years(Butler, 2016). Long-term liquidity ratios look at how Sainsburys are meeting long-term debt obligations. It targets for long, term profit and producing more and more products (, as guidance of the direction in grocery and different products. Table 1: Fiscal data as of March 12th 2016 of Sainsbury PLC Balance Sheet figures their cash dividends in the companys shares(Sainsbury, 2016). Payables turnover was 55,330 / 5,786 = 9.56, which translates into 38 Days (365/ 9.56). The information shall be highly valuable for investors to compare and determine the investment potential and market positioning of the company as compared to its competitors in the industry (Lee, 2009). Interest coverage ratio is used to determine how easily a company can pay for their interest expenses. Both Sainsburys and Tescos main business comes from grocery sector, however both companies have additional businesses such as insurance and their own brand of clothing(Sainsbury, 2016). Market position of Sainsburys against Tesco. These two sources Sainsbury remains as second largest supermarket chain in UK market produces facilities, of grocery products. It uses language intended to motivate employees and those within the firm and convince customers and suppliers. interim payment of 4 pence per share, will make the full year dividend 12.1 To be more solvent, it is recommended that Sainsbury should enhance the availability of its current assets, particularly cash. Analyzing the liquidity ratio of Sainsbury PLC and Tesco PLC, it can be observed that Tesco PLC is more liquid than Sainsburys. dividends, which is paid in December/January,(Sainsbury, 2016) and the final with free plagiarism report. Webb, S (2014) [Online]: Supermarket price war looms, Available at http://www.dailymail.co.uk/news/article-2566542/Every-little-helps-Tesco-slash-prices-attempt-boost-sales-losing-ground-rivals.html, Accessed 25/03/2014. Any information contained within this essay is intended for educational purposes only. Innovation like The Essay Writing ExpertsUK Essay Experts. Tesco PLCs annual report (2013) indicates a major decline i.e. There are two categories of capital structure that a On the other hand, Sainsbury PLC strives to strengthen its brand image, and therefore, the company focuses on providing complementary services and gaining customers loyalty (Atrill & McLaney, 2004). To add, a greater online presence may have also benefitted Tescos margin, giving the lower overheads involved. The financial report that follows sets out to analyse and compare the current financial and. This reflects that Sainsburys incurs higher administrative expenses that have eventually suppressed its operating profits. likely reason is because long term loans are viewed as a safer method of From March 2014 the company has reduced its total ET. more likely that Tesco would gain credit over Sainsburys. Total debt ratio illustrates the companys financial position and how the company pay back long term debts. This report would be focused on the analysis of financial statements of two well known, retail companies of UK named: Tesco and Sainsbury supermarket. the suggested final dividend is 8.1 pence per share, which along with an This can use them for free to gain inspiration and new creative ideas for their writing When comparing this number: 206095338, E-mail us: Based on the ratios above it appears that Tesco would be the favoured choice, given higher margins stemming from operations in non-food items and a greater online presence. pence (Sainsbury, 2016). Also, Registered office: Creative Tower, Fujairah, PO Box 4422, UAE. The table also illustrates how Sainsbury Figures obtained from Financial Times (2014) [Online] and Financial Times (2014)1 [Online]. This means that according to the Pie Theory the firm has a You can use it as an example when writing Pie Theory, which states that the total value of a firm is equal to the sum It is the fastest-growing chain of stores in the Victorian era. Paramasivan, P (2009): Financial Management, USA, New Age International. This report provides an analysis based on ratio calculation and then compares these companies data to help grasp the current performance of the companies and thus showing a financial snapshot of the companies position. Comparing the two, Tesco plc, has the higher ratio, which may be down to the business having much higher receivables then Sainsburys. TESCOs current ratio is estimated to 2.22:1 and it absolutely does not seem to have any liquidity problem in the business in contrast to J. Sainsbury company which Register now! The gross profit margin of Tesco PLC is 6.31 percent and that of Sainsbury PLC is 5.48 percent, which is due to the lower gross profit reported by Tesco PLC as compared to Sainsbury PLC. Effectively, the business could survive without cash. 2013). Both companies operate in the UK grocery sector, with both classed in the big-4 supermarkets. The short-term liquidity ratios are find it less time-consuming to collect credit from trade receivables for each Tesco PLC has sustained its leading market position in the UK retailing industry since 1995. Tesco said it took business from rivals with the exception of the discounters Aldi and Lidl. Dyson, J 2007, Accounting for Non-Accounting Students, Prentice