Analysis of Tesco PLC's Working Capital and Financial Statements

This report provides a financial analysis of Tesco PLC, focusing on working capital. It begins with a calculation of working capital, detailing current assets (cash and equivalents, short-term investments, prepaid expenses, and other current assets) and current liabilities (short-term debt, capital leases, accounts payable, taxes payable, and other current liabilities). The analysis reveals a negative working capital of -£4577, indicating a potential financial strain. The report then explains working capital turnover, calculating it as -12.21, reflecting the relationship between revenue and working capital. This negative turnover suggests that Tesco relies heavily on revenue to meet its working capital needs. The report concludes by emphasizing the importance of improved cash management to enhance cash inflows and reduce outflows, thereby improving the company's financial standing. The analysis uses data from 2017 and references relevant sources to support its findings.

ANALYSE FINANCIAL STATEMENT

TABLE OF CONTENTS
Calculate working capital................................................................................................................1
Explanation on working capital turnover........................................................................................1
REFERENCES................................................................................................................................3

Calculate working capital
Table 1Calculation of working capital
Current assets 3082
Cash and its
equivalents 3639
Short term investments 2430
Prepaid expenses 440
Other current assets 5237
Total current assets 14828
Current liability
Short term debt 2549
Capital leases 11
Accounts payable 8875
Taxes payable 613
Other current liabilities 7357
Total current liabilities 19405
Working capital -4577
In order to calculate working capital simply from current assets current liability is deducted. It
can be observed that current assets value is £14828 and current liability is £19405. Difference
between current assets and current liability is -£4577 (Tesco PLC ADR, 2017). It can be said that
there is lack of working capital in business.
Explanation on working capital turnover
Working capital turnover is the one of the main ratio which reflect the proportion of
revenue that comes on each unit of working capital (Working capital turnover ratio, 2017). It can
be observed that revenue of Tesco is £55917 and working capital amount is -£4577. This means
that working capital turnover of Tesco is -12.21 which reflects that on each unit of working
capital negative amount of revenue comes in existance which means that in order to meet
working capital needs firm is puerly dependent on its revenues.
able 2Working capital turnover ratio
Revenue 5517
Working capital -4577
Working capital turnover ratio -12.217
This means that there is no amount of working capital that can be carried forward from last year
to support current working capital needs of the firm. It can be said that firm condition is critical
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and it needs to work a lot in order to improve its performance. In this regard it must improve its
cash management in the busines. By doing so cash inflow will be enhanced and cash outflow
will be reduced in business.
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REFERENCES
Books and Journals
Tesco PLC ADR, 2017. [Online]. Available through:< http://financials.morningstar.com/income-
statement/is.html?t=TSCDY&region=usa&culture=en-US>. [Accessed on 28th July 2017].
Working capital turnover ratio, 2017. [Online]. Available through:<
https://www.accountingtools.com/articles/2017/5/16/working-capital-turnover-ratio>.
[Accessed on 28th July 2017].
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