Essays on Analysis of Tesco Plc and its Market Segment Case Study

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The paper 'Analysis of Tesco Plc and its Market Segment" is a great example of a finance and accounting case study. Companies and organizations employ the services of financial analysts to undertake the financial analysis of their performance. In most cases, financial analysts use financial statements for several years of a company or a particular financial year statements in conducting their analysis. Financial analysis is the process of selecting, evaluating, and interpreting financial data of a company with other pertinent information which assists in the assessment of risk and return associated with a particular investment (Drake & Fabozzi 2012, p.

101). Analysis of financial data has some benefits to both internal and external stakeholders of a company. It may be used in evaluating the efficiency of operations, credit policies effectiveness, and company’ s creditworthiness among other things. In this report, an analysis of Tesco plc and its market segment is conducted by mainly using financial ratios. Discussion of Tesco plc strategy and market share, as well as comparison of profitability with a competitor, are also included in this report. Overview of Tesco PLC Tesco PLC is a multinational general merchandise and grocery retailer founded in 1919 in London, United Kingdom.

The company is one of the World’ s largest retailers having its headquarters in Chestnut, Hertfordshire, United Kingdom. Tesco PLC has expanded its operations and it is now conducting business in 12 countries across Europe, North America and Asia. It is currently employing over 530,000 people (Tesco PLC 2014). Financial analysis of Tesco PLC will be mainly drawn from the primary source financial data, that is, the annual report and disclosures of Tesco PLC. The current events such as extraordinary losses, development of a new product, and acquisition of another company which has a bearing on future prospects will be also considered in relation to Tesco PLC current situation. Financial Statement Analysis Financial management and effective planning are required in order to have a sustainable business.

Analysis of financial ratios thus becomes a useful tool for the management in improving understanding of a company’ s financial results and provision of key indicators of organizational performance. Ratio analysis is important in this analysis because it focuses on the evaluation of a company’ s market performance and financial policies.

The financial ratio analysis of Tesco Plc is done for the financial year 2014 and compared it with that of the previous year 2013. The first part of Tesco PLC financial ratio analysis is the construction of profitability ratios. Profitability Analysis Profitability analysis is achieved by calculating profitability ratios. Profitability, in essence, reflects the end result of business operations. Profit margin and rate of return are the two types of profitability ratios. Gross profit margin, net profit margin and operating profit margin ratios are common profit margin ratios.

Rate of return ratios include return on assets and return on equity ratios. It reflects the relationship between profit and investment (Chandra 2011, p. 80). Profit margin ratios Gross profit margin ratio This ratio is calculated as follows: Gross profit/Sales revenue. The 2014 and 2013 Tesco gross profit margin ratios are as follows: 20142013 4,010/63,557= 6.3 percent4,154/63,406=6.55 percent This ratio indicates the amount of money left out of the sales revenue the company has generated (Tracy 2012, 14). This will be used in paying the expenses and remaining becomes net profit. Interpretation is that 6.3 percent of Tesco PLC sales revenue ended up as profit in 2014 and 6.55 percent in 2013.

The company’ s gross profit margin ratio marginally decreases in 2014 from that of 2013 indicating increases in costs of operations of the company.

References

Brigham, EF & Houston, JF 2009, Fundamentals of financial management. South-Western Cengage Learning, Mason, OH.

Chandra, P 2011, Financial management: theory and practice, 8th edn. Tata McGraw-Hill Education, New Delhi.

Dlabay, L. R & Burrow, J 2007, Business finance. Thomson South-Western, Mason, OH.

Drake, P & Fabozzi, F. J 2012, Analysis of financial statements, 3rd edn. John Wiley & Sons, New Jersey.

Gitman, LJ & McDaniel, CD 2008, The future of business: the essentials, 3rd edn. Thomson South-Western, Mason, OH.

Henry, A 2011, Understanding strategic management, 2nd edn. Oxford University Press, Oxford.

Lee, T. A 2006, Financial reporting and corporate governance. John Wiley & Sons, Chichester.

Siddiqui, S. A & Siddiqui, A. S 2005, Managerial economics and financial analysis. New Age International, New Delhi.

Tesco PLC 2014, History, accessed 10 July 2014, .

Tracy, A 2012, Ratio Analysis Fundamentals: How 17 Financial Ratios Can Allow You to Analyse Any Business on the Planet. Createspace, Sydney.

Vasigh, B, Fleming, K & Mackay, L 2010, Foundations of airline finance: methodology and practice. Ashgate Publishers, Burlington.

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