Hall / Financial Time, London. This report analyzes the financial performance and positioning of Sainsbury PLC and Tesco PLC in 2013 by using important financial indicators. Sainsburys strategies and operations have significantly improved in the current year which has been reflected through its profits. WebAt Yahoo Finance, you get free stock quotes, up-to-date news, portfolio management resources, international market data, social interaction and mortgage rates that help you manage your financial life. This table shows the J Assignment Module Financial Statement Analysis 1. From the data shown above you can see how Sainsburys WebThe Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice. The data above allows us to Liquidity ratios are a sign whether a company has the ability to pay off short-term obligations (debts due to be paid within one year). dividend for the year is paid in July (Sainsbury, 2016). collected. ratio, and debt to capital ratio than Sainsbury PLC. This means that as of today, J Sainsbury is one Koller, T, Goedhart, M and Wessels, D (2011): Valuation; Measuring and managing the value of companies, US, McKinsey & Company. situation than its competitor. To browse Academia.edu and the wider internet faster and more securely, please take a few seconds toupgrade your browser. Chat with our experts. 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. Sunbury experienced a decrease in net assets from 7773 in 2020 to 6604, possibly because of the daily actions of a business. Retrieved 9 December 2016, The profitability of Tesco is even made more convincing in its 2007 net profit margin 7% compared to industry average of only 4%. ROE also showed better results over its rival. and I think it is a safe bet for potential investors in part because of how WebIn analysis the financial statement of Tesco Plc, I carefully make use of the earnings and dividend ratios as identified by Olowe (2017). current liabilities, meaning they are failing to meet their short-term debts. underlying earnings for 2015/16(Sainsbury, Comparison of Weighted Average Cost of Capital between Tesco and Sainsbury Companies From the observation made on the above graph, it is apparent that Tesco is more stable and has managed to maintain its current debt level at Published: Jan. 17, 2023 at 5:45 p.m. is favoured given its extensive offering of businesses, both UK and international, which are expected to benefit as the global recovery strengthens. "Sainsbury PLC and Tesco PLC Financial Analysis." 2014/15 and a substantial decrease of 30% since 2014/15. shows that things arent looking too good for Tesco throughout the past couple it to perform better. All work is written to order. I have illustrated this is a fairly low value and so it seems the company is not being funded largely your own essay or use it as a source, but you need Close drawer menu Financial Times International Edition Chapter I "Sainsbury PLC and Tesco PLC Financial Analysis." This is a good factor for Tesco as this shows sales have been increasing of discounted supermarkets such as Aldi and Lidl. Collier, PM 2003, Accounting for Managers: Interpreting accounting information for decision-making, John Wiley, Chichester. strategic decision to build up more long-term debt instead of short term. 1. It is still the UKs second biggest Supermarket(Butler, 2016).The largest retailer Tescos capital structure when compared to Sainsburys. an effect on the share price of the organisation. However, Tesco has acquired more debt than Sainsbury. Sainsburys -20.64%, Tesco -46.95%, Financial analysis is used to evaluate economic trends, set financial policy, build long-term plans for business activity, and identify projects or companies for investment. trade receivables in 6.2 days and not had to pay trade payables for 45.7 days. Raising capital is an essential part of any firms (Tesco 2019)). to explore millions of study resources. Both businesses have a high level of turnover and high level of cash-generation which could be used to meet short-term obligations. Sainsburys has been successful to develop a strong brand image, which has been the reason for about 17 percent increase in the overall sales of the company. Sainsbury PLC and Tesco PLC Financial Analysis. of the UKs biggest retail companies. Home Retail group owned retailers such This figure is less Tesco ensures the availability of assets to meet its current and long-term obligations, whereas Sainsburys obligations are relatively more than its assets. With this the value of inventories will be lower than the value recorded on financial statements. It should not be treated as authoritative or accurate when considering investments or other financial products. Firms can enter the international markets through different strategies, including licensing. PLC has increased their total equity by 362m from 2014 to 2016 where total In comparison with Tesco, Tesco has excellent use of its capital, increasing to 26.13% in 2015, almost a 43% increase. Note: Ratios calculated from data in Table 1. and their current policy has a dividend cover that is fixed at two times the Investment Analysis of Tesco, Sainsbury, Morrison and Marks And Spencer, Background information on Sainsbury's Plc, get custom Premium Fashion Range The range will cost more than previous budget that Tesco has much higher debt to equity ratio, long term debt to capital WebThe Zacks Consensus Estimate for 2023 (ending February) has increased 3 cents in the last 7 days. BusinessEssay. 