Report on the Financial Analysis of J Sainsbury Plc and Tesco Plc for the potential investor
... Company analysis a. ... Comparative analysis a. Financial Ratio Analysis i. ... Gearing/Financial Risk v. ... Evaluation of Financial Analysis 5. ... Introduction The objective of financial reporting/statements is to provide information about the reporting entity’s financial performance and financial position that is useful to a wide range of users for assessing the stewardship of the entity’s management and for making economic decisions. This is a report on the operations of J. Sainsbury Plc and Tesco Plc, and will focus on a financial analysis and comparative analysis, from which an evaluation will be drawn on to determine which of the two companies would seem to be a more viable investment to a potential investor. ... Aims and Objectives The main aims of this report is to make a recommendation based on a financial analysis of J. Sainsbury Plc and Tesco Plc for the potential investor of which of the two companies to invest in. As a potential investor this report will be very useful to help determine whether or not to buy shares in the business, and it could also be used to indicate to current investors whether to hold or sell the shares they already own. ... Methodology The main source of information for this report was secondary research as the information was gathered from the annual report and financial statements of companies, newspapers, websites, books (literature). ... Brief Overview Sainsbury Sainsburys was founded in 1869 by John James and Mary Ann Sainsbury. ... It was so successful that further branches were opened in other market streets and by 1882 they produced the first Sainsbury brand product. ... The Sainsbury group today is one of the worlds leading retailers (3rd in the UK), playing a part in the lives of over 11 million customers a week and as at October 2003 had 512 stores throughout the UK employing over 145,000 people. ... Sainsbury’s is best known as a supermarket retailer. But it has a series of other activities, which are: • Sainsbury’s Supermarkets • Shaw’s Supermarkets Inc • Sainsbury’s Bank • J Sainsbury Developments Ltd (JSD) • Sainsbury’s Property Company Sainsbury’s like other companies has a lot of competitors in the different fields which it operates, they are: • In the supermarket business Sainsbury’s main competitors are Tesco, Asda, Safeway and Morrisons (the big five) • In retail banking the main competition comes from Tesco Financial Services, M & S Financial Services, the traditional high street banks, Egg, Halifax and Abbey National mortgages. ... Tesco Tesco was founded by Jack Cohen in 1919 as a little stall in East London selling foodstuffs. The first line of Cohen brand goods placed on the market was Tesco tea. ... The first Tesco store was opened in 1929 in Burnt Oak, Edgware. In 1947 Tesco Stores (Holdings) Ltd was floated on the Stock Exchange, with a share price of 25p. ... Tesco competed by offering low prices to customer, which it achieved buying in bulk and keeping costs down. Since 1998, Tesco Stores has been the biggest trade network in England, Scotland and Wales. In Great Britain, where Tesco owns over 700 stores and department stores, an average commercial unit offers about 40 000 sales lines from food to CDs, clothes, books, garden furniture, and toys. Recently, Tesco has run trade units in Ireland, Poland, the Czech Republic, Slovakia, Hungary, Thailand, South Korea, Malaysia and Taiwan. Today, Tesco Plc is the UK’s largest retailer, and some of its activities include: • Tesco Supermarkets • Tesco Finance and Insurance Services • Tesco Telecoms 3. Comparative analysis In this section, a financial ratio analysis will be used as the major tool to highlight the comparative analysis of both companies. ... Financial Ratio Analysis Financial ratio analysis is a very important tool used to interpret so much about accounts and businesses. When we use ratio analysis we can work out the profitability of a business, tell if it has enough money to pay its debts and even tell a bit about its shareholders situation/reaction. It provides a quick and relatively simple means of examining the financial conditions of a business like checking whether a business is doing better this year than its previous year; and also comparing it to similar businesses in the industry.