Financial Analysis of TESCO: Funding, Capital, and Institutions

This report provides a financial analysis of TESCO, a major UK supermarket company, examining its sources of funding and capital structure. It explores the company's use of banks, government grants, debt, and equity capital, along with retained earnings and the potential of crowdfunding. The report details the roles of different financial institutions within the financial system, including commercial banks, investment banks, hedge funds, mutual funds, and financial companies, and their impact on TESCO's financial strategies. The analysis includes an overview of TESCO's current financial position and discusses potential future funding sources. The conclusion emphasizes the importance of the capital market in the overall financial strategies of an organization and the need for managers to make appropriate decisions when choosing financing options. The report uses academic references to support the analysis.

Assessment 1: Written project

Table of Contents
INTRODUCTION.......................................................................................................................................2
Main Body...................................................................................................................................................2
Current source of fund for Company:......................................................................................................2
Capital Structure of Company.................................................................................................................3
Future Sources of fund:...........................................................................................................................3
Role of different financial institutions within financial system for selected company.............................4
CONCLUSION...........................................................................................................................................6
REFRENCES..............................................................................................................................................7

INTRODUCTION
In organization, funds are required to undertake various business functions such as
marketing, advertisement, research and more. Banks are consider as more authentic and reliable
source to borrow funds but there are several other sources such as Debt capital, equity, crowd
funding and so on (Doyle, 2018). In addition, capital market is emerging rapidly that is proving
opportunities to companies to get necessary amount for expanding operations at minimum
possible price. The current report is about TESCO that is a renowned supermarkets company of
UK. It deals in groceries and general merchandise across the globe in nearly 13 countries. The
current report discussed about financial position along with various sources of funds used by
company. In addition, it also discussed the role of hedge funds, mutual funds and investment
banks. Moreover, the following report render a detailed prospective about financial position and
sources to get required funds to accomplish predefined objectives.
Main Body
Current source of fund for Company:
It is analysed that funds are essential to perform necessary business functions. It helps to
maintain consistency and avail the opportunities of future growth. There are certain sources used
by TESCO are given as under:
Banks: Here, company can borrow money from banking institutions for a particular
period of time and need to pay fixed rate of interest. Although, it is consider as an authentic and
reliable source but creates a burden over organization as it need to pay adequate amount of
interest on borrowed money. It is analyzed that TESCO also uses this source to receive required
funds to meet with the current requirements.
Government Grants: Grants and subsidies received by Government are also play a
crucial role in overall development & growth of company (Biekpe, Cassimon and Verbeke,
2017). TESCO is a renowned organization which is working at global level. It is consider as a
major source of employment & taxes for government. So, higher authorities of UK also provide
grants for further growth of entity which is essential to enlarge business. For instance,

Government provided grant of 5 million to organization in the year of 2009 to initiate a new
store in Glasgow.
Capital Structure of Company
Capital structure is a combination of equity and debt that are used by an organization in
order to meet with desired goals & objectives. Debt includes debenture, loans and more sources
in which funds are gathered from external sources for a particular period of time. Whereas,
equity comprises stocks, retained earnings and more that affect overall decision making process
of company. In other words, it demonstrates the way in which an organization funds its
operations and growth. Here, TESCO uses equity as well as debt to get necessary funds that is
essential to perform various business functions in an appropriate way. Here, it is analyzed that
retain earning are the major source of funds for organization. Managers invest some predefined
amount of profit again in business ensure future growth. They invite gernal public by issuing
share and also provide timely dividend. It is analyzed that TESCO has a debt of 57.61% of its
total capital.
Future Sources of fund:
Debt Capital: It is a capital in which company acquires fund from external sources such
as loans, debentures and investors. Managers also need to pay predefined rate of interest while
borrowing money from this sources (Jones, 2017). It is consider as major source of funds for
business growth and expansion. Here, higher amount can be gather in minimum possible period
of time that is generally need to repay after a particular period of time. In reference of TESCO, it
may use this source to borrow necessary funds from external parities. It may take short term and
long term loans as per requirement that will help ti perform various business functions in an
efficient manner.
Equity Capital: Here, interest of existing managers is also diluted with equity shares.
Shareholders have the right to take part in decision making process of company that affects
authority of managers. In regard of TESCO, equity share is considered as a suitable source of
fund because here is no compulsion to pay promised dividends to share holders. It can be paid as
per the profit margin of company. On another side, use of equity shares may reduce down the
control of managers over business operations.