2016, was 11.29, this is almost half the sector average. you to an academic expert within 3 minutes. 10 minutes with: Financial Performance Analysis of Tesco Plc and J Sainsbury Plc. The site owner may have set restrictions that prevent you from accessing the site. acquisition of Home Retail Group, they should be looking to continue this brand, and one-day delivery service, the future does look bright for "Sainsbury PLC and Tesco PLC Financial Analysis." Form above analysis it is clear that Tesco with large operating scale and resources giving tuff competition to its competitor Sainsbury. However, Sainsburys leading competitor is Tesco PLC, therefore the main comparison throughout the report will be made between J Sainsbury PLC and Tesco PLC. Both Sainsburys and Tescos main business comes from grocery sector, however both companies have additional businesses such as insurance and their own brand of clothing (Sainsbury, 2016). In this report we aim to present and evaluate the past, present and future of J Sainsbury plc. Efficiency ratios determine how efficient a company is using liabilities/ assets to generate revenue for the business. This essay was written by a fellow student. Sainsburys has revealed its first quarterly sales growth in more than two Sainsburys have many things planned for the future, that Although the firms Free resources to assist you with your university studies! Sainsburys is the UKs Second biggest supermarket (Armstrong, 2016).The company is working to integrate the 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. This study explores the different theories of international entry strategies and then analyses the international strategy of Tesco Plc. The current ratio measures Profitability ratios measure a companys profitability. Sainsburys has used their capital to their benefit in 2013 and 2014, but in 2015, it is very low. Sainsbury defied the gloomy rhetoric around consumer spending in its third quarter to January 7 as it raised full-year guidance on the back of a record Christmas. Sainsburys shares. The increase in customers will be attractive to investors as WebIt indicates entity's strengths and position in competitive markets also useful for effective decision making and further strategic planning activities ( Ebrahimi and Talebnia, 2016 ). 2016). The following tables provide calculations for the chosen ratios. 2016) When looking at Sainsburys inventory days Investor confidence in both businesses would allow the ratios to be lower. .I believe this is important to potential investors as a premium fashion brand Such measures have become increasingly popular among investors and financial evaluators as they provide detailed information about the financial performance of a company (Atrill & McLaney, 2004). Study for free with our range of university lectures! Whereas Tesco have seen a decrease over the long-term debt than some of its main competitors. As profits are used to fund capital expenditure and pay dividends, these measures will be important to analysts and closely watched in terms of industry comparisons. This shows the company cares greatly 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. likely to be a result of their change in policy, which is aimed at trying to lessen a great amount in their 2016 yearend(Morgan, 2016). Introduction. The key point to recognise in Chart 1 is that the firms 48 Vitosha Boulevard, ground floor, 1000, Sofia, Bulgaria Bulgarian reg. Gearing ratio indicates the financial risk of a company. A ratio of 2:1 is usually considered a benchmark, however, this may vary across industries depending on cash-flow. WebSainsbury was more than that of Tesco in 2015. Tesco PLC as I did for Sainsburys so that a fair comparison could be made of This rise occurred dividend that is being paid out. Tesco. 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. The technique of ratio analysis is used by an entity as. In reference to analyze financial position several ratios will be showed in comparing and similar. According to Kantar Worldpanel (2014), over the past 3 years, the 3 grocers above have taken a combined 3.5 share points from competitors, equating to around ?4.4Billion in sales. from https://markets.ft.com/data/equities/tearsheet/financials?s=TSCO:LSE&subView=BalanceSheet. may be of interest to potential investors. average to gain outstanding credit from sales. Need urgent help with your paper? 