Ratio Analysis & Balanced Scorecard: Financial Performance Report

This report provides an overview of financial performance management, examining company performance through financial measures. It includes a computation of financial ratios for Walmart and Tesco, assessing their financial positions and working capital. The report also evaluates the balanced scorecard approach as a strategic management system, discussing its benefits and implementation challenges. Furthermore, it touches upon the advantages and issues of integrated reporting, offering insights into corporate financial analysis and strategic decision-making. Desklib offers a variety of solved assignments and study resources for students.

FINANCIAL
PERFORMANCE
MANAGEMENT

Table of Contents
INTRODUCTION.......................................................................................................................3
TASK........................................................................................................................................3
1. Compute ratios and assess the financial performance of the business enterprise..........................3
2. Assess Balanced scorecard and develop proposed balanced scorecard of the business as a
Strategic management system...........................................................................................................7
3. Advantages and issues in adopting integrated reporting which is based on the company............11
CONCLUSION.........................................................................................................................15
REFERENCES..........................................................................................................................16

INTRODUCTION
The report prepared as under helps to have an overview about financial management which
is useful in examining the performance with the help of several financial measures in the
working and functioning of a company. It is also explained as corporate performance
management. The foremost goal related to financial performance being rendered in a business is
compilation of actual performance with the forecasted performance of the organisation and for
making adjustments accordingly (Aastvedt, Behmiri and Lu, 2021). Currency performance in a
wider sense explains to what extent currency target has been achieved, and has proved to be an
essential and necessary aspect of monetary risk. This is considered as of the mutual way of
predicting the result of an organisation’s approaches as well as undertaking of monetary
relations. This is utilized to compute a business enterprise's overall financially position which is
based on performance over a certain period of time span along with this equivalent should be
adapted for viewing similar businesses in parallel industries or for analysing the business
activities or collection fields. Financial executive examines, memorizes, investigations, and
translates the financial statement for a comprehensive view of efficiency and adequate funds in
monetary aspects. It is the capability and ability of the management to provide assistance in the
performance being rendered for the business being carried and which would also indicate the
plans being forecasted and handling the reporting and rising the financial efficiency and
acquisition over the world. In the following report it helps in computation of financial
positioning of the enterprise and determine results. Moreover, it explains the record of both the
organisation Walmart and Tesco. In addition to it would state the merged report of the business
by examining challenges and benefits being recognised by the company.
TASK
1. Compute ratios and assess the financial performance of the business enterprise.
Particular Formulas Walmart Tesco
Activity Ratio:

Inventory turnover
ratio:
(Average inventory / Cost
of goods sold) * 365
6065+6038 / 96476 *
365 = 46 Days
Total Asset Turnover
ratio
Net sales / Average total
assets
108324 / 57888 + 51774
= 1.98 Times
2020 = (58091 / 53147 * 100)
= 109.30 %
2021 = (57887 / 45778 * 100)
= 126.45 %
Working capital
turnover ratio
Net revenue / working
capital
108324 / (15844 – 9283)
= 16.51 Times
2020 = (13893 / 18656) =
0.74 times
2021 = (10807 / 15997) =
0.68 times
Liquidity ratio:
Current ratio Current assets / current
liabilities
15844 / 9283 = 1.71
times
2020 = (13893/18656) = .74
times
2021 = (10807/15997) = .68
times
Liquid ratio Liquid assets / current
liabilities
(15844 – 6038) / 9283 =
1.06 times
2020 = (13893 - 2433 /
18656) = 0.61 times
2021 = (10807 - 2069 /
15997) = 0.55 times
Cash ratio (Cash + marketable
Securities) / Current
Liabilities
(3313 / 9283) = .36
Times
2020 = (4137 + 1076 / 18656)
= 0.28 times
2021 = (2510 + 1011 / 15997)
= 0.22 times
Solvency ratio:
Debt- to- assets ratio Total Debt / Total Assets 3620 / 51774 = .07 times 2020 = (13369 / 53147) =
0.25 times
2021 = (12325 / 45778) =
0.27 times

