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Competing Company Compaisons - Essay Example
Author : braedenchamplin
Pages 3 (753 words)
This research paper will reveal the financial analysis techniques used to evaluate the financial performance of Tesco in comparison with Morrison and evaluate the company's worthiness as an investment.
Tesco plc is an international retailer company having operations in more than 15 countries with over 2000 stores with huge market turn over…
Each sets of these ratio figures indicate that Tesco would possibility have some difficulties in meeting its financial obligations, so these numbers will be important to watch closely in the future. On the other hand Morrison has also a bad current ratio it means in the company could have problems in paying their debts.
Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. Tesco has working capital of m 165 for the year 2006 and for the year 2005 is m 24 which is a good sign for the company. The liquidity of the company is not so good and they have to focus on it. (M C Shukla, 1999)
The return on assets of Tesco is 7.89% and 8.0 for the year 2006 and 2005 and for Morrison the ratio is 4 and 14 for the year 2006 and 2005. by comparing the two companies we have analysed that TESCO is much efficient in generating revenues from their assets than Morrison. (Sheldon Gates, 1993)
ROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every dollar of net assets .tesco financial statements shoewd return on equity of 17.57% in FY 2006 and 20 in FY 2005.howevwr the Morrison showed return on equity of 7.3 in FY 2006 and 24.3 in FY 2005. ...