Tesco is a FTSE 100 Index constituent and has a strong position in the London Stock Exchange. The company’s corporate history shows that “it had a market capitalisation of approximately £24.4 billion as of 15 January 2012” (Tesco Plc’s brand licensing, n.d.). This paper will critically analyse Tesco’s financial strategy with respect to the firm’s sources of funds and dividend policy. The paper also recommends an appropriate financial strategy for the organisation.
Tesco’s financial strategy
In order to analyse the company’s financial strategy effectively, one must evaluate Tesco’s financial performance over the last years. The following chart indicates the firm’s turnover and profit for the last five fiscal periods.
From the above figure based on Tesco’s historical financial data, it is evident that the Tesco’s turnover and thereby profit have been consistently increasing over the last five years. At the end of the 2005-06 financial period, Tesco was positioned as the world’s fourth largest retailer behind Wal-Mart, Carrefour, and Home Depot with turnover £38,300 million and a profit of £1,576 million. In the following fiscal year, the company improved its position and moved ahead of Home Depot with a £ 1,899 million profit. A fall in the US dollar value against the British pound also contributed to the company’s achievement. Tesco further improved its financial status over the next two accounting periods also despite the adversities of the 2008-09 global financial crises. ...