Understanding and interpreting financial statements - Coursework Example

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Understanding and interpreting financial statements

Understanding and interpreting financial statements

Financial Statement Analysis involves the careful selection of data from the financial statements in order to assess and evaluate the firm’s historical financial performance. The study focuses on the performance of Morrison’s and Tesco companies for 2008 and 2009. The financial statement analysis is based on the financial statements of both Morrison’s and Tesco companies. The four groups are Turnover, Solvency, Profitability, and Liquidity. Reasons for using ratio analysis. The financial statement ratio analysis is conducted to compare the financial performance of Morrison’s and Tesco over time (2008 and 2009). Both companies are competitors in the United Kingdom Grocery Chain market segment. The financial statement analysis is used to aid management or any interested party to make more informed decisions. Ratio analysis is a better alternative when compared to using pure hindsight, gut feeling, or plain guesswork in terms of making decisions. According to Gibson (2008), financial statement analysis is useful in improving all decision making activities. Since, the financial statement ratios are taken from both company’s audited financial reports, the analysis is based on actual economic (buy and sell, etc.) conditions occurring in the United Kingdom during 2008 and 2009. Economic conditions include supply, demand, equilibrium, scarcity, opportunity cost, and government (tax and other legal interventions) conditions. ...Show more

Summary

Based on the above discussion, Tesco performed financially better than Morrison’s. There are more financial statement ratios indicating Tesco did better than Morrison’s. However, some financial statement ratios indicate Morrison’s performed financially better than Tesco. …
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