Sainsbury's: Analysis of International Finance and Performance

This report provides an overview of international finance, examining its impact on multinational enterprises (MNEs) with a specific focus on Sainsbury's. It begins by exploring the international financial environment, including risk management, macroeconomic events, and their effect on financial performance. The report then delves into key elements crucial for MNEs, such as dividend policy, the foreign exchange market, the global financial system, and international markets, including Eurocurrency and Eurobond markets. The balance of payments is also analyzed, providing a framework for understanding international transactions. Furthermore, the report identifies various sources of finance available to businesses, including bank loans, venture capital, angel investors, international capital markets, and commercial paper, highlighting how Sainsbury's can leverage these sources for business expansion and enhanced financial performance. The report references several academic sources to support its findings, providing a comprehensive analysis of international finance principles within the context of a major UK retailer.

International
finance

INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
International financial environment:............................................................................................3
TASK 2............................................................................................................................................4
Key elements for MNE’s:............................................................................................................4
TASK 3............................................................................................................................................7
Financial performance analysis:..................................................................................................7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Sainsbury's, a subsidiary of J Sainsbury plc, is the 2nd biggest retail chain in the United
Kingdom, with a 16.0 percent of the market. Sainsbury's was founded in 1869 by John James
Sainsbury with a store in Drury Lane, London, and by 1922 had grown to become the largest
grocery chain in the world. Tesco surpassed Sainsbury's as the industry leader in 1995, and Asda
surpassed Sainsbury's as the second biggest in 2003, relegating Sainsbury's to third position for
the majority of the following decade until January 2014, when Sainsbury's reclaimed second
place. Sainsbury's was demoted to 3rd spot in April 2019, while awaiting the merger with Asda,
as their company came in second. J Sainsbury plc's annual retail revenue in the United Kingdom
(with the exception of VAT and fuel) were nearly 28.4 billion British pounds in 2019/20. The
data was gathered from the company's balance sheet which spans many years. Facing Sainsbury's
Bank's lower earnings, we are satisfied with the latest analyst forecast for 2018/19 UPBT of
£629 million. This report includes topics which is international financial environment. Apart
from this it includes topic which are key elements for MNE’s international, financial
performance analysis which helps for better performance which helps for higher profitability for
businesses (Madura, 2020). This report is about international finance. The company which is
includes for this report is Sainsbury. It is larger supermarket chain for UK. It founded for 1869,
headquarter situated for UK.
TASK 1
International financial environment:
Recent developments impact on financial performance
(1) Development in risk management process: Emerging challenges and prospects is
acceptance test this year as part of our risk assessment process. Although change position are
frequently addressed and listed as risks “to watch” as part of our lower part risk management
process, Internal Audit and Risk facilitated a supplemental analysis this year. The analysis
looked at a variety of possibilities to see if there were any new threats or opportunities that could
affect our market, as well as their future timeline and level of similarity. The Corporate Board
and Audit Committee are informed of the findings. This assessment will be down the possible in
the future and will be aligned with strategic strategy.
Impact on financial performance: Due to changes in
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(2) The international financial situation represents the conditions of employment in the global
economic or financial markets. It can be influenced by a larger factor, such as the suitability of a
single country loan. Governments, corporations, and other investors around the world play a role
in purchasing foreign debt as profit opportunities arise. Reducing a country's debt by the rating
agency can damage that country's debt and suggest that the error may be imminent. These
situations have the potential to create sales, in which case there are more sellers than buyers of
risky debt in the market.
Impact on financial performance: The international financial situation represents the conditions
of employment in the global economic or financial markets. It can be influenced by a larger
factor, such as the suitability of a single country loan. Governments, corporations, and other
investors around the world play a role in purchasing foreign debt as profit opportunities arise.
