Strategic Financial Management Report: Benedict Co and Tesco Analysis

This report provides a strategic financial management analysis of Benedict Co, a company operating in the retail industry, examining its financial performance, stakeholder relationships, and corporate social responsibility (CSR). The report begins with an introduction to strategic financial management and its importance, followed by a company overview, stakeholder analysis, and a review of the company's corporate social responsibilities, including environmental and social impact. The analysis includes an evaluation of Tesco plc, a competitor in the retail industry. Task 2 of the report focuses on the purpose and relevance of financial ratios, calculating and interpreting various ratios such as current ratio, quick ratio, inventory turnover, and return on assets to assess Benedict Co's financial health. The report compares the company's performance to industry benchmarks and provides a critical evaluation of its financial standing, concluding with a summary of the importance and scope of strategic financial management.

Running Head: Strategic Financial Management
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Project Report: Strategic Financial Management

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Contents
Introduction.......................................................................................................................3
Task 1................................................................................................................................3
Company overview.......................................................................................................3
Stakeholder...................................................................................................................3
Corporate social responsibilities...................................................................................4
Task 2................................................................................................................................8
Purpose and relevance of ratios....................................................................................8
Ratio analysis................................................................................................................9
Performance of Benedict Co.......................................................................................10
Critical evaluation.......................................................................................................10
Conclusion......................................................................................................................11
References.......................................................................................................................13
Appendix.........................................................................................................................15

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Introduction:
Strategic financial management is a financial study which considers the strategic goal
of an organization and helps the organization to meet the objectives and the goal in terms of
financial context. Strategic financial management include those financial aspects which
affects the overall financial process and management of a business (Williams et al, 2005). It
is important for a business to manage and plan the strategies for better financial management.
It is a process which outlines and defines the strategies and directions to meet the overall
objectives and financial performance of the company. It is a good process to make better
decisions.
In the report, the process of strategic financial management has been done on
Benedict Co to measure the overall performance of the company as well as the comparison
study on the company along with the competitors of the company in the same industry.
Corporate governance report and environmental and social review of the report has also been
studied to measure the performance of the company. The report mainly concludes about the
importance and scope of strategic financial management.
Task 1:
Company overview:
Tesco plc is a British company which is operating its business in retail industry. The
company mainly operates its business in general merchandise and grocery. It has diversified
its business at international level to improve the overall performance of the business. The
main products of the business are supermarket, hypermarket, convenience store, superstore
etc. Tesco plc has been founded in 1919 and currently, it is operating its business through
6553 stores (Home, 2018). The stakeholder position and CSR position of the business has
been evaluated in this report.
Stakeholder:
Stakeholders are the party which has an interest in the business and could be affected
by the business’s action, policies and the objectives. The primary stakeholders of a business
are investors, customers, employees and suppliers. Stakeholders could be internal parties of
the business as well as external parties of the business. Internal stakeholders are those people
whose profits and interest in the business comes along with a direct relationship such as
investment, ownership or employment (Weygandt et al, 2009).

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On the other hand, external stakeholders are those people who do not have a direct
relationship with the business but the parties are affected in few ways through the outcomes
and actions of the business. Creditors, suppliers, public groups etc are the main stakeholder of
the business. Stakeholders are quite crucial for the business. Ignorance of stakeholders could
affect the overall business of the company. Proper management of the stakeholders in the
business would actively promote the business and improve the overall performance of the
business (Guedes et al, 2018).
The main problem in an organization which arises due to the stakeholders is their
various self interests which might not be aligned with the stakeholders of the business. In
other words, a conflict could be there. The main goal of the business is to manage a good
relationship with the stakeholders and maximize the profitability of the business. The most
efficient companies successfully administer the expectations and the self interest of their
stakeholders in the business.
In case of Tesco plc, it has been found that the main stakeholders of the business are
as follows:
1. Customers: Customers are the external stakeholders of the business which are not
within the limits of the business but the actions of the business affect the customers.
2. Employees: Employees are the internal stakeholders of the business which are
within the limits of the business and the actions of the business directly affect the
employees of the business (Annual report, 2016).
3. Suppliers: Suppliers are the external stakeholders of the business which are not
within the limits of the business but the actions of the business affect the supplier’s
interest.
Corporate social responsibilities:
Corporate governance is a set of practices, rules and processes through that a business
is controlled and directed by the business. Essentially, corporate governance involves the
interest of stakeholders such as shareholders, employees, customers, suppliers, financial
institutes, government and society of the company. On the other hand, environmental and
social review is the process which is done by each organization to help the society to become
better.

