Non Financial Factors

TABLE OF subject area INTRODUCTION1 TESCOS RATIO ANALYSIS2 SUMMARY TESCOS RATIO13 COMPARATIVE ANALYSE Tescos Vs Marks and Spencers________________ _______14 CRITICAL ANALYSIS OF TESCO PLC__________________________________________ 21 CONCLUSION? BIBLIOGRAPHY? addendum 1 TESCOS PLC APPENDIX 2- MARKS AND SPENCERS- CONSOLIDATED STATEMENTS I-Introduction This fib volition approximate the pecuniary performance of Tescos and comparing it to Marks and Spencers has the persona of evaluating the come withs worthiness as enthronization.As a well knowing social club some the world and having an important background in the retail environment Tescos is one of the largest supermarkets in the world. Present in 14 countries around Europe, Asia and trade union America. Tescos is always dealing in the financial world, providing withal deposit and insurance services. Tesco was founded in 1919 by Jack Cohen from a market carrel in Londons East End. Over the years our phone line has grown and we now operate in 14 countries around the world, work all everywhere 500,000 people and serve tens of millions of customers every week.We have always been attached to providing the best shopping experience. Today we continue to focus on doing the remedy thing for our customers, colleagues and the communities we serve. (Tesco 2012). The first section of this report, which is the main body, will use financial disceptations from 2010, 2011 and 2012, along with standard financial balance analysis to develop a clear picture of Tescos financial performance comparing to the competitor. The min section includes a comparative analysis of the competitor strategy and also a conclusion on the performance and wellness of Tesco PLC based on the years 2010, 2011 and 2012.The third section, presents a critical analysis containing the non-financial factors and risks impacting on the proximo of Tesco PLC. II-Tescos proportion analysis Ratio Analysis simplifies the financial statement an d helps in future planning. It also helps us to pronounce the entire news report of changes and up-to-date performance of the comp some(prenominal). Ratios highlight all the different factors linked with made and unsuccessful business. It is a powerful tool of financial analysis in the confedeproportionn. By using Ratio analysis it is easy to evaluate and extrapolate financial health and curl of the business and accomplishable future gauge of the accompany.Currency = ? (000) The return on chapiter employed is an important measure of a companys positiveness. If ROCE is high(prenominal) than the company is sound healthy. In 2010 Tesco had 11. 52% ROCE which increase steadily in 2011 and 2012 respectively 12. 93 and 12. 64. So there is a mathematical reason for this change is that pay increase. It de destinationines instructions ability to generate earnings from a companys total pool of bully. Companys gross profit coast symmetry shows that there is slimly differen ce between 2010 and 2012 which shows there was no any major change in their prices.In 2011 the company recorded a gross profit margin ratio of 8. 30%. The positive trend in this margin shows that the company is on profitability trend and accordingly is a good investment option. So there is a possible reason for this change the higher cost of production. Operating Margin frequently refer to simply as a companys profit margin, there is no major change during the period from 2010 to 2012. Activity ratio 1. summations Turnover Asset Turnover= Sales revenue/Capital employed During the blend in tercet years Tesco has improved gradually returning unendingly in 2011 and 2012 turnover rate was respectively 2. 4 and 2. 06 . For most companies, their investment in net assets represents the largest fraction of their total assets. There are no signifi sternt changes in asset turnover. Liquidity ratio Liquidity is a very important ratio for money lenders, suppliers and potential investor s to access. According to the Tesco annual statement the result from 2010 to 2012 shows that the current ratio was less than 1 which has a problem to meet their financial obligation in short term. Tescos assets are less and its liabilities are preferably high which indicates companys weak current ratio and fluidness problem.Quick ratio is a more conservative (safer) measure of fluidity. A higher quick ratio implies greater safety. According to the acid test ratio Tescos acid test ratio was non good because it is at a lower place the standard. The liabilities have increase because of increased contrisolelye 2010, 2011 and 2012 respectively. In the year 2010 receivable years was 12. 10 days only after that in 2011 and 2012 monetary year respectively it was increased to 13. 86 days and 15. 02 days, which is showing their attitude is non good to collect receivable earlier.It could affect business as well because customers always prefer a long time to salary back whatever the y have taken on cite. 2012 = 3598/59278*365 = 22. 