Financial Ratio Analysis of Morrison in Comparison with Tesco
Financial Ratio Analysis of Morrison in Comparison with Tesco
Introduction
The purpose of this report is to critically analyse the financial ratio results of Morrison 2008 and 2009 as an equity analyst and compare it with like for like by using Tesco supermarket. To achieve this report will be looked at in four main areas. Firstly, we will use financial ratios obtained from annual reports of 2008 and 2009 to analysis and appraise Morrison’s financial performance. This would be followed by a comparative analysis with Tesco, for the same period. In addition, a trend analysis will be done to show the pattern of Morrison’s financial performance over the years 2006 to 2009. Furthermore, a comparison will be made with industry average figures where available to show its development in the industry.
Finally, a conclusion would be argued to reveal how well the managers and the company have performed and how well they handled the demands of the economic downturn to reduce the shock on their financial performance.
The ratios would be looked at in five broad areas: Profitability, Liquidity, Gearing, Working Capital management and Investors.
PROFITABILITY
“…Profitability relates profits to the investment made to achieve them.” R.H Parker (2007) it also provides an insight to the degree of success in achieving the purpose of the business.
Morrison Tesco
Profitability ratios 2009 2008 2009 2008 ROCE- Return on Capital Employed 10.82% 10.58% 11.44% 14.03%
Operating profit margin 4.62% 4.72% 5.90% 5.90%
Gross profit margin 6.28% 6.31% 7.76% 7.67%
Mark up (Not calculated in class) 6.71% 6.73% 8.42% 8.31%
Asset turnover ratio (useful productivity/ efficiency ratio) 2.35 times 2.24 times 1.94 times 2.38 times
Cost of sales as % of sales 93.37% 93.69% 92.24% 92.33%
Operating expenses as % of sales 1.93% 3.03% 2.30% 2.17%
ROSF/ ROE 10.18% 12.65% 16.67% 17.90%
Morrison had a
Introduction
The purpose of this report is to critically analyse the financial ratio results of Morrison 2008 and 2009 as an equity analyst and compare it with like for like by using Tesco supermarket. To achieve this report will be looked at in four main areas. Firstly, we will use financial ratios obtained from annual reports of 2008 and 2009 to analysis and appraise Morrison’s financial performance. This would be followed by a comparative analysis with Tesco, for the same period. In addition, a trend analysis will be done to show the pattern of Morrison’s financial performance over the years 2006 to 2009. Furthermore, a comparison will be made with industry average figures where available to show its development in the industry.
Finally, a conclusion would be argued to reveal how well the managers and the company have performed and how well they handled the demands of the economic downturn to reduce the shock on their financial performance.
The ratios would be looked at in five broad areas: Profitability, Liquidity, Gearing, Working Capital management and Investors.
PROFITABILITY
“…Profitability relates profits to the investment made to achieve them.” R.H Parker (2007) it also provides an insight to the degree of success in achieving the purpose of the business.
Morrison Tesco
Profitability ratios 2009 2008 2009 2008 ROCE- Return on Capital Employed 10.82% 10.58% 11.44% 14.03%
Operating profit margin 4.62% 4.72% 5.90% 5.90%
Gross profit margin 6.28% 6.31% 7.76% 7.67%
Mark up (Not calculated in class) 6.71% 6.73% 8.42% 8.31%
Asset turnover ratio (useful productivity/ efficiency ratio) 2.35 times 2.24 times 1.94 times 2.38 times
Cost of sales as % of sales 93.37% 93.69% 92.24% 92.33%
Operating expenses as % of sales 1.93% 3.03% 2.30% 2.17%
ROSF/ ROE 10.18% 12.65% 16.67% 17.90%
Morrison had a
References: Morrison’s Annual Reprot 2009 Tesco’s Annual Report 2009 Business accounting 11th Edition Frank wood 2008 Business finance theory and Practise Eddie Mclaney Successful Finanace for Non-Accountants, Brian Brown R.H Parker (2007) Paul M Collier (2009)