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Www Refinanceloanshomeequity Tag Credit Markets Refinance Loans Home Equity A Case Study on Tesco Plc

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On top of that, the gearing ratio is so important for the business for evaluation the financial performance. The Tesco’s gearing ratio of the year 2009 is 116.52% that is at a quite high level, while the ASDA’s is 84.49% at the same year. This shows the Tesco has higher financial risk than ASDA, because the company ahs more long-term loans which will affect the company’s financial performance. Otherwise, the interest cover of Tesco is 6.56 times which is less than ASDA (7.33 times), indicates that it will not to cause any concern regarding the company’s ability for paying the interest.

6.0 Conclusion
From the ratio analysis above, it shows the Tesco plc has steady financial performance in profitability, efficiency, liquidity, and gearing in 2009 compared to the last year. As the interpretation of the financial statements of Tesco plc and the comparison with ASDA plc, it can get that the Tesco Company did better in financial position in 2009 compared to 2008 in this industry, but still have many weaknesses need to improve. But, ratio analysis had many limitations and cannot reflect the company’s operation performance across-the-board so that should be considered more information about it. In the end, the gearing ratio about Tesco plc is 116.52% in 2009, which is quite high. This data has given the strong confident to investors, so that the investors can HOLD the shares of Tesco plc that would reach their expected results.

Reference:

Liu, C.C., 2007, A DEA study to evaluate the relative efficiency and investigate the reorganization of the credit department of farmers’ associations in Taiwan, Applied Economics, Nov 2007, Vol. 39, Issue 20, pp. 2663-2671.

Mark, H.L., 2010, Research, standard setting, and global financial reporting, Accounting Review, Jan 2010, Vol. 85, Issue 1, pp. 381-382, Available from: ehost/pdf?vid=10&hid=6&sid=9721b19e-c0fe-47cb-8487-aa7176a02aae%40sessionmgr13 [Assessed 07/02/2010]

Tesco plc, 2008, More than the weekly stop: Annual report and financial statements 2008, Available at: annualreport08 [Accessed 06/02/2010]

Tesco plc, 2009, The annual report and review 2009, Available at: annualreport09/ [Accessed 06/02/2010]

Appendix 1: Ratio Calculations for Tesco plc

Profitability:
1. R.O.C.E

2. Net Profit Margin

3. Gross Profit Margin

4. Operating Expenses Margin

Liquidity:
5. Current Ratio

6. Quick Ratio

7. Creditors Days

8. Stock Days

Efficiency:
9. Asset Turnover

10. Fixed Asset Turnover

11. Stock Turnover

Investor:
12. Gearing Ratio

13. Interest Cover

14. EPS (Earning per Share)

15. Dividend Cover

Appendix 2: Annual Reports of TESCO Company

Profit & Loss Account
2009 2008
mil GBP mil GBP
Turnover 54327.00 47298.00
UK Turnover 38191.00 34874.00
Overseas Turnover 16136.00 12424.00
Cost of Sales (50109.00) (43668.00)
Exceptional Items pre GP
Other Income pre GP
Gross Profit 4218.00 3630.00
Administration Expenses (1280.00) (1037.00)
Other Operating Income pre OP 236.00 188.00
Exceptional Items pre OP
Operating Profit 3206.00 2791.00
Other Income 110.00 75.00
Total Other Income & Int. Received 226.00 262.00
Exceptional Items
Profit (Loss) on Sale of Operations
Costs of Reorganisation
Profit (Loss) on Disposal
Other Exceptional Items
Profit (Loss) before Interest 3432.00 3053.00
Interest Received 116.00 187.00
Interest Paid (478.00) (250.00)
Paid to Bank (478.00) (237.00)
Paid on Hire Purchase
Paid on Leasing (13.00)
Other Interest Paid
Net Interest (362.00) (63.00)
Profit (Loss) before Tax 2954.00 2803.00
Taxation (788.00) (673.00)
Profit (Loss) after Tax 2166.00 2130.00
Extraordinary Items
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