : The another is for the long period which are more than one year of
the time limit .
Another are internal and external sources :
▪ Internal sources are those funds which available inside of the company. The profit
can be used to re invest in the business as a growth and expansion of the
organisation. In this the company if need to pay the liabilities they can sell the
assets to free the cash and maintain the operation (Ameen, 2011).
▪ External sources are the those which are come from the outside of the business. It
is divided into two parts:
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1. Short term External sources : It covers the overdraft facility of the banks which are allow to
the business and the trade credit to the supplier for the delivery of the goods and the factory
where the company sell its detail invoice to the banks(Aras, Aybars and Kutlu, 2010).
2. long term External sources : It includes the owners who invest in the business of the Tesco plc
and provide loan facility to the company and they have the option of leasing shares , debenture,
retained earning of assets to pay of the debts. The company may issues debenture as a loan.
1.2 Implication of various sources of finance
Finance are the honour to the fund of the business. But to every business like Tesco plc is
based on the aspect that the planning , direction to use the funds in such a manner that it should
give more benefit to the organisation(Boiral, 2011). In the case of Tesco plc they using the
proper decision making to use the fund by introducing the new variety of the products to its
customer with the discount and feature with better quality. But at the same time it has some of
the implication are also associated with the companies outcome because of improper planning
and co ordination in the financial investment.
The most of the company depend on the desire result , outcome they are getting from the use of
fund in their activity. There are some of the impact of finance in the business operation of the
Tesco plc :
1. Growth : It the company is not able to maintain the funds in the proper manner
then it will directly impact the growth of the business. The funds should be
utilised in proper manner to enter into the new market for the expansion.
2. Cost cutting : It is seen many a times that the expenses of the company are over
valued which leads to the company to cut the cost to minimise the risk of the
business.
3. Investment in personal : the most difficult for the company in hiring of the labour
for the operation which is to costly(Broadbent, M and Cullen, 2012). In the case
of Tesco plc it hiring cost is more which is directly impact the company because
they have to provide training and development as per the knowledge and skill of
the labour.
Financial implication :
 Equity Financing : In starting stages public offering & Offering Equity. Under this
business can not raise capital by public offering.
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 Debt financing : In case of debt funding the legal impact is that they have to pay tax on
the amount of loan they borrowed and with interest.
1.3 Proper evaluation of the source of business finance
The finance for the operations are the main source of businesses assistance in England
over so many years explaining the ideal example of designing the business activity of the
company finance(Farmer, and et.al., 2012). Some of the basic things in the evaluation of the
finance of the small and large business organisation is related with the amount of fund invested
in the start of the business. So the following points are taken into account to evaluate the finance
are :
1. Capital invested : In the case of the small enterprises it not requires huge capital
to start the business operation but in the case of the large size business like Tesco
plc are required huge capital to start the business.
2. Bank Loan : under the case of the Tesco plc the type of loan taken from the
market and the banks are to be the also major part in evaluating the source of
business. Mortgage of loan is depend on the time period of repayment and growth
of the business is available(Foerstl, and et. al., 2010) .
3. Shareholder : these are the investor who are investing his funds in the company of
tesco plc to expand business and make them important part in the decision making
of the management ,so that they have the idea about the investment of the finance
in the best way to earn maximum output.
4. Credit availability : Another important aspect in the financial management is the
credit avail to the company until the goods are not sold .
5. Venture capital : In the context of the raising the fund is use of venture capital
from the merchant banker and the special investor who are willing to invest in the
business like Tesco plc.
6. The grant from government : sometime government grant help to overcome the
funds to meet the businesses(Greene, Brush and Brown., 2015).
From the above mentioned various sources of finance the best suitable is venture capital
as it is because capital invested into business may create strong growth opportunities to the
company.
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Other financing sources are Business partner and strategic alliances by entering into
partnership with other owner to get more funds that to growth his business.
2.1 Cost of different sources of finance
The cost is simply is the amount of funds invested in the internal or external sources of
the finance. In the case of Tesco plc the external source cost to much to manage the funds in the
different type of investments. The cost of funds are measured in different ways are :
1. Banks loans : banks are the most important areas in the finance of the business the
cost of loan is very much different for the company in raising the funds for the
company . They have the rate of interest which is as higher side in the large
business sizes enterprises in Tesco plc(Hendrick.,2011).
