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留学生作业阿根廷国家队官方赞助商：Tesco Financial Analysis
2017-07-07 来源: 51due教员组 类别: Report范文
下面为大家整理一篇优秀的Report范文- Tesco Financial Analysis，供大家参考学习，这篇论文讨论了特易购的财务。特易购是全球三大零售企业之一，在世界其他大洲都有经营。该店还有多家子公司，包括特易购银行、特易购手机等。在2015年的时候，该公司的收入、销售额等同比上一年都有下降。这是艰难的一年，那一年特易购的净损失高达50亿英镑。这可能意味着特易购正在失去市场份额，或者市场需求有所减少。
Tesco is a grocery store based in the UK that operates in many other continents in the world. Founded in 1919 by Jack Cohen, the grocery store has become one of the largest retailers in the world in terms of revenue. The store also has many subsidiaries including Tesco Bank, Tesco Mobile and etc. The firm is traded on the London Stock Exchange (LSE: TSCO) and is a part of the FTSE 100 Index. However, in 2015, the company has had a tough year with revenues, net income, and cash all declining from the previous year. The revenue totalled 62 billion pounds and the net loss is 5 billion pounds. This paper will dig deeper into the specifics of the financial statement and compare this year’s results with that of previous years’ to get a comprehensive view of the financial performance of Tesco.
2. Financial Analysis
2.1. Sources of revenue
The main source of revenue is retailing and selling the grocery products in their stores.
2.2. Profitability ratios
These ratios are certainly not prosperous because the net income is negative. So all of the profitability ratios are negative. At the end of the income statement, the firm listed the underlying profit before tax and showed the adjustments for the total restructuring and other off line items. With these included, they showed a profit of 961 million pounds. However, to be GAAP-compliant, the net income is negative 5 billion pounds. The profitability ratios would deserve a low rating for the potential investors.
2.3. Liquidity ratios
The current ratio and quick ratio are both above 1, which means that the firm is will be able to pay the current liabilities with the current assets. However, the cash ratio is lower, which means that most of the current liabilities are accounts receivables. The net working capital to assets is also relatively low. I would give a medium rating for the liquidity ratios.
2.4. Leverage ratios
The leverage ratios suggest that the firm is rather highly leveraged, with 84% debt and 16% equity. Although leveraging up and trying to use all the opportunities to grow this firm is a positive sign. This figure is rather high and implies a higher risk for the firm, especially when their net income is negative. They may not be generating enough money in the future to repay their debts. I would give their leverage ratios a low rating.
2.5. Efficiency ratios
The efficiency ratios are definitely looking better than the other ratios because about 12 to 16 days for the average collection period and days in inventory is somewhat fast. I would give a middle to high rating for the efficiency ratios.
3. Comments on the financial position
3.1 Horizontal Analysis
We can see that the revenue has been constant from 2012 to 2014. However, the revenue decreased in 2015 and further decreased in 2016. This suggests that Tesco is having trouble generating revenue. This could mean that Tesco is losing market shares or that the general economic environment suggested a decrease in demand.
Net income over the past 5 years has been very unstable, with the largest loss in 2015. Hwoever, we can also assume that the net loss in 2015 does not represent its usual performance and that they usually profit. We can see that from 2016, they are starting to recover a little.
The size of the firm has been shrinking since 2015 and it continued to shrink in 2016. As a matter of fact, the firm has been decreasing in total assets ever since 2012. The trend is not a positive sign for investors.
Over the past few years, Tesco is trying to leverage up and fully utilize all the opportunities they have. Although this could bring a positive outcome, this could also signify a high risk. Investors who are more risk loving can consider this investment.
3.2 Vertical Analysis
For the vertical analysis, I calculated the balance sheet so that every item is shown as a percentage of total assets. I calculated the income statement such that every item is shown as a percentage of total revenue. From the percentage income statement in the appendix, we can see that the main reason for Tesco’s negative net profit is that the cost of goods sold is higher than the revenue. For such a popular grocery store, I believe that many reader have shopped there before enjoyed the low prices that you can get. However, the store is losing money and there seemed to be a problem with their pricing and cost controlling. If their sales is not enough to cover the cost of goods sold, how can they profit given that there will be more expenses associated with selling? From the percentage balance sheet, I also drew the conclusion that the leverage might be too high for the firm right now, especially when it is not profiting. I consider it a significant risk.
3.3 Overall investment suggestion
Overall, based on the annual report ratios analysis, and the vertical and horizontal analysis, I would only recommend this equity investment to risk loving investors. 2015 has been a tough year for Tesco, and as the CFO said on the annual reports, they are trying to make a difference and change their current condition. Although further analysis is needed such as industry and macroeconomics analysis, I would say that solely by the data presented on the financial statements, this is not the perfect investment choice for risk averse investors. For the risk loving investors, due to the high leverage, the experienced management team, and the brand image for the past 100 years, I suggest that they can try to invest in Tesco because there is chance that the firm will thrive again.
One of the limitations of my study is that I believe that investors will be more interested in knowing how well Tesco can perform in the future rather than how it performed in the past. The goal of analysing the past annual report is to generate an idea of how it could potentially perform in the future. However, if I were to do it again to better suit the demands for the investors, I would use analysts’ consensus estimations of future revenue growth and related ratios from sources such as Capital IQ. I would also include more information about their stock performance.
Another limitation is that I believe that investors will also want to compare Tesco’s performance with that of the industry average and its main competitors’ because it is hard to tell the performance of a single firm without a benchmark to compare with. So if I were to do this project again, I would include some industry average and main competitor data.
In conclusion, I believe that the profitability and the liquidity for Tesco in 2015 is at one of its lowest levels in the past recent years. The firm is leveraging up and trying to utilize all of the opportunities they have. This risky movement might help the firm to generate high profits in the future and thrive again. So I recommend some risk loving investors with both the ability and willingness to take risk to invest in this stock. I do not recommend this stock to those with low willingness and/or ability to take risk.
Markets.ft.com. (2016). Tesco PLC, TSCO:LSE financials - FT.com. [online] Available at: http://markets.ft.com/research/Markets/Tearsheets/Financials?s=TSCO:LSE [Accessed 22 Jun. 2016].
Tesco.com. (2016). Tesco | Online Groceries, Homeware, Electricals & Clothing. [online] Available at: http://www.tesco.com/ [Accessed 22 Jun. 2016].
Tesco Official Site. (2016). Tesco Annual Report and Financial Statements 2015. [online] Available at: https://www.tescoplc.com/files/pdf/reports/ar15/download_annual_report.pdf [Accessed 22 Jun. 2016].
1. Balance sheet
2. Income statement
1. Profitability measures:
Return on assets=Net income/Total assets
Return on capital=Net income/(Long term debt+ total equity)
Return on equity=Net income/Total equity
Operating profit margin=Net income/Net sales
2. Efficiency measures
Asset turnover=Revenue/Total assets
Receivables turnover=Revenue/Accounts receivable
Average collection period=365/Receivables turnover
Inventory turnover=Cost of goods sold/inventory
Days in inventory=365/inventory turnover
3. Leverage measures
Long term debt ratio=Long term debt/ (long term debt+ equity)
Long term debt to equity ratio=Long term debt/equity
Total debt ratio=Total debt/Total Asset
Times interest earned=EBIT/Interest expense
4. Liquidity measures
Net working capital to assets= (Current assets-current liabilities)/total assets
Current ratio= current assets/ current liabilities
Quick ratio= (cash+ accounts receivable)/current liabilities
Cash ratio= cash/current liabilities