Reducing a country's debt by the rating agency can damage that country's debt and suggest that
the error may be imminent. These situations have the potential to create sales, in which case
there are more sellers than buyers of risky debt in the market (Akan and Tevfik, 2020)
Macroeconomic events occur that have a negative impact on the global financial
environment. Whatever the case, in one country or another, the economic situation of one
country has the potential to affect global markets. This could be because some countries are
lending to a country where an event, good or bad, has occurred or is likely to occur. The impact
of a major global economy or emerging market has the potential to create financial turmoil,
which can affect borrowing costs, cross-border deals, and profit opportunities..
It is not uncommon for the international financial system surrounding the global stock
markets to be the result of one country responding to another. For all the different time periods
around the world, trading times occur at different times of the day around the world. When the
stock market in one country is under intense trading pressure during the session, this feeling has
the potential to affect the foreign exchange market when that market begins to trade. This can be
termed a market infection in which the impact of a single market behaviour has a negative
impact on global employment (Lee and Yoo, 2019).
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TASK 2
Key elements for MNE’s:
Dividend policy: The Dividend Policy is a monetary judgement that specifies the
percentage of a company's profits that will be distributed to shareholders. A company determines
if a part of the income can be paid to owners as dividends or reinvested in the company. The
dividend strategy specifies how the dividend amount is determined and where it is paid. If a
company has different share levels, it also clarifies which receives what. Dividends distributed to
investors by J Sainsbury from their taxable earnings are seen here, mostly on an intermediate and
yearly basis. Where appropriate, the list all of LON:latest SBRY's dividend declarations and
earnings growth. The next dividend from Sainsbury (J) plc is scheduled to just go ex in one
month and be paid in three months. Sainsbury (J) plc's latest dividend was 7.3p, which went ex 5
months earlier and was paid 4 months ago. The dividend cover is estimated 2.0, and there is
usually one rate of return per year (with the exception of specials).
Foreign Exchange Market: A foreign exchange market is a market in which currency
denominated in a single currency is bought and sold with a currency mixed with another
currency. It is in the over the market, because there is no single physical or electronic market
place or formal exchange with a trading purification process where traders meet and share funds.
It expands globally, with moving prices and funds trading elsewhere every hour of every
business day. Big world trade starts every morning in Sydney and Tokyo, and ends in San
Francisco and Los-Angeles (Henning, 2019).
The foreign exchange market consists of two categories: the domestic banking market or
the hostel market, and the retail or customer market. Participants in wholesale markets are
commercial banks, investment banks, companies and major banks, and retailers who sell their
accounts. The grocery store, on the other hand, has travelers, and visitors exchange currency for
currency notes or travelers' checks.
Currency Conversion
The foreign exchange market assumes that the currencies of various countries are freely
converted into other currencies. But this assumption is not true, as many countries reduce
citizens and non-citizens to convert local currency into foreign currency, making international
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trade more difficult. Many overseas business firms use “opposing trade” practices to overcome
the problem arising from currency exchange restrictions.
Global Financial System
Any country needs to have its own financial system and authority to maintain order in the
system, and to facilitate trade and investment. India has its own monetary policy, and the
Reserve Bank of India (RBI) manages it. Just like the world, you need a financial system to
promote trade and investment in all countries. The international financial system has been in
existence since 1944. The International Monetary Fund (IMF) and the World Bank have been
maintaining order in the global financial system and in the development of the global economy
(Narayan and Phan, 2019).
International Markets
The international financial market was born in the mid-fifties and has grown slowly in
size and breadth. The international financial markets have overseas banks, the Eurocurrency
market, the Eurobond market, and overseas stock markets. Overseas banks play an important role
in supporting international trade by acting as commercial banks and investment banks. Many
overseas banks are formed through inter-bank relations. But now a few days the big banks have
done their job internationally with their overseas operations to improve their international
competitiveness. The Eurocurrency market was originally called the Eurodollar market, which
helps to invest more efficiently and effectively, and helps to increase short-term bank loans to
finance business needs, including imports and exports. The Eurobond market helps MNCs
increase long-term debt by issuing bonds. Global bonds are classified as foreign bonds or
eurobonds. External bond is issued by a foreign borrower in the country where the bond is
lodged. On the other hand Eurobonds are traded in countries other than the country represented
by the currency they are identifying (Tyson, 2019).