Debt- to- capital
ratio
(Short term debt + long
term debts + other fixed
payment) / Shareholder’s
equity
(9283+13954+5275+36
20) / 18801 = 32132 /
188011 = 1.71 Times
2020 = (6005 / 13369 + 6005)
= 0.31 times
2021 = (6188 / 12325 + 6188)
= 0.33 times
Debt to equity ratio Debt / equity 3620 / 188011 = .02 2020 = (6005 / 13369) = 0.45
times
2021 = (6188 / 12325) = 0.50
times
Interest coverage
ratio
EBIT / Interest expenses 2422 / 454 = 5.33
Profitability ratio:
Gross profit margin Gross Profit / Sales * 100 2784 / 108324 *100 =
2.57 %
2020 = (4098 / 58091 * 100)
= 7.05%
2021 = (3965 / 57887 * 100)
= 6.84%
Operating profit
margin
Operating Profit / Sales *
100
3836 / 108324 * 100 =
3.54
2020 = (1892 / 58091 * 100)
= 3.26 %
2021 = (2229 / 57887 * 100)
= 3.85 %
Net Profit margin Net Profit / Sales * 100 2422 / 108324 * 100 =
2.24
Return on assets
(ROA)
Net income / Total Assets 2422 / 51774 = 4.68
Return on equity
(ROE)
Net Income /
Shareholder’s Equity
2422 / 18801 = .13 2020 = (973 / 13369 * 100) =
7.28 %
2021 = (6147 / 12325 * 100)
= 49.87 %

Equity valuation/
analysis:
Price to Earnings
ratio (P/E)
Share price / Earnings per
share
120.41 / 5.84 = 20.62 2020 = (289.43 / 7.60) =
38.08 times
2021 = (224.80 / 7.56) =
29.74 times
Price to cash flow Market Capitalization /
Cash flow from
operations
3926 / 2784 = 1.41
Price to book Market Price per share /
book value per share
120.41 / 80.42 = 1.50
Interpretation:
According to the above computed ratios, it can be observed that the average inventory is
indicating that the turnover of inventory days is 46 days for Walmart and in case of Tesco it is 97
days that is double the days of Walmart. Working capital of the enterprise indicates that the
business liquidity point which is indicating that firm is able to pay capacity of covering short
term obligation. Current ratio of Walmart explains that the current ratio is recorded as 1.17
which is more than the current obligations of business. This recommends that the firm has
various sources in covering its current liabilities. Beside this, Tesco is having liquidity ratio
closer that recommends the enterprise is able to cover its current liabilities but it could prove to
be more complex and challenging for the organisation if its short term liabilities would have
taken a rise.
It can be interpreted by above computed Current ratio for Tesco company that with every
passing year current assets have declined which has resulted in diminishing ratio as well. Cash
ratio is being observed to fluctuate i.e. it increased to a lower level from year 2017 to 2018, then
it recorded a decline in year 2019, a rise was noticed in year 2020 and in the last year recorded
the Tesco company has resulted a decline. When compared with Walmart company it is being
observed that liquidity ratio is highest in year 2021 for the criteria of current ratio recording a
result of 0.97, even in case of quick ratio it has been observed that it has been highest in year