15 days It takes Tescos approximately 19 to 22 days taken to cheat its product from the time it acquire it. Inventory days increased continuously since 2010 to 2012. The possible reasons could be the companys sales are non good. Capital Gearing The term capital gearing or supplement normally refers to the proportion of relationship between lawfulness pct capital including reserves and surpluses to preference share capital and different fixed affaire bearing funds or loans.As the higher a companys degree of supplement as the more the company is considered risky. In, Tescos gearing scenario gearing was diminish in 2010 and 2011 separately from 0. 51 to 0. 43, and it was stands cashbox 0. 43 in 2012, which indicates the company improving financially. So there are possible reasons for this change, long term is diminish in comparison with capital employed. unsay on assets . The profitability ratio here measures the relationshi p between net profit and assets. Return on assets= Net profit before interest and tax / meat asset* snowReturn on asset (ROA) indicator of how profitable a company is relation to its total asset . ROA gives us an idea of Tesco how efficient management is sat using its asset to generate earning. In 2010 return on asset was 7. 51% after that there was a decrease till 2012 to 5. 54 %. Tesco PLC has recorded in decreasing sharply value of P/E with values of 14. 12, 12. 12, and 8. 74, being recorded for 2010, 2011, and 2012 respectively ( hayseed Finance beginning(a) Nov 2010,2011,2012). A number of factors could be possible vary due to decreasing in P/E including increased competitiveness for capital in market. Yahoo Finance 2012) 2. Earnings per share The Earning per Share (EPS) considers the profits that could be paid to each indifferent shareholder. The increase in profit resulted in the increase in EPS. Earnings per share Earnings o holders / No of o shares in issue 2010 = 29. 33 p 2011 = 34. 43p 2012 = 36. 75p The company recorded EPS increased in 2010, 2011 and2012 respectively. There could be number of reason for increasing earnings per share. likely reason could be the increase in profit, increasing in loan. exclusively it would non be the long term sustainability. 3.Dividend Dividend per share (DPS) is the sum of state dividends for every ordinary share issued. DPS is the total dividends paid out over an entire year divided by the number of outstanding ordinary shares issued. Tesco financial statements indicate that dividend yield for the company has been rising in the last five years. The company recorded dividend yields of 3. 15%, 3. 56 %p and 4. 59% for 2010, 2011 and 2012 respectively (Yahoo Finance 1st Nov 2010, 2011, 2012). This is an indication that investor willing to invest in the company have a chance of receiving better dividend in the future. Yahoo Finance 2012) In 2011 companys debt/equity ratio was higher to1. 04, which is not very goo d indication for the company. Because it heavily depends on loan is not a good policy for any business. But it was bring down the following years in 2011 and 2012 respectively 0. 77 and 0. 77. Debt to Equity Debt to equity = Non-current interest bearing debt Equity It is used to determine how easily a company can pay interest expenses on outstanding debt. In 2010 companys interest coverage was 5. 99 times which increased in 2011 to 10. 47 times but in 2012 decreased slightly to 9. 5. The companys profit has increased to pay their interest easily. comment and ratio analysis conclusion In the year 2012 Tescos activity, profitability, liquidity ratio, financial gearing, and investment ratio was comparing with the previous year ratio. In the activity ratio net assets turn increased. Liquidity ratio was quite a reasonable due to the economic condition and creditor days decreased which was not good for the company. Financial gearing was not satisfactory and finally, investment ratio in creased margin which indicates revenue.The organization managed to increase its return on capital and assets turn over remarkably. Tesco has slightly increased its receivable and payable credit payment period currently showing its financial position. On the other side, it can also be an opportunity for the customers to attract more customers as they always prefer to hold back as more as possible. There is no major difference in the net profit and gross profit margin that means Tesco did not bring any change in its prices and there was not any external pressure from government or competitors.Liquidity of Tesco shows not a major decline over the past 3 years even though it is below 1 which is quite risky condition because current ratio below 1 means liabilities are more and assets are very less. If there will be major decline in the business, the company will not be able to pay their short term liabilities. The Interim report shows that they are reducing the gearing but we Tesco imp roved its shares value by having an increase in the dividends per share and share price. Investors will be attracted by this but this will not persist in for long. Yahoo Finance, 2012) III-comparative degree Analyse Tescos Vs Marks