TESCO - FINANCIAL ANALYSIS

Tesco - Financial Analysis



Table of Contents

Introduction to Tesco PLC4

Profitability comparison of TESCO and Morisson4

Operating income margin4

Return on equity5

Return on assets analysis6

Net profit margin7

Liquidity comparison of TESCO and Morissons7

Current ratio analysis7

Quick ratio analysis8

Cash ratio analysis9

Gearing ratio comparison of TESCO Plc and Morissons10

Total debt to assets analysis11

Debt to equity analysis11

Investor ratio comparison of TESCO and Morissons13

Earnings per share13

Price-Earnings Ratio13

Dividend Yield14

Beta Anlysis15

Conclsuion15

References16

Appendices18

Calculation18

Operating income margin18

Return on equity18

Return on assets analysis18

Net profit margin19

Current ratio analysis19

Quick ratio analysis19

Cash ratio analysis20

Total debt to assets analysis20

Debt to equity analysis20

Earnings per share21

Price-Earnings Ratio21

Dividend Yield21

5 year Financial Data22

Tesco - Financial Analysis

Introduction to Tesco PLC

The company engaged in retail and related activities in the United Kingdom, the Republic of Ireland, Hungary, Poland, the Czech Republic, Slovakia, Turkey, Thailand, South Korea, Malaysia, Japan, China, and the United States. Despite the fact that this strategy assisted Tesco in attracting a great amount of consumers, it also assisted Tesco in branding itself as a store for average class consumers and even earned an image as a low-end store. Furthermore, Tesco had small and poorly equipped stores, as well. The only competitive edge Tesco had been the price. The products that were available at the store seemed to be of ordinary. Due to the rise in the income of customers in Britain, the customers did not want to look for bargains. They were now seeking high quality products. In order to cater these changing demands of the customer, Tesco decided to close down its numerous stores to focus on super-stores to provide improved quality.

Profitability comparison of TESCO and Morisson

Operating income margin

In table 8, we have described the operating income margin of both the companies in our analysis. From the above table, we cans see that there is not much difference between the profitability of Morissons and TESCO in terms of percentage. The operating income margin of TESCO has been at a constant percentage of six percent in the past three years and in case of Morissons, it has been around five percent. We can see the same thing in chart 1, in which we have shown the operating income margin trend of Morissons and TESCO.

Chart 1: Operating income margin trend

Return on equity

The second ratio in our analysis is a comparison of return on equity, which is a measure of the profits of the company in comparison to its equity. This ratio measures that how much a company is earning on its equity, i.e. how much returns is the company providing to its shareholders. In table 9, we have summarized the return on equity of our companies, calculated from the data extracted from their financial statements. From the above figures, we can see TESCO has been providing more returns to its shareholders as compared to Morisson.

Chart 2: Return on equity trend

From chart 2, we can see the trend of return on equity of TESCO Plc and Morisson. We can see that in chart 2, the return on equity of TESCO is showing a pretty consistent trend in the past three ...