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It is a social responsibility of each organization to work for the betterment of the
society as the business is the part of the society. For this, company conducts various policies
and events which would help the society to become better as well as the environment and the
surrounding of the business could also be better (Davies and Crawford, 2011). In case of
Tesco plc, it has been measured that the corporate governance committee has been managed
by the business in such a way that clear direction could be done on the various decisions
related to the business. The committee is responsible for any activity of the business. The
governance framework of Tesco offers clear activities and parameters of responsibilities and
delegation from the board. Following is the corporate governance structure of the business:
Figure 1: Tesco plc

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(Annual report, 2016)
Further, the environmental and social review of the business explains that the main
motto of the business is to focus on “every little help makes a big difference”. The main
effect of the environmental and social review and corporate governance has been done on the
stakeholders of the company (Environmental and social review, 2018).
Corporate social responsibilities are a regulating business model that assists a business
to be socially accountable for its stakeholder, publically and itself. By practicing the
corporate social responsibility, companies could be conscious about the kind of impact which
is hold by the company on various social, economical, environmental aspects of the business
(Damodaran, 2011). To engage in the CSR explains that a business could operate its business
in various ways which enhances the environment and the societal effect of the business
positively.
Corporate social responsibilities are quite crucial for a business to manage and
improve the overall performance of the business. In case of Tesco plc, it has been found that
the main impact has been done on the stakeholders of the company:
Employees:
The changes and the new implementation in the environmental and social review of
the business have improved the level of the employees. Through the given draft of the
company in annual report (2016), it has been found that the gender gap of the company has
been reduced.
Figure 2: Employee Impact
(Environmental and social review, 2018)
The table explains that the ratio of male and female workers of the company at all the
levels have been improved from last year. The company respects the human rights and offer
the same support system to all the employees so that the issues of the business could be
overcome and better efficiency could be given by the employees of the company. The
business focuses on the health issues of the employees and special services and leaves are

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offered to them in case of health issues. In current year, company has raised Pound 7.89
million from last year in the employee health budget (Environmental and social review,
2018).
Further, the main operations of the business is related to the production business
which impacts a lot on the health of the issues and the chances of sudden accidents are also
higher. Due to which, the company has implemented various new policies and various safety
tools have also been set up by the business at the site so that no issues and risk could take
place regards to the accidents and the health of the employees.
Customers:
Further, the impact of the environmental and social review and corporate governance
of the business on the customers have improved the level of the employees. Through the
annual report (2016), it has been found that the main motto of the business is to focus on
“every little help makes a big difference”. The other values of the business explains that the
company tries harder for the customers to be satisfied and the company treats to the
customers in the same way that want to be treated.
The new policies of the company explain that the company has focused for the
customer to choose the healthier options and reduce the food waste which would help the
poor people to have food. The company respects the human rights and offer the various
policies and an event which not only helps the customers of the company as well as it helps
the business to support the society for the betterment. The business focuses on delivering the
nest services to its customers and always put them on the first. It focuses on the quality first
along with ensuring that the society and environment policies of the business does not affect
due to it.
Further, the main operations of the business is identifying the threats to the customer’s
health and for it, company has reduced the 4.6 billion calories and 1480 tonnes of sugar from
its soft drinks (Environmental and social review, 2018). The business has also started a
campaign in which the donated food by the customers is given to the people who are in need
which would help the business to improve the overall performance.
Through this case, it has been found that the overall level of the business has been
improved and it would help the business to improve the overall social and environmental
position in the business.

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Task 2:
In the given case, the data of the Benedict Company has been evaluated to identify the
financial performance of the company for the investors, suppliers, lenders and other
stakeholders of the company. The financial ratios of the business have been calculated and it
has been compared with the industry benchmark to identify the performance of the company.
Purpose and relevance of ratios:
Ratio analysis is ratio application which compares the similar variables of the
company along with the competitors of the company or from previous variables to compare
the financial performance of the business and evaluate the last conclusion of the report. It is a
systematic process which manipulates the financial figures of company’s financial statement
to produce the information for the investors, suppliers, lenders and other stakeholders of the
company (Davies and Crawford, 2011). The financial information and the arithmetic
information of the business are obtained in the final reports of a business.
In this report, current ratio, quick ratio, inventory turnover ratio, trade receivable
days, trade payable days, return on assets, return on equity etc has been evaluated to measure
the overall financial performance and position of the company. All of these ratios have been
calculated for the different purpose and the relevance of each of these ratios is also different.
Such as, current ratio and quick ratio have been calculated to measure the liquidity position
which is helpful for the suppliers to evaluate that whether the company would be able to pay
all the short term debt quickly or not (Bromwich and Bhimani, 2005).
Further for the potential customers and lenders of the company, inventory turnover
ratio, trade receivable days and trade payable days have been calculated which would help
them to identity the efficiency position of the company and total time period in which the
total cash would be converted (Brigham and Ehrhardt, 2013). In addition, to identify the
financial performance of the company in context with the investors, return on assets and
return on equity have been calculated which would help them to analyze that how much
return could be generated from the company.
These ratios are quite helpful for the company and its stakeholders to evaluate the
financial performance of the company and make a conclusion about the overall performance
of the company. These ratios would make easier for the stakeholders to make a better
decision about relations and investment into the company.