Payment Balance
International trade and other international activities cause the flow of funds between
countries. All transactions relating to the movement of goods, services and funds at national
borders are recorded in the balance of payments for the countries concerned.
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Payment balancing (BoPs) is a structured statement that summarizes a systematic,
timeframe, transaction in the global economy. Put simply, the balance of payments in a country
is a systematic record of all transactions between 'citizens' of the country and the world. Payment
balance includes both direct and indirect transactions. Displays split record:
All receipts for exports, services provided and money received by ‘residents’ as well
Payments made at the time for imported goods and services received from the capital are
transferred to ‘non-residents’ or ‘immigrants’.
Transactions therefore include the export and import (by individuals, firms and
corporations) of goods and services, income inflows, cash flows and gifts and one-way transfers
of payments. The sixth law that helps the BOP to understand is to "follow the flow of money".
The balance of the payments in the country is the sum of the Current Account, the Capital
Account, and the change in Official Reserves (Marsden and Whatmore, 2019).
For a Business there are various source of Finance which can be used by Sainsbury to
increase the business activities and performance that are as explained:
Bank Loan and financial institution – This is the main source which can be use by
company to arrange the funds at it provides money by charging the tax rates. Sainsbury that
wants to arrange the finance for growing business in international country can be use bank loan
in which it can apply for require loan and needs to mortgage the properly for security. Thus,
finance can be arrange.
Venture capital – This is not necessary for all entrepreneurs to collect the fund from
venture capital but who have requirement of small amount of fund can be use this source to
increase the productivity. This brings an equity position in the company by arranging the funds.
Sainsbury can be use venture capital as finance source in case of collecting small amount of
funds (Bakhadirov, Pashayev and Farooq, 2020).
Angel Investors – This is another kind of finance source which are mainly uses by small
companies when they have requirement of funds. This provides $25,000 to $100,000 amount of
fund to start up and growing the funds. Sainsbury can be use this source by collecting the fund
from international angel investor that can help to grow the business and increase the profitability.
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International capital market – A capital market is basically a system in which
organization, people, and government with an excess of funds transfer the amount and those
companies or people who have lack of funding. The capital market involves debt and equity that
can help to arrange the funds by providing the securities. If Sainsbury wants to arrange the
international finance then it can be use capital market in which it has to issue the debt and equity
shares to public. This can help to arrange funds and running the business continuously.
Commercial Paper – This can be explained as short term debt instrument which issued
by organization to raise the fund for a period of time within a year. These are typically issued by
large banks or corporations for covering short term receivables and meeting the short term
financial obligations. Sainsbury has also this option which can be used to arrange or collecting
the funds by issuing the commercial paper. This can help to increase the business performance
(Lvova, Voronova and Ivanov, 2019).
From the above, Bank loan and capital market can be used by Sainsbury that are
appropriate source to arrange the funds and managing the all activities at the workplace. By
issuing shares or debentures it could arrange a large amount of funds which increase the
profitability.
TASK 3
Financial performance analysis:
Financial analysis involves the use of financial statements. A financial statement is a set
of data organized according to sound and consistent accounting procedures. Its purpose is to
convey an understanding of some of the business's finances.
It may reflect the status of a period as in the case of a Spreadsheet Sheet, or it may
indicate a series of activities in a particular period, as in the case of a Benefit Statement.
Therefore, the term ‘financial statements’ usually means two basic statements: the Balance Sheet
and the Profit Statement.
The Balance Sheet indicates the financial status (status) of the firm over a period of time.
Provides a summary that can be considered as a still image. "Balance Sheet is a summary of the
firm's financial position on a given date showing the total assets = Total liabilities + Owner
equity."
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The Profit Statement (referred to in India as a statement of profit and loss) reflects the
company's performance over a period of time. "A statement of income is a summary of the
income and expenses of a company's business over a period of time, ending in revenue or loss of
time."