and Spencers We can use Ratio Analysis to do a comparative analysis and seeing our performance with respect to our competitors. For this I have taken Marks and Spencer Group PLC and compared it with Tesco PLC to see the Standing of my company with another company. This helps us to know our strengths and weaknesses in all the areas of the business. Summary of Comparative Results between M &038 S and Tesco (2010-2012) Revenue and Operating ProfitsThe revenues bring in by the company and the level of operating profit does tell us the size , capacity and type of player the company is in market. The Tescos Operating profit s increase over the years but if we see the table below M &038 S, they reduced the operating cost, but the revenue increased constantly as well. Chart Tesco &038 M and S Revenue Comparison The Comparison of Tesco and Marks &038 Spencer tells us that Tesco is a much bigger company and has a much higher turnover. But with its policies we see that the level of Operating profit of Tesco is higher because of its strong optimisation policies and procedures.Ratios comparison between M&038 S and Tesco Tescos and M &038 S ratio analysis Ratio Analysis helps us to inform the entire story of changes and current performance of the company. = 12. 93% 2012 = 3985/ (13731+17801) *100 = 12. 64 % The return on capital employed is an important measure of a companys profitability. If ROCE is higher than it the company is sound healthy. If we see the chart we can M is in stronger condition. 2011= 9740. 30/ (2677. 40+2456. 50) =2. 46 2012= 9934. 30/ (2778. 80+2489. 10) = 2. 49 = 0. 43 2012 = (1460. 10-681. 90) /2005. 40 0. 38 Earnings per share Earnings o holders / No of o shares in issue 2010 = 29. 33p 2011 = 34. 43p 2012 = 36. 75p M &038 S 2010 = 33. 50 p 2011 = 38. 80 p 2012 = 32. 50 p The increase in earnings per which is attractive point for investors. Tesco Earning per share increased on 2012 speckle M Earning per share decreased. 2012 = 2489. 10/2778. 80 = 0. 89% Tesco debt/equity ratio was higher to 1. 04 %, which reduced the following years in 2011 and 2012 respectively 0. 77% and 0. 77%. While M &038 S was 1. 40 % on 2010 &038 its got bit better on following years.IV-Critical Analysis of the non- financial factors and risks for Tesco PLC In todays world good competitive environment organisations have to compete with others regarding a wide range of fields like product quality, delivery, reliability, after-sales services, brand, customer care and feedbacks (Chairman, FTSE 100 Company, 2003) The financial ratio analysis done above, is very useful as it summarises all the necessary information in order to understand the health of a company, covering profit, liquidity, growth and risk of a company.But it is also intrinsic to look at the non financial factors that can have a extensive impact on a companys future potential. V-Conclusion winning into consideration the ratio analysis applied to Tescos between 2010 and 2012 what can be noticed is that the company had some variation. According to level of risk, Tescos is less risky than M&038S in terms of investment considering that in 2010, 2011 and 2012 had as gearing ratios 1. 04 %, 0. 77% and 0. 77% respectively and M &038 S for the same period 1. 40 %, 0. 92% and 0. 89%. As much higher is the gearing ratio more vulnerable is the company to downturns.With an improvement of its shares value by having an increase in the dividends per share and share price, Investors will be attracted by this but this will not stay for long. Moreover considering how much cash flow is available for each wad invested, which is demonstrated by the dividend yield, Tescos in 2010 had a variation from 3. 15% to 4. 59% in 2012 which is positive for the bus iness. On the other hand, Tescos reacted negatively into the full analysis of profitability, efficiency and effectiveness, liquidity and investor ratios.As an example, the investment per share had a decrease of 5. 38 from 2010 to 2012 and also receivable days had a considerable increase which is a negative impact. Despite of having lower prices than M&038S with strong position in UK and also in other continents, Tescos might be a good investment in the future, depends on its performance and long-term investment for the follow years. However currently it is not an investment to be considered. Bibliography London inventorying Exchange (2012). Tesco PLC ORD SP. London Stock Exchange (2012). Marks and Spencer Group PLC ORD 25P.Available athttp//www. londonstockexchange. com/exchange/prices/stocks/summary/fundamentals. hypertext markup language? fourWayKey=GB0031274896GBGBXSET1 Mark and Spencer (2010)-Annual Report and Financial Statements. Available at http//corporate. marksandspencer . com/documents/publications/2010/annual_report_2010 http//corporate. marksandspencer. com/documents/publications/2011/annual_report_2011 http//corporate. marksandspencer. com/documents/publications/2012/annual_report_2012 (Yahoo Finance, 2012) http//www. bizmove. com/finance/m3b3. htm APPENDIX 1 APPENDIX 2 APPENDIX 1 APPENDIX 2