Financial Information: Coursework Assignment [Instructor Name] Financial Information: Coursework Assignment Principal Activities of Tesco Plc.: Tesco Plc. Is one of the leading international retailers with its core business as in retailing of grocery…
The company has also recently initiated its telecom and data manager and distributions business lines (Bloomberg 2012). The company sells its products and services through its physical stores and also online ecommerce solutions to its millions of customers worldwide. The company operates for achieving its visions that is “to create value for customers to earn their lifetime loyalty” (Tesco Plc., 2011) and deliver its values “no one tries harder for customers and treat people how we like to be treated” (Tesco Plc. 2011). Auditors Report and its Importance The auditors of Tesco Plc are from the London office of PricewarehouseCoopers LLP. The independent auditor’s report briefly provides the responsibilities of directors and auditors along with the scope of the audit of the financial statements. The opinion of the independent auditors indicated that the company’s financial statements have been prepared according to IFRSs, which have been adopted by the EU and the information provided by the company represents true and fair view of the company’s operations and other affairs. The opinion of the external auditors also indicate that the directors report has been prepared in accordance with the requirements under the Companies Act 2006 however there are certain exceptions which the auditors have noted and reported. These exceptions are related to certain disclosures of Director’s compensation that are viewed not to fulfil the requirements of the law and there are some elements of information which auditors did not receive from the company for completion of the audit. The importance of external auditors report is significant as they are viewed by shareholders and other stakeholders as responsible for checking the validity and completeness of the information provided by companies in their financial statements and other related documents and the report provided by external auditors provide means for assessing the company’s current financial standing by outside world. Financial Ratio Analysis The financial ratio analysis of Tesco Plc has been performed based on the financial information provided by the Group in its consolidated financial statements for the years ending February 2010 and 2011. The findings of the ratio analysis is presented in the following table: Ratio Expression 2011 2010 2011 2010 Industry Result Result Average ROE Net Profit / Total Equity 2671/16623 2336/14681 16.07% 15.91% 19% Gross profit margin Gross Profit / Sales Revenue 5060/60931 4607/56910 8.30% 8.10% 10% Net profit margin Net Profit / Sales Revenue 2671/60931 2336/56910 4.38% 4.10% 3% Current ratio Current Assets / Current Liabilities 11,869/17,731 11,765/16,015 0.67 0.73 1.7 Inventory turnover period 365/(Cost of Sales/Inventory) 365/(55,871/3,162)) 365/(52,303/2,729) 21 19 50 days Payables’ turnover period 365/(Cost of Sales / Trade Payables) 365/(55,871/10,484) 365/(52,303/9,442) 68 66 20 days Gearing ratio Total Debt/ (17,731+12,852)/16,623 (16,015+15,327)/14,681 1.84 2.13 4% Total Equity P/E ratio Price per Share / Earnings per Share 401.90/33.10 419.70/29.33 12 14 9.0 x Share Price Source: (Yahoo! FInance, 2010-11) Financial information Source: (Tesco Plc., 2011) Horizontal Analysis Horizontal analysis is performed for the following financial items to indicate whether they have increased or decreased. 2011 2010 % Change Sales 60,931 56,910 7% Increase Operating Profit 3,811 3,457 10% Increase Share Price 401.9 419.7 -4% Decrease ...
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