Retained Earnings: It is known as a prominent internal source of finance which
demonstrates the profit left with company after paying dividend and other expenses. Profit can
be used to undertake various business functions. In reference of TESCO, uses its retain earning
in an efficient manner which helps company to accomplish predefined goals. Here, retain earning
of organization for the year of 2020 was $ 3,928 million.
Crowd funding: Here, crowd funding is a source in which funds are gathered from
general public through online platforms. It also helps to get some innovative as well as creative
ideas from experts. In addition, crowd funding is also essential to know the thoughts, opinions
of general public about products & services of company. TESCO is retail giant hence it is not
wise decision to collect money from crowd funding. Rather, organization launched its own
crowd funding platform in the year of 2016 to help small grocery retailers.
Role of different financial institutions within financial system for selected company
Commercial Banks: These are banking institutions where funds are deposited and
withdrawn by customers as per requirement. In business world, banks consider as a major source
of funding. It comprises both public as well as private sector banks that provide necessary
amount to companies for a particular period of time (Sarker, Khatun and Alam, 2019). Here,
predefined interest is also imposed over organization. Sometime s, managers need to pledge
assets as mortgage while borrowing money from baking institutions. There are several kinds of
loans such as business, personal and more provided by banks that can be avail by individuals as
per their requirements.
Investment Banks: These are the financial institutions which provide advisory, financial
transactions services to individuals, companies. It acts an intermediary between corporations and
financial markets. These banks help clients to make higher profit margins by minimizing risk. It
provides advice regarding investment, financial position. Investment banks also play a major role
for startups that are going to launch their first IPO (Initial Public Offering). In addition, these
also act a broker and financial adviser for multinational clients.
Hedge funds: It refers to the partnership under which funds are gathered from investors
and invested into efficient strategies in order to generate huge profit margin (Hu and Zheng,

2016). Here, marketers use efficient strategies to minimize risk and ensure higher profitability
for investors. Main motive of hedge funds is to safeguard & protect investors against risk.
Portfolio of hedge fund comprises asset class such as equities, derivatives, currencies, and
convertible securities.
Mutual Funds: In this, a pool is created from money collected through investors and it
further invested in stocks, bonds, and other market instruments. It is generally operated by
experienced & professional managers who have higher expertise in managing funds in an
efficient manner. It enables individuals to get the advice from professionals that is essential to
manage funds effectively.
Financial Company: These companies are the institutions which provide assistance to
individuals and managers to fulfill their requirements. These companies help individuals to
purchase necessary goods and services by providing small loans (Dushnitsky and Zunino, 2019).
There are several specialized financial companies which are operating across the worlds. Beside
this, it also provides appropriate support as well as advice to business professional and
individuals.
It is analyzed that TESCO takes help of commercial banks to get necessary funds for
further expansion and growth of business. There are several public as well as private banks in
UK which from which organization can borrow money to enlarge operations. Managers give due
consideration to this factor while preparing financial strategies for organization.

CONCLUSION
With above discussion, it is analyzed that Capital market is a crucial part of overall
financial strategies of an organization. It is analyzed that Banks is a vital source to get necessary
funds for expansion but now there are some other non banking sources such as equity, dept,
crowd funding and more which are also used by companies in order to borrow appropriate funds.
Discussion has been carried out about financial structure of organization. Further, various
financial institutions such as commercial and investment banks, hedge funds, financial
companies are also play an integral role in growth and expansion of business. Moreover,
managers are required to take appropriate measures while undertaking appropriate source of
finance.

REFRENCES
Books and Journals
Biekpe, N., Cassimon, D. and Verbeke, K., 2017. Development Finance and Its Innovations for
Sustainable Growth. An Introduction. In Development Finance (pp. 1-15). Palgrave
Macmillan, Cham.
Bizri, R., Jardali, R. and Bizri, M.F., 2018. Financing family firms in the Middle East: the choice
between Islamic and conventional finance. International Journal of Entrepreneurial
Behavior & Research.
Doyle, M.W., 2018. Addressing Declining Appropriations for Bureau of Reclamation
Infrastructure: Policies Needed for Enabling Private Finance. JAWRA Journal of the
American Water Resources Association, 54(5), pp.993-1000.
Dushnitsky, G. and Zunino, D., 2019. The role of crowdfunding in entrepreneurial finance.
In Handbook of research on crowdfunding. Edward Elgar Publishing.
Hu, B. and Zheng, L., 2016. Digital finance: Definition, models, risk, and regulation.
In Development of China's Financial Supervision and Regulation (pp. 31-58). Palgrave
Macmillan, New York.
Jones, C., 2017. A historical evolutionary and cyclical perspective on models of development
finance. Routledge Companion to Real Estate Development.
Sarker, M.N.I., Khatun, M.N. and Alam, G.M., 2019. Islamic banking and finance: potential
approach for economic sustainability in China. Journal of Islamic Marketing.