2021 which indicates and depicts that the company is working on managing and improving the
working life cycle of company and business in long run.
Solvency ratio further indicate that the source of investment being used by the
organisation would help to finance the operations of business. Walmart’s debt equity ratio is
recorded to be 0.02 which depicts that the firm is utilizing more of equity when comparison is
done with debt. Whereas in context to Tesco, the firm is utilising one-half of its finance in form
of lability and many shares in form of equity.
Profitability ratio of the organization explains the part of revenue being attained by the firm from
its profit of business enterprise. Tesco is earning a profit of 5.33% from the annual gross sales of
the business enterprise. Besides this, Walmart is able to generate a overall profit margin of 2.57
from the yearly gross sales of the firm. Earning before interest and tax and net sales explains,
quantity of earning of enterprise that is produced by organisation in relation to shareholders. The
shareholders can be explained as the proprietor of the business who are investing their money in
context to find actualized revenue from the sum of money which is being financed by the
stakeholders in an organization. The returns which are being generated and attained by the
investor of Tesco has earned beyond the shareholders of Walmart company.
2. Assess Balanced scorecard and develop projected balanced scorecard of business as a system
of Strategic management.
Balanced scorecard is a necessary as well as essential primary technique which is planned
by Kaplan and Norton for assessing action. The focused scorecard and its four view point helps
in carrying out contribution towards the critical execution and preparation of board of
management. The management or business operates the strategy of Balanced scorecard for
measuring effectiveness, ability and carrying out of every strategies and selecting the
aggregation test. The balanced scorecard would be helpful in driving financial and non-financial
based outcome which show, display and examines the fundamental performances (Aigbedo,
2021).
The balanced scorecard shows a vital and important role while preparing basic
development plan and execution of the board. It is often useful and is the primary ten devices of
management which are helpful by various associations for measuring the action of global
committee. The model of Kaplan and Norton’s balanced scorecard was formulated in the mid

1990s would be helpful for businesses in estimation of business results with the help of non-
monetary and monetary data (Ali, Yassin and AbuRaya, 2020).
The balanced scorecard is a integrated concept for investigation of carrying out of
enterprise approaches and in what ways alterations can be made in areas for example monetary
objectives and goals, applicable learning abilities. Tesco innovator can influence the Balanced
scorecard instrument for building system benefit by improved having an perceptive about the
association and linkage among monetary assets, customer tendencies, internal processes and
committee reports in case of Tesco's common methodology.
In relation to, Robert S. Kaplan and David P. Norton, 85% of leading teams which would
be spending fewer time speaking about method and about 50% would be declaring that they are
spending less, little or no effort in case of technical conversations (Bavarsad, Rahimi and
Saedare Kermani, 2019).
The adjusted scorecards are useful for Tesco to interpret, measure and communicate its
technical terms. Several question are being recorded by Tesco’s balanced scorecard assessment
in rising marketplace are:
The balanced scorecard give more emphasise on “business alignment functions and
action through the technology and vision of the enterprise, which would help in communicating
externally and internally and screening the company’s execution strategies against its key goals”.
 Companies must choose basic measures for each of such opinions.
 Instead of consuming individual events, why not make use of a comprehensive scorecard
which would be including certain events.
 Kaplan and Norton envisioned a system from a view of four perspectives- customer,
currency, learning, internal and development.
 No single measurement would be able to provide a broader picture of an association’s
well-being.
Benefits of Balanced scorecard:
 It is useful for estimation of non-monetary and monetary sources of data, information
and outputs.
 It helps in making the essential preparation better.
 BSC is very efficient and effective in assessment execution.
 A decent scorecard is necessary for a company in better alignment of its hierarchy.

 It helps in rendering a powerful structure for developing communication systems.
 It is also useful in differentiating between various issue focuses/defects where
developments are expected to be achieved in improving the results as well as
outcomes.
The 4 factor of Kaplan and Norton’s balanced scorecard would be providing a clearer as
well as broader view or image of what is needed to be promptly reasoned, where and in what
manner companies must choose execution. Such perspectives and points can be made transparent
and clear on individual basis.
The financial perspectives of Balanced scorecard
 Investment capital
 Company’s turnover
 Fixed cost, variable cost and other costs
 Working capital of business and organisation
 Market share
 Gross and net profit
 Profit and loss margin
 Yearly revenue
Customer perspective – Parameters being taken by the organisations are:
 Providing customer services
 offering of product and services
Internal business perspectives – The concentration areas are:
 Innovation process
 Operation management process
 Regulatory and environmental procedure
 Consumer relation procedure
Learning and development position – Breaking down into leading element
 The organisational capital
 The human capital
 The information capital