2. Leasing : Most of the company like Tesco plc they buy machinery , equipment
and vehicle which is again the huge cost for the company in the financing the
sources of the different businesses. It is the agreement between the company and
the customer on the some lease of the assets .
3. Hire purchase : the cost of hire purchase in the case of assets is less because the
full amount is not invested in acquiring of the assets. It allow the seller the right to
invest the funds in large amount without borrowed it help to generate fixed
amount of cash flows to the company.
4. Retained profit : It is that amount of funds which are kept by the company rather
than investing into the shareholders as a part of dividends , which is a agin a profit
to the business (Ioannou, and Serafeim., 2010).
5. Business angles : These are those investor who are trying to inter into the new and
growing business.
2.2 Importance of financial planning
Financial planning : It refers to the continuous process of the managing the finance of the
business in such a way that it should help the organisation in achieving their target in the
future .it can be achieve by proper planning, implementing the techniques and tools ,evaluation
the process in proper manner. The strategy of the Tesco plc is to be the most valuable retail store
in the UK that is providing products to the customer in the good quality to get this aim they are
continuously planning the operation of the finance to earn maximum profit.
Following are importance of the financial planning :
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1. It help to facilitate optimum fund : To protect the company from wastage and over
exploitation they are estimate the requirement of the funds.
2. It help to fix appropriate capital structure : the funds of the business are utilized in
many ways like for the long ,short and the medium term which is necessary to
look after the time period that the funds are used(Kusumasari, Alam and
Siddiqui., 2010) . It also help to manage the shareholder and the other financial
institution and the commercial banks .
3. Use of fund in the right projects or activity : the financial planning help to get the
estimation of the use of fund in right project that it will cost this much to the
project .like as the case of the Tsco plc in opining the new projects .
4. Operation activity : the growth and failure of the business is depend on the
financial decision which are used in the floe operation activity(Lu Knutsen and
Brower, 2010).
5. Utilization of proper finance .
2.3 Information require in the assess of decision making
Decision making is an integral part of the financial planning because the business is
totally depend on the proper decision of the authority and the management to determine the the
total capital require to complete this projects. To forecast the sale estimation of the Tesco plc that
how to use resources of the business and to meet the liability to pay the shareholders and the
debentures and the loan etc.
The need of information in decision making :
1. The high quality of information is the important requirement of the decision
maker because it give the important features and characteristics of the data which
help the company like Tesco plc to take the decision for the financial planning.
2. The decision makers are soul of the business because whatever the decision they
provide is totally affect the businesses directly ,so the effective planning is to be
done before implementing the plans(Lusardi, 2011).
3. The judgement is the valuable part of the decision making in case of the scientific
data feature are available with the decision makers related with the company
Tesco plc. there is always threat of serious damage to the environment because of
the limited information financial data available with them.
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4. There are so many writers who suggest that present and historic data are better
ways of decision making ,so that in the current scenario the information and
technique are mostly based on the historic data pattern in the decision more
effective.
5. Another important assess of decision maker are the availability of the insufficient
data which are sometime very difficult task to manage the finance of the
businesses .
2.4 Impact of finance on financial statement
Financial statements are the records in which all the information related to finance are
presented and recorded in appropriate manner. Funds will be used by Tesco Plc in relation to
different operations for effective conductions of their business and as different activities that are
related there will have impact on one another. As in financial data will be considered so there
will be a big impact of finance on them which is explained underneath:
 Income statement: It is recognised as profit and loss account. In this all the transactions
that take place by which income is generated or expenses are incurred are recorded under
this head. All the opening and closing change in profit can be seen under this.
 Balance sheet: It is the combination of assets and liabilities of Tesco Plc which is
represented through either side of the statements. As, purchase and sale of goods there
will be change in money so their will see on it.
3.1 Effect on the finance in the financial statements
Project cash budget : It is the type of budget which highlight the flow of the cash which
are require meet the resource of the company in managing the operation of the business. It an
important source of budget estimation which shows the individual that they going to invest in
those project which befit them mostly.
