tesco finance
KEELE UNIVERSITY
KEELE MANAGEMENT SCHOOL
ACCOUNTING PRINCIPLES ESSAY 2013-14
MAN-40074
Essay title: Tesco Plc. 2012 Annual Accounts compare them with Sainsbury Plc. as appropriate
Word Account: 1957
Student Name:SICHEN LU
Student ID:1301529701
Module Leader: Professor Istemi Demirag
Date of Submission: 2nd December 2013
Introduction
Tesco was established in 1919 and now has become the largest retailer in the UK, the second largest retailer measured by profits and third largest retailer measured by revenues in the world. It has operations in 14 countries with 520,000 people employed and millions of customers served every week (Tesco, 2013). Tesco’s 2012 Annual Report has just published, through which we can critically analyse the company’s operational and financial conditions. There are numerous relationships between the figures published in the annual report, and ratios have been commonly used for conducting a quantitative analysis of these relationships (Atrill and McLaney, 2013). They are calculated by comparing the current year numbers (2011-12) with previous years (2010-11) and other companies. Hence, J Sainsbury plc (known as Sainsbury’s) is chosen since it is the major competitor of Tesco at home. The ratios can be classified into five categories, namely profitability ratios, liquidity ratios, activity or efficiency ratios, gearing ratios and investment ratios. When using the ratios to assess two companies’ performances, relevant social, political and economic changes will all taken into account.
Profitability Ratio
Profitability ratios are the ratios used to assess a company’s capability to generate earnings in comparison to its expenses and other relevant costs. Major profitability ratios include return on investment (ROI), return on capital employed (ROCE), gross profit margin and net profit margin. Firstly, ROI is a concept evaluating the efficiency of an investment, and equals to ‘net profit after tax’ dividing
KEELE MANAGEMENT SCHOOL
ACCOUNTING PRINCIPLES ESSAY 2013-14
MAN-40074
Essay title: Tesco Plc. 2012 Annual Accounts compare them with Sainsbury Plc. as appropriate
Word Account: 1957
Student Name:SICHEN LU
Student ID:1301529701
Module Leader: Professor Istemi Demirag
Date of Submission: 2nd December 2013
Introduction
Tesco was established in 1919 and now has become the largest retailer in the UK, the second largest retailer measured by profits and third largest retailer measured by revenues in the world. It has operations in 14 countries with 520,000 people employed and millions of customers served every week (Tesco, 2013). Tesco’s 2012 Annual Report has just published, through which we can critically analyse the company’s operational and financial conditions. There are numerous relationships between the figures published in the annual report, and ratios have been commonly used for conducting a quantitative analysis of these relationships (Atrill and McLaney, 2013). They are calculated by comparing the current year numbers (2011-12) with previous years (2010-11) and other companies. Hence, J Sainsbury plc (known as Sainsbury’s) is chosen since it is the major competitor of Tesco at home. The ratios can be classified into five categories, namely profitability ratios, liquidity ratios, activity or efficiency ratios, gearing ratios and investment ratios. When using the ratios to assess two companies’ performances, relevant social, political and economic changes will all taken into account.
Profitability Ratio
Profitability ratios are the ratios used to assess a company’s capability to generate earnings in comparison to its expenses and other relevant costs. Major profitability ratios include return on investment (ROI), return on capital employed (ROCE), gross profit margin and net profit margin. Firstly, ROI is a concept evaluating the efficiency of an investment, and equals to ‘net profit after tax’ dividing
References: Atrill, P. and McLaney, E. (2013) Accounting and Finance for Non-Specialists (8th edition). Pearson Education Ltd. BBC News (2012) Tesco 'disappointed ' by its UK Christmas trading (online). Available at: (Accessed: 30th November 2013) BBC News (2013) Sainsbury 's threatens court over Tesco price comparison (online) Davies, T. and Bockzo, T (2005) Business Accounting and Finance (2nd Edition). McGraw Hill. Sainsbury’s (2013) Annual Report 2012 (online). Available at: http://www.j-sainsbury.co.uk/investor-centre/reports/2012/annual-report-and-financial-statements-2012/ (Accessed: 30th November 2013) Tesco (2013) Annual Report 2012 (online) The Telegraph (2012) Tesco pays £40m to exit Japan (online). Available at: (Accessed: 30th November 2013) Appendix Tesco (2010-11) Tesco (2011-12) Sainsbury (2011-12) Profitability Ratio