61.08% of Tescos capital structure whereas in the same year, debt financing Sainsburys used to have a clothing range, at the cheap end conclusions made previously that Sainsburys has a very low leverage ratios, Recently, Tesco has announced it will enter the Indian market, under a 50:50 joint venture with Tata, making it the first foreign supermarket to enter Indias ?330Billion retail sector. Tesco Plc (2011) states, that the retail industry is a highly. Analyzing the financial indicators of Sainsbury PLC and Tesco PLC, it can be determined that the overall profitability of Sainsbury PLC has remained relatively less than Tesco PLC. These ratios are strong indicators that the firm is a safe and the increasing popularity of discounted grocery stores such as Lidl and are paid out in two separate payments. The analysis will be based on the calculation of a number of ratios measuring profitability, efficiency, financial standing and investment opportunities. current assets than current liabilities. Table 2 above shows a number Both companies operate in the UK grocery sector, with both classed in the big-4 supermarkets. for the past five years Sainsburys current liabilities have exceeded their indicate that there is lower risk to the company. context. B. in a healthy position in terms of its financing and is considerably less Again, this would be important to a shareholder as a company would use income for either dividends or capital expenditure; so, if dividends are low, investors would expect higher capital expenditure in the hope of increasing the future value of the business, increasing share-price, leading to capital gains. Sainsbury PLC, SBRY:LSE profile FT.com. This growing business remains full of, opportunities to grab ideas and opinions to encourage its employees and customers. It seems clear that Sainsburys is and will Therefore, the company is more focused to enhance and expand its business internationally. This is because any shares My financial analysis and ratios for Tesco and Sainsburys are derived from the companys annual report and is a valued tool for investors. 23 Pages. service in London(Butler, 2016) . over the past three years. growth has slowed down in recent years it is still a very profitable business Sainsbury also. directors aim to provide a dividend policy that is affordable to the business, Tesco shows how over the past 3 years they have maintained having greater Sainsburys, the fact that they have little closing inventory is beneficial as (2022, December 14). the second largest supermarket in the UK, as we discussed earlier in the essay, take the information we already have on Sainsbury PLC and put it into some Essay. Other ratios to be considered are Gross Profit Margin and Net Profit Margin. WebThe essay attempts to carry out a strategic financial evaluation and analysis of two companies: TESCO and Benedict Co. Tesco is a leading UK shopping mart in the firm in terms of its capital structure as the company uses both debt and equity reason for this could be because ever since the Great Recession of 2007 many safeguards the company from bankruptcy in case Sainsburys suddenly begins to This shows that The Quick ratio is very similar to the to the current ratio Note: Adapted from Tesco PLC, Financial Times, 2016, Chart 2: Pie Theory charts for Tesco PLC This allows the management to evaluate the strategies of the company with its peers. The date in which dividends are recorded and paid will have According to Sainsburys annual report (2013), the companys online sales have contributed significantly to its business i.e. Overall, Tesco has remained efficient to sell commodities at higher prices to their customer that has eventually increased its profitability. To export a reference to this article please select a referencing stye below: If you are the original writer of this essay and no longer wish to have your work published on UKEssays.com then please: Our academic writing and marking services can help you! This is not the main way to perform well however it is necessary. A ratio of less than one suggests that the company may not have sufficient resources to settle its short-term debt obligations. essay, An Analysis of Sainsburys Supermarkets Ltd and the Effect of the Credit Crunch on Its Performance, Tesco For my assignment I have chosen Tescos. Supplementary financial measures are useful as they provide a much clear and more understandable view about the companys performance based on which users can make their decisions better. Well write a 100%plagiarism-free paper this fast! Did you know that we have over 70,000 essays on 3,000 topics in our BusinessEssay, 14 Dec. 2022, business-essay.com/sainsbury-plc-and-tesco-plc-financial-analysis/. Again, Tesco Plc will be the favoured choice due to its exposure to non-food business as well as international operations, which have potential to drive future sales. Retail Group is now complete. experience cash flow or income issues. a good company. Although due to the downturn of the British economy, Higher receivables present higher risks, given some consumers may have an in-ability to pay. & Randolph, 2013). This shows that Sainsburys has the least movement in Another thing Sainsburys are doing that is The organisation pays dividends to its shareholders in order to remain focused This would be the value of a companys current assets that could be converted to cash over the next twelve months compared to the value of liabilities that may mature over the same period, (Peterson, 2012). Web1869. In comparison, Sainsburys competitor position over a short term period (twelve months). figures show that Sainsburys has a debt to equity ratio of 0.3791 in 2016. Looking at both Sainsburys and Tescos quick ratio values for the past five stores. and reliable choice for potential investors however the figures must be
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