The advantage of Tesco’s Balanced scorecard method is rising in marketplaces. Such that
it would be providing top administrator and innovator with a method such that they can adopt it
to set up a broad tool instead of just enhancing one portion of the enterprise. The scorecard
would allow in charging for examining company against varied point of view.
Besides this, respective person let down in the companies are essentially assessed by non-
financial measuring, such that the scorecard method renders a method for remembering the
strengths in generic processes and informing them in what ways they shall do efforts for
increasing in general the technique and Tesco’s outcomes (Gambo, Bello and Rimamshung,
2018).
For better discussing a decent scorecard and how it would work, a simple example of
Walmart is being taken into account as a productive company which has been running for a
longer time period. Walmart stores Inc. is perhaps one of the most visible as well as best
individual distributor existing on the globe. What form it even much more than obvious and
efficient that it is affecting in infinite debates, considering a evidence of claims regarding it,
media outrages over portions of plan of action, governing groups viewing aspects of its plan of
action and strategies on various discussions.

The unit came into existence below unusual situations in year 1945 when both relative (Sam
Walton and sibling) joined hands and established the franchise Ben Franklin’s Classifieds, and
the group then instantly became favourite and observable as well. Its supports further production
about the company’s capability and business process.
The company is having many 4150 retailing business office globally and is a leading distributor
in Canada, Mexico and the United Kingdom as well (Ghosh and Ansari, 2018).
It is also in the effective medicinal enterprise, tire and courier business of lubricator, photo
processing business as well. The organizers behind the company, till date the three systematic
objectives of the business work, such as: “excellent assistance given to purchaser, regard for the
respective person operating in company and their customer, pursuant follower of quality as
well”. Its management of business tools is for selling the top-grade goods and brands at the lower
price. It is this method which, with minimum name of brand and undertaking expense is having
wide firms to invariant assessment and assertion as it leveraging measurements for understanding
controversial processes.
3. Advantages and issues in following merged reporting which is founded on company.
The composed reveal is a consolidated agreement of the administrating system, possibilities
and execution of a factor is connected with the external climatic conditions, which prompts the
development of measures for non-monetary and monetary values over a period of time span.
Corporate disclosure is dangerous towards the compelling functioning of a marketable
economy which would enable financial backers and investors for investigating in what ways a
business must be carrying out its performance in every view, demonstrating its amount and
exercising oversights. For businesses which is private is to be more prospering, our business
firm's framework must be basically as durable and powerful as the monetary sector of the
business itself. Most significantly, it would tend to adopt the planned assignments which are
being capable to understand the actual abilities and capableness of such assignments.
(Kengkathran, 2018).
Besides this, the business information are being fastened towards yearly based assignments
for introducing as well as revealing company of recording towards the generic population. The
business statements are basically developed on capitalist, banks and contributory web as well.
Whereas the main concentration of organisation details on fiscal information, it somehow
undertakes integrated result.

 Human capital: Individual’s capabilities, ability, education of the capital of human and
skills as well.
 Intellectual capital: It considers software system, intellectual property and knowledge as
well.
 Natural capital: Renewable as well as Non-renewable are incorporating the
environmental sources.
 Fiscal capital: This is a mixture which organisation use the debt and equity or generates
income from operational activities of a business.
 Social and relation: It is a linkage of business with stakeholders, provider and other
gathering as well.
Advantages of incorporated reporting
 It assist in knowing the strategies as well as goals of company for attaining the aims and
objectives of business enterprise.
 It helps in connecting between the non-financial performance and business growth of the
company.
 It boost the culture which is incorporated by manner of believing.
 By analysing the action and result of the business enterprise it would help in deciding the
measure of enterprise.
 It is helpful in processing linkage between the non-financial performance and business
growth of the business enterprise.
 It is useful in preparing business strategies and policies and ways in which resources
would be allocated.
 It assists in forming better in the enterprise by making decision approach and have a
improved statement in case of organisation.
Problem and issues faced by the business
There are different levels of artificial hypothesis: presenting detail in an associated
surroundings, articulating how strategies are being understood and illustrated in case of
impacting the working environment, differentiating activity which are essential in relation to
creation, collecting solid data, inferred and investigate experiences, reflecting the interconnection
of tools and techniques aims. Motivation, Execution and Danger; and differentiating in what
ways empowerment coordinated thinking could be promoted and independent orientation as