ROE also showed better results over its rival. Rivalry and competition in the retailing and merchandising industry have caused the company to face several challenges, whereas, Tesco PLC is the first largest retailing and merchandising company in the United Kingdom and the second-largest retailing company in the world after Wal-Mart. If you need assistance with writing your essay, our professional essay writing service is here to help! Sometimes it is hard to do all the work on your own. likely reason is because long term loans are viewed as a safer method of their cash dividends in the companys shares(Sainsbury, 2016). The financial analysis report provides an analysis and evaluation of the pass and present financial performance, liquidity, share price movement and financial stability. dividend that is being paid out. This suggests that Sainsbury was more profitable than Tesco. on building shareholder value (Sainsbury, 2016). This means that as of today, J Sainsbury is one The profitability of Tesco is even made more convincing in its 2007 net profit margin 7% compared to industry average of only 4%. A companys gross profit margin may also be viewed as a measurement of production efficiency. compared with those of rival companies for a more reliable analysis of The results are shown below: The results above show that both retailers have low ratios compared with the benchmark mentioned above; however this may be the case due to: There are very few trade receivables on the books, while trade payables are higher suggesting that the business could effectively operate without any cash. raising finance while simultaneously reducing the companys total debt. Tesco PLC. For the year 2015/16, okay, however there are some areas where the retailer will need to improve for Collier, PM 2003, Accounting for Managers: Interpreting accounting information for decision-making, John Wiley, Chichester. Increasing competition in the industry has led to another supermarket price-war, which is expected to knock margins again as retailers vie for market share. number: 206095338, E-mail us: Firms can enter the international markets through different strategies, including licensing. Published: Jan. 17, 2023 at 5:45 p.m. trade receivables in 6.2 days and not had to pay trade payables for 45.7 days. financed by debt only, or by both debt and equity. The organisation pays dividends to its shareholders in order to remain focused Sainsburys as these two things should drive sales, increasing profits. dividend yield was 6.68%, whereas their competitors such as Morrisons had a In 2014 and 2013, Sainsbury has good interest coverage ratio that is 6.82 and 6.17 respectively, but in 2015, it drops to 0.6. //= $post_title the companys ability to settle debt. directors aim to provide a dividend policy that is affordable to the business, Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. around 28%(Butler, 2016). pence (Sainsbury, 2016). to have more leverage when negotiating for loans in the future and is a sign A company with a gross profit margin higher than that of its competitors, or the industry average, is deemed to be more efficient and is therefore, all things being equal, preferred, (Paramasivan, 2009). the 2016 figures in Table 3 compared to Table 1. Tesco ensures the availability of assets to meet its current and long-term obligations, whereas Sainsburys obligations are relatively more than its assets. Note: Adapted from Tesco PLC, Financial Times, 2016, Chart 2: Pie Theory charts for Tesco PLC If your specific country is not listed, please select the UK version of the site, as this is best suited to international visitors. Sainsburys strategies and operations have significantly improved in the current year which has been reflected through its profits. In comparison, Sainsburys total revenue (all-UK) only amounts to ?23.03Billion, with non-food and banking making up a much smaller proportion of sales, Sainsburys (2013). An increase of about 1.3 percent in sales of the company has been determined, and Tesco Bank has shown a negative growth of 2.2 percent. From about all the ratios used in the analysis. the second largest supermarket in the UK, as we discussed earlier in the essay, support@phdessay.com. The Financial health of Tescos had been assessed by doing a ratio analysis which included ratios such as: Return on capital employed: It is a measure of the return earned by the business from the capital employed. It can be used to assess whether the business is earning enough to meet its cost of capital. WebThe Zacks Consensus Estimate for 2023 (ending February) has increased 3 cents in the last 7 days. https://business-essay.com/sainsbury-plc-and-tesco-plc-financial-analysis/. that Tesco has much higher debt to equity ratio, long term debt to capital B. concerned with current assets and current liabilities in view of Sainsburys financial growth in future quarters into 2017. The Essay Writing ExpertsUK Essay Experts. Although Tesco PLC is percentage change, whereas Tesco are almost double of what Sainsburys, this Introduction to the company and its role within the wider international market; including competitors and current market conditions that may impact on its financial performance. Tesco Plc (2011) states, that the retail industry is a highly. strategic decision to build up more long-term debt instead of short term. Note: Adapted from Sainsbury PLC, Financial Times, 2016. in a healthy position in terms of its financing and is considerably less The calculations can be seen in Appendix 1. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Payables turnover was 55,330 / 5,786 = 9.56, which translates into 38 Days (365/ 9.56). This report would be focused on the analysis of financial statements of two well known, retail companies of UK named: Tesco and Sainsbury supermarket. liquidity and financial performance in making the best suitable decisions in an entity. Tesco For my assignment I have chosen Tescos. 2014/15 and a substantial decrease of 30% since 2014/15. likely to get lower interest rates. This reflects that Tesco has been inclined to ensure the availability of internal equity. As an organization, Tesco has diversified its operations and extended into new markets in various countries such as China,. Whereas Tesco have seen a decrease over the Gross profit margin considers revenue minus the cost of goods sold. Sainsbury PLC is the parent company of Sainsburys store chains. a good company. about its customers, and as a business they want to be ethical. as some of their produce can become waist if their sell by date passes. https://markets.ft.com/data/equities/tearsheet/profile?s=SBRY:LSE, https://markets.ft.com/data/equities/tearsheet/financials?s=TSCO:LSE&subView=BalanceSheet. The receivable days illustrate how long it can take on It, indicates entity's strengths and position in competitive markets also useful for effective decision, making and further strategic planning activities (, financial statement permits measuring cash, profitability and assets and liabilities of the, organization. of the spectrum, however in September 2016, they decided to launch a new being as big as possible. they contribute about 20 percent or 1.0 billion to its total sales. Study for free with our range of university lectures! tool of raising finance. (2022) 'Sainsbury PLC and Tesco PLC Financial Analysis'. 2 Research Institute of Foreign Languages, Beijing Foreign Studies University, Beijing, China. it to perform better. In addition, the joint ventures of Sainsbury are the major factor that has enhanced the performance and profitability of the company. The report will hold information for potential investors, who can then use this information for their own analysis, in order to decide whether they will be investing in the company. The greater Being founded in 1924, Tesco is now becoming. They follow marketing concept to accomplish the task to fulfill customers', needs and demands and then supply products (, position in UK market can analyses through this report in wide range with various forms. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. figures show that Sainsburys has a debt to equity ratio of 0.3791 in 2016. This would be extremely enticing for investors as Financial Times (2014)1 [Online]: J Sainsbury Plc, Available at http://markets.ft.com/research/Markets/Tearsheets/Financials?s=SBRY:LSE&subview=IncomeStatement, Accessed 25/03/2014. However, Sainsburys have maintained a steady gross profit margin throughout the past three years, 5.08%, 5.79% and 5.48% respectively. You can download the paper by clicking the button above. Net profit margin considers the net income once all costs are removed. Sainsburys dividend yield has fluctuated in the last 5 years, and Sainsburys recently Poached Poundlands boss Kevin Regarding Sainsburys results as at 2015 this is compared to Tesco. 1 above (Sainsbury PLC, Financial Times, 2016) that Sainsbury PLC is a levered The financial, statements include income statements, balance sheets and the cash flow statements which is, regarded as the standard statements prepared by an entity. we are online and ready to help. A low debt to equity ratio also allows Sainsburys Tesco returns of assets (ROA) for years 2007, 2006 and 2005 averaged at 9%. boost their balance sheet (Jefford, 2015) and to help fund their price cuts, as According to Sainsburys 2016 annual report, their board of on or around the date of the Ex-dividend date. Sainsburys is the UKs Second biggest supermarket (Armstrong, 2016).The company is working to integrate the In addition, the report identifies and analyzes different information required by users of financial information. In terms of return on capital employed computation, Sainsbury generated a four percent return on capital employed or ROCE. You do not have access to www.ukessays.com. 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