TESCO SUPERMARKET

Tesco Supermarket



Introduction3

Capital Structures4

Capital Structure of Tesco4

Capital Structure Strategy of Tesco and its Effects7

Concept of Financial Management10

Significance of Financial Management11

Successful Promotion11

Smooth Running of a Business11

Financial Management harmonizes various Functional Activities11

Centre of Decision Making12

Business Success Determinant12

Measure of Performance12

Financial Management at Tesco13

Implications of Good Financial Management14

Difficulties faced in implementing the Concept at Tesco18

Conclusion19

References21

Appendices24

Appendix A24

Appendix B25

Appendix C25

Appendix D26

Appendix E26

Appendix F27

Tesco Supermarket

Introduction

The UK industry of food retailing is highly concentrated that captured half of the sales of the retail industry. The four major market players of UK food retail are Tesco, Wm Morrison Group, ASDA Group and J Sainsbury; however, Tesco is the market leader with a market share of 25.7%. The Annual Report of Tesco 2012 stated that Tesco operates in 14 countries with 6,351 stores across the world (Tesco, 2012, pp.1-154).

Tesco is among the third largest retailers across the globe. Food retail is the main source of sales in Tesco while non-food products also have enjoyed good sales during recent times. Tesco has listed among the most successful general merchandise and retail groceries with 30.5% share in UK market.

The overall strategy of Tesco refers to growth that has helped Tesco in strengthen their key business activities. The plan is to attain this strategy by diversifying their range of products other than food and to include telecommunication, non-financial and financial products/services through penetrating new markets internationally.

This assignment assesses Tesco, evaluating their capital structure and examining how this may impact the organisation image and investing decisions, analysing at how past and future investment are advantageous for Tesco. The paper takes into consideration a number of different theoretical frameworks, such as Modigliani and Miller's (MM) propositions 1 and 2, trade-off theory, to evaluate their financial decisions and understand such effects on the capital structure.

Capital Structures

Capital structure is the way of financing its assets of a corporation by a combination of debt, equity and hybrid securities. A capital structure of a firm is then the structure and composition of its liabilities.

A lucrative capital structure is a vital decision for any corporation. Such decisions are significant not merely as of the need to make the most of returns to several constituencies of organisation; whereas, as of the effect like a decision has on the ability of organisation to handle with its competitive environment. The widespread argument referred that an appropriate capital structure facilitates in keeping a balance between the tax savings of debt and bankruptcy risk. As a result, the capital structure offers higher returns to investor in comparison to receive from all-equity organisation (Walsh, 2006, pp.12-398).

Instead of its theoretical call, studies in financial management have not determined the best possible capital structure. The best practitioners and academics have been to attain are directions that assist in achieving short-term objectives. On the other hand, it can be true in few conditions, it will not succeed to take account of wither long-term survival needs of the corporation and difficulties of the competitive ...