However, the financial statements do not provide all the information related to a
company's financial performance, but do provide some very useful information, highlighting two
key factors for profit and financial viability (Amin, 2019).
Financial Performance Analysis
Financial performance analysis involves the analysis and interpretation of financial
statements in such a way as to maximize the profitability and financial viability of the entity. The
system of financial analysts provides important methods of financial analysis. In other words,
financial performance is the completely evaluation of organization's overall standing in assets,
liabilities, equity, expenses, revenue and profitability. Sainsbury is the large size organization in
which financial management analysis the all statement and balance sheet to evaluate the business
performance and bringing the changes accordingly. This can help to increase the productivity
and profitability by arranging the assets and liabilities of chosen organization (Andreychik and
Martinez, 2019).
Areas of Financial Performance Analysis:
Financial analysts often evaluate the company's production and performance (overall
business performance), profitability, asset performance, operating performance, fixed asset
performance, fund performance and public performance. Analysis of various financial estimates
includes
1. Performance analysis
2. Financial structure analysis
3. Job Analysis
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4. Benefit Analysis
Significance of Financial Performance Measurement:
The interests of the various related parties are affected by the financial performance of
the company. The type of analysis varies depending on the specific interest of the group
involved:
Commercial lenders: are interested in corporate finance sales (corporate financial
valuation)
Bond holders: are interested in the company's cash flow (company structure inspections,
capital resources and expenditures, profit margins, and future profit estimates)
Investors: are interested in the current and future earnings and stability of the earnings
(estimates of corporate profits and financial position)
Management: is interested in internal control, better financial position and better
performance (assessment of current financial position, assessment of opportunities in relation to
the current position, return on investment provided by various company assets etc.)
1. Water Measurements
Water rates measure a company's ability to pay off its short-term liabilities as appropriate, using
the company's current or immediate assets. Water rates include current rate, acceleration rate,
and operating cost.
2. Solvency Ratios
Also called financial growth rates, solvency rates compare a company's debt levels with its
assets, equity, and cash flows, to assess whether a company can continue to move long-term, by
paying off its long-term debt and interest on its debt. Examples of solvency ratios include: debt
equity ratios, debt ratios, and interest rate estimates.
3. Profit Estimates
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These estimates reflect how a company can generate profits in its operations. Profit margins,
asset returns, equity returns, reimbursement, and total cash equivalents are all examples of profit
estimates.
4. Efficiency Ratings
Also called performance measures, performance measurements assess how well a company uses
its assets and liabilities to generate sales and increase profits. Significant performance
measurements include: profit margin, revenue, and sales dates in the asset.
5. Integrating Estimates
Measurement rates measure a company's ability to make interest payments and other obligations
related to its liabilities. Examples include interest rate and credit service rating.
6. Market Expectations
These ratios are most commonly used in basic analysis. It includes dividend production, P / E
rate, per share per share (EPS), and dividend payment rate. Investors use these metrics to predict
future gains and performance (Nazlioglu, Gupta and Bouri, 2020).
7. Liquidity ratio
This is the kind of financial ratio which used to identify the organization's ability for the
purpose of paying its short term debt obligation. The type of liquidity ratio is current ratio, cash
ratio, and quick ratio which are identified by Sainsbury by analyzing the financial statement of
2018/19 or 2019/20 that can help to increase the business performance.
