The Business and Financial Performance of Tesco Plc

Oxford Brookes University

Research and analysis report

Topic 8



The Business and Financial Performance of

Tesco Plc.

By: BINAY YADAV

(6338 words)

March 2009

Reg. no.1346326

CONTENT

1. INTRODUCTION

1.1 TOPIC CHOSEN

1.2 REASON FOR TOPIC CHOSEN

1.3 AIMS AND OBJECTIVE 3

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2. INFORMATION GATHERING

2.1 SOURCES USED AND REASON

2.2 METHOD USED TO GATHER INFORMATION

2.3 LIMITATION TO INFORMATION

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3. ANALYSIS AND PRESENTATION

3.1 OVERVIEW

3.2 FINANCIAL ANALYSIS

3.2.1 REVENUE ANALYSIS

3.2.2 PROFITABILITY MEASURE

i. GROSS PROFIT MARGIN

ii. NET PROFIT MARGIN

3.2.3 EARNING MEASURE

i. RETURN ON CAPITAL EMPLOYED

3.2.4 STABILITY RATIO

i. GEARING RATIO

ii. INTEREST COVER RATIO

3.2.5 LIQUIDITY RATIO

i. CURRENT RATIO

ii. QUICK RATIO

3.2.6 INVESTOR RATIO

i. BASIC EARNING PER SHARE

ii. DIVIDEND PER SHARE

iii. SHARE PRICE

iv. PRICE / EARNING RATIO

3.2.7 EFFICIENCY MEASURE

i. NE T ASSET TURNOVER

ii. RETURN ON TOTAL ASSET

3.3 NON FINANCIAL ANALYSIS

i. SWOT ANALYSIS

ii. STRATEGIC ANALYSIS

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4. CONCLUSION

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5. RECOMMENDATION

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6. BIBLIOGRAPHY

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7. APPENDICES

i. RATIO CALCULATION

ii. FINANCIAL STATEMENT 33

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1. INTRODUCTION:

1.1Topic Chosen

This research and analysis report is based on topic 8 'The business and financial performance of an organization' over a three year period. This report analyses the financial situation of Tesco Plc. This report will analyse the financial situation of Tesco Plc from an investor's point of view. It will be carried out by looking at the key ratios and important aspects of the business and evaluating Tesco performance in light of general economic environment. To make the analysis more meaningful, J Sainsbury, one of the close rivals has been chosen.

1.2 Reason for the topic chosen

I have chosen this topic of analysing the position of Tesco Plc because of my interest in the retail sector and have always been attracted by vision and values what Tesco possess in comparison to its competitor. I am also impressed by the values of Tesco which its core purpose is to create value for customer to earn their lifetime loyalty. Tesco is the leading retailer in the UK market occupying over 31.2% market share (TNS worldpannel 30 December 2008) despite of entrants of many rivals in the same sector. Tesco has a well established and consistent strategy for growth which has allowed them to strength the core UK business and drive expansion into new market. EC Harris writes in a article that Tesco have been able to sustain a long term position in its development programme because of the track record in being able to deliver up to 30% cost saving in schemes, improving on the aggressive delivery plan as well as introducing retail rollout 'best practice' such as programme management and supply chain management.

The press release www.ft.com says that Tesco has cast itself as the nation's biggest discounter response to research suggesting that consumers are more anxious about food prices. And I am so interested to know that how Tesco is much profitable after being the biggest discounting superstore.

Tesco plc's has opened a chain of convenience store named "Fresh and Easy" Neighbourhood market in 2007 in United States which is one of its key expansions. They have opened over 60 stores since last November and are still continuing its expansion. Also the financial news on 12th August 2008 announces that Tesco is going to develop cash-and-carry business