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Ratio analysis:
The ratio analysis study has been performed on the company and it has been
compared with the financial ratio of the last year of the company. The ratio analysis study of
the company is as follows:
Current ratio:
Current ratio evaluates the short term debt payment position of the company. It
recognizes that whether the company is able to pay all the current liabilities through the
current assets of the company (Bierman, 2010). According to the given case study, it has been
found that the liquid position of the company is 1.19 in current year which has been lowered
from last year by 0.06.
Quick ratio:
Further, quick ratio evaluates the short term debt payment position of the company. It
recognizes that whether the company is able to pay all the current liabilities through the
current assets which could be converted into cash at any time of the company. According to
the given case study, it has been found that the quick liquid position of the company is 0.70 in
current year which has been improved by 0.05 from last year.
Inventory turnover ratio:
Inventory turnover ratio evaluates that how efficiently the company could manage the
inventory against the COGS. It recognizes that how many times a business sell its total
inventory in dollars in a particular time period (Brewer, Garrison and Noreen, 2005).
According to the given case study, it has been found that the inventory turnover ratio of the
company is 118.63 days in current year which has been improved from 65.45 from last year.
Trade debtor’s days:
Trade debtor’s ratio evaluates that how efficiently the company could manage the
debtors against the COGS. It recognizes that how many times a business receives the amount
from debtors in a particular time period. According to the given case study, it has been found
that the debtor’s turnover ratio of the company is 90.06 days in current year which has been
improved from 55.70 from last year.
Trade payable days:

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Trade payable’s ratio evaluates that how efficiently the company could manage the
creditors against the sales of the company (Brealey, Myers and Marcus, 2007). It recognizes
that how many times a business pays the amount to its creditors in a particular time period.
According to the given case study, it has been found that the creditor’s turnover ratio of the
company is 155.13 days in current year which has been improved from 108.24 days from last
year.
Return on assets:
Return on assets ration evaluates the total net profit of a business against the total
assets of the business. It recognizes that how much profit is generated by the company against
the total available resources of the company. The given case and the calculations express that
the return on assets of the business has been reduced from 0.18 to 0.13 in current year.
Return on equity:
Return on equity ratio evaluates the total net profit of a business against the total
equity of the business. It recognizes that how much profit is generated by the company
against the total equity of the company. The given case and the calculations express that the
return on assets of the business has been reduced from 0.27 to 0.24 in current year.
Performance of Benedict Co:
The financial performance of the business has been evaluated and it has been
recognized that few changes are required to be done by the business to improve the financial
performance and the position of the business. It has been found that the profitability position
of the company is reducing continuously which would affect the investor’s level and the
overall performance of the business.
It has also been found that the few strategies have been changed by the company from
last year in current year. In the year of 20X1, it has been evaluated that the net profit of the
company has been lowered even after improving the sales. These changes have occurred due
to higher operating expenses and thus it is suggested to the business to reduce the level of the
extra expenses (Arnold, 2013). However, the case explains that the dividend paid amount was
higher from last year which has helped the company to improve the stock price as well as the
investment level of the company.
Critical evaluation:

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On the basis of the evaluation on financial performance of Benedict co, it has been
measured that the financial performance benchmark of the industry is quite different from the
Benedict co. The current ratio of Benedict is 1.19 whereas the competitor’s ratio is 1.6 which
explains that it is necessity for the company to improve the level of the current assets so that
the liquidity position of the company could be improved and liquidity threat could be reduced
(Besley and Brigham, 2008). In addition, the quick ratio has also been evaluated and the same
difference has been found. Company should focus on the quick assets so that both the level
could be managed.
Further, the trade receivable days of the business have been compared and it has been
found that the level of business is higher which must be reduced by the company to reduce
the level of the required working capital. The trade payable days of the business has been
compared and it has been found that the level of business is higher than the competitors
which are a good sign for the company as company could run the business in lower price as
well. Lastly, the inventory position has been compared and it has been recognized that the
performance of the company is required to be changed through making few changes into its
efficiency level and the strategies.
These changes would help the business to not only improve the overall performance
of the business as well as the market position and the performance. These changes would
make it easier for the stakeholders of the business to make positive decision about the
business (Baker and Nofsinger, 2010). Further, it has also been found that the dividend
payout policies of the company are quite attractive. The company is following the relevant
dividend policy to pay the dividend to the shareholders of the company which not only
attracts the investors to invest into the company but as well as it would help the business to
improve the stock position in the market.
Conclusion:
Through this case of Tesco limited, it has been found that the overall level of the
business has been improved and it would help the business to improve the overall social and
environmental position in the business. The corporate governance, environmental and social
review and corporate social responsibility of the company are quite strong.
The overall position of the Benedict co and its competitors explain that it becomes
very important for the business to make few changes into the strategies and policies to

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improve the position for the investors, lenders, suppliers, customers etc of the company. After
these changes the trust of the investors, lenders, suppliers, customers and other stakeholders
of the business would be improved and it would help the business to maintain the
performance.