Gross profit ratio: Gross profit/net sales*100
Particulars 2020 2019 2018
Gross profit 2.55 2.42 2.33
Net sales 5.18 4.86 4.66
Calculation 2.55/5.18*100 2.42/4.86*100 2.33/4.66*100
Gross profit ratio 49.22% 49.79% 50%
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Net profit ratio: Net profit/Net sales*100
Particulars 2020 2019 2018
Net profit 0.68 0.70 0.82
Net sales 5.18 4.86 4.66
Calculation 0.68/5.18*100 0.70/4.86*100 0.82/4.66*100
Net profit ratio 13.12% 14.40% 17.60%
Return on equity: Net income / shareholder’s equity
Particulars 2020 2019 2018
Net Income 0.68 0.70 0.82
Shareholder’s equity 2.62 2.49 2.28
Calculation 0.68/2.62*100 0.70/2.49*100 0.82/2.28*100
Return on equity ratio 25.95% 28.11% 35.96%
Current ratio: Current assets/current liabilities
Particulars 2020 2019 2018
Current assets 1.40 1.24 1.30
Current liabilities 2.22 2.84 2.68
Calculation 1.40/2.22 1.24/2.84 1.30/2.68
Current ratio 0.63 times 0.43 times 0.48 times
Quick ratio: Quick assets/current liabilities
Particulars 2020 2019 2018
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Quick assets 1.40 1.24 1.30
Current liabilities 2.22 2.84 2.68
Calculation 1.40/2.22 1.24/2.84 1.30/2.68
Quick ratio 0.63 times 0.43 times 0.48 times
Fixed assets turnover ratio: Net sales / Average net fixed assets
Particulars 2020 2019 2018
Net sales 5.18 4.86 4.66
Average net fixed assets 0.50 0.33 0.34
Calculation 5.18/0.50 4.86/0.33 4.66/0.34
Fixed assets turnover ratio 10.36 14.72 13.71
Total asset turnover ratio: Net sales / Average total assets
Particulars 2020 2019 2018
Net sales 5.18 4.86 4.66
Average total assets 4.45 4.04 4.12
Calculation 5.18/4.45 4.86/4.04 4.66/4.12
ratio 1.16 1.20 1.13
CONCLUSION
From the above report it has been concluded that international financial management is
about managing financial performance. It includes various elements which are IMF, balance of
payment, stock market which helps for better performance which helps for higher profitability
for businesses. Finance is necessary element for businesses which works for arranging funds &
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managing it for running business activities. Financial management is about planning, organising,
analysing, managing, budgeting financial activities for businesses. International finance is about
managing financial activities for those businesses which managing their business for
international level. Finance is necessary element for businesses, every business department needs
for funds which is managing by finance department. International finance is the application of
new rules and regulations that are important to apply in a business and it affects the business.
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REFERENCES
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Gruyter.
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finance using a maqasid framework: A preliminary study. International Journal of
Islamic Economics and Finance (IJIEF). 2(1). pp.47-72.
Andreychik, M. R. and Martinez, V., 2019. Flipped vs. traditional: An analysis of teaching
techniques in finance and psychology. Teaching & Learning Inquiry. 7(2). pp.154-167.
Bakhadirov, M., Pashayev, Z. and Farooq, O., 2020. Effect of location on access to finance:
international evidence on the moderating role of employee training. Review of
Behavioral Finance.
Henning, C. R., 2019. Regime complexity and the institutions of crisis and development
finance. Development and Change. 50(1). pp.24-45.
Lee, S. I. and Yoo, S. J., 2019. Multimodal deep learning for finance: integrating and forecasting
international stock markets. The Journal of Supercomputing, pp.1-19.
Lvova, N. A., Voronova, N. S. and Ivanov, V. V., 2019, January. The relevance of the
sustainable finance paradigm in the EAEU financial market's strategy development.
In Proceedings of the 33rd International Business Information Management
Association Conference, IBIMA 2019: Education Excellence and Innovation
Management through Vision 2020(pp. 2933-2941). IBIMA.
Madura, J., 2020. International financial management. Cengage Learning.
Marsden, T. K. and Whatmore, S., 2019. 4. Finance Capital and Food System Restructuring:
National Incorporation of Global Dynamics. In The global restructuring of agro-food
systems (pp. 107-128). Cornell University Press.
Narayan, P. K. and Phan, D. H. B., 2019. A survey of Islamic banking and finance literature:
Issues, challenges and future directions. Pacific-Basin Finance Journal. 53. pp.484-496.
Nazlioglu, S., Gupta, R. and Bouri, E., 2020. Movements in international bond markets: The role
of oil prices. International Review of Economics & Finance. 68. pp.47-58.
Tyson, J. E., 2019. International financial centres and development finance. ODI Report.
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