Particul
ars
April May June July August Septembe
r
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Opening
balance
300000 290700 275900 189740 225240 218070
Credit
sales
60000 50000 35000 110000 60000 70000
Cash
sales
35000 40000 20000 20000 35000 40000
Total 395000 380700 330900 319740 320240 328070
Credit
purchase
62000 50000 80000 70000 60000 50000
Cash
Purchase
25000 20000 35000 10000 10000 15000
Loan
repay
NIL 400 300 200 500 400
Interest NIL 150 160 100 120 110
OD
Interest
300 650 700 600 550 400
Wages 10000 25000 20000 10000 20000 15000
Capital 4000 7000 4000 1500 9000 8000
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expendit
ure
Allowan
ces
3000 1600 1000 2100 2000 1500
Total 104300 104800 141160 94500 102170 90410
Surplus/
Deficit
290700 275900 189740 225240 218070 237660
From the above cash budget we have made decision that it has health cash to sustain it
operation in market.
Other budget : The other budget are the image of the economic condition , and the availability of
the outcome that the company should get it from the investment in the various project of the
company is experienced. It includes sale budget , production budget and many other which are
directly contribution to the growth of the business enterprises in the future time.
Effects in the financial statements can be identified by the data provided in these three above
statements are correct because it the directly impact the investor before investing in the business
of Tesco plc.
a. On the stock price : Financial statements have direct effects on the prices of the stock of the
company. The decision are made on the basis of the price of the fluctuation to the investors.
b. Financing decision : The impact of finance is also based on the believe that how business can
get financed by taking the help of the financial statements.
c. By approaching new investors : It is the first time when the Tesco plc issues share in the
market to raise the funds with the help its financial statements the new investors are tried to
invest in the company.
d. In the case of others company it influences the others businesses(Remund, 2010).
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3.2 Budget analysis and make decision
Budget : It refers as the total amount of funds estimation which are utilised in the future
period of time .it is made to generate maximum revenue with minimum expenses incurred on the
projects of the Tesco plc company. It also help in the planning of the company finance in
appropriate manner.
According to the current year budget statement there are many changes has seen:
The budget is the highlight of the investment decision related with the small scale
business .
unit cost : It is the cost to company for producing one unit of product and service(Renz, 2016).
Calculation of unit cost :
unit cost = fixed cost -variable cost/total cost
= 3-1/11.4
= 2.91 per unit.
Fixed cost =3
variable cost =1
Total cost =11.4
It is price at which the company to sell its product to the customers. pricing decision are designed
to achieves the target of the company goals.
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As per the companies like manufacturing and financial sectors are increasing with a 68%. the
unit cost is the estimation of the budget that to produce one unit the companiy have to pay
2.91pounds as a per unit cost. This minimum cost of the decision will help the small scale
business to growth for the long period of the time.
The budget also says that the government is going to invest 26% of their income in the
development of the small business . So that it will take potion to expand there business.
So,if you trying to open up your business with 20000 and the government support to them will
help to start their new business .
3.3 Investment techniques with with recommendation and conclusion
The investment techniques help to shows the effect on the businesses. There are of
various types of investment techniques :
1. Accounting rate of return : As from the budget the expected investment amount
decision are taken to the average capital investment.
2. Pay back period : It is the techniques which indicate the time length to repay the
amount of investment.
3. Sensitivity analysis : It totally involve the investment risk associated with the
company has to be analysed.
4. Discounted cash flow : The net present value of the investment and the initial rate
of return are different aspects of the investment decision.
As per above techniques the project cost is decide by the entrepreneur that on the basis of the
these techniques he can make the investment decision . The average rate of return, it recovery
time and risk associated with the project are all can be made through the above points.
In the 300000 of the total amount fixed to the project which should not be exceed and the initial
amount is 20000 only with the person to invest he must have the huge chance of risk of shutting
down of the project or might be the less option of success.
Recommendation to the entrepreneur for the investment are :
1. The best option he have of the investment in the bank as a fixed deposit which
will make them a specific interest on it.
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