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Analyse and evaluate the performance, liquidity and financial structure of Tesco plc over the three-year period 2013 – 2015

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  • Post Date 2018-11-03T13:30:27+00:00
  • Post Category Essay Queries

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Analyse and evaluate the performance, liquidity and financial structure of Tesco plc over the three-year period 2013 – 2015

 

TASK ONE

Analyse and evaluate the performance, liquidity and financial structure of Tesco plc over the three-year period 2013 – 2015.

You should use the accounting ratios shown below and any other information relevant to Tesco plc taken from the annual report and accounts for 2015 and any other source of evidence that you believe helps to explain the company’s performance and position.

You should also highlight any limitations in the use of accounting ratios that you found in your analysis and evaluation of the company over the three-year period.  This may include reference to the movements in the company’s share price particularly in 2015.

This task contributes 30% to the overall coursework mark.

                                                                             Word limit 300 Words

TESCO PLC                                                 

                                                         2015        2014       2013

Performance ratios

 

Pre-tax profit margin  ( % )              ( 10.2 )      3.6         3.0

Return on total assets  ( % )           ( 14.1 )       4.5         3.9

Return on capital  ( % )                   ( 25.6 )       7.9         6.3

 

Liquidity ratios

 

Current ratio  ( : 1 )                            0.60       0.73       0.65        

Acid test ratio  ( : 1 )                          0.45       0.56       0.45 

Stocks/ sales  ( % )                           4.80        5.60      5.80  

 

Gearing ratio 

 

Total debt/ net worth  ( % )             415.7       110.8    144.6

 

                                    Source:  Key Note Financial Database

SOURCES AND HYPERLINKS

Tesco plc  Annual Report and Accounts  2015

http://www.tescoplc.com/files/pdf/reports/ar15/download_annual_report.pdf

Understanding Tesco plc

http://www.tescoplc.com/index.asp?pageid=656

Key Note Financial Database

https://0-www.keynote.co.uk.emu.londonmet.ac.uk/company-report/financials/key-ratio/00445790

 

Tesco settles US lawsuit over profit overstatement  BBC Business 

26 November 2015

http://www.bbc.co.uk/news/business-34930313

TASK TWO

Senior management at LMU Plc have identified that there is a strategic need for a replacement machine to be acquired in one of its production departments. They have to make a choice between two models of the machine they have in mind. Model 1 is called Super and model 2 is called Deluxe. They are unsure as to which of the two models they should buy. They have given you the following profiles of the two models.

                                                                   Super                  Deluxe

Cost                                                           £500,000            £800,000

Net Cash Inflow                                               £                          £

Year           1                                              250,000               150,000

                   2                                              100,000               200,000

                   3                                              100,000               250,000

                   4                                                50,000               100,000

                   5                                              150,000               100,000

                   6                                              100,000               250,000

 

Scrap value                                                 20,000                 80,000

Cost of Capital                                                             12%

 

They want you to appraise the two prospective projects using the following investment appraisal techniques:

(i)           Payback

(ii)          Accounting rate of Return

(iii)        Net Present Value

(iv)        Internal Rate of Return

 You are told that funds are only available for only one model.

 

Required

(a) Write a report to the senior management of the company explaining how each of the aforementioned techniques works. Your report should include the advantages and disadvantages of each technique.                                                 50% 500 Words

(b) Explain briefly which machine you would recommend to senior management of LMU Plc under each technique and state your reason why you would recommend that machine. 20% 200 Words

 

ALL WORKINGS SHOULD BE SHOWN



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