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Compare Tesco and Sainsbury - Coursework Example

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The earnings per share (EPS) tend to have an effect on the market price per share, as reflected in the price earnings ratio (Garrison & Noreen, 2003). Tesco in 2013 had an…
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A ratio analysis for fiscal years and of Tesco and Sainsbury’s is illustrated in Appendix A. The earnings per share (EPS) tend to have an effect on the market price per share, as reflected in the price earnings ratio (Garrison & Noreen, 2003). Tesco in 2013 had an EPS of £1.54. Its EPS was reduced drastically in comparison with its 2012 result of £34.98. Sainsbury with £32.6 had a better EPS than Tesco in 2013. Dividends per share measure the amount of dividends paid out during a year (Investopedia, 2015). The dividend per share of Tesco in 2013 was £14.76. The firm paid an extra £0.04 in comparison with the previous year. Sainsbury had a dividend per share in 2013 of £16.7, a figure that is £0.6 higher than in 2012. Overall Sainsbury paid higher dividends than Tesco. Tesco’s dividend cover was 0.10 and 2.38 in 2013 and 2012 respectively. Dividend coverage indicates the capacity of an organization to pay dividends out of profit attributable to shareholders (Accounting-simplified, 2013). Sainsbury had dividend coverage of 1.95 and 1.99 in 2013 and 2012. The dividend coverage of Sainsbury was better than Tesco in 2013, but lower in 2012. The dividend yield ratio shows the return on terms of cash dividends being provided by the stock. Tesco dividend yield ratio was superior to Sainsbury both in 2013 and 2012.
The price-earnings ratio is an important indicator of comparative value in which an investor is better off buying a stock with low price-earnings ratio than high price-earnings ratio (Ft). Both the price-earnings ratio results of Tesco in 2013 and 2012 were lowered than Sainsbury, thus Tesco performed better than Sainsbury in this metric. The book value per share measures the amount that would be distributed to shareholders if all assets were sold at their balance sheet carrying amounts and if all creditors were paid off (Garrison, et al. 2003). Since a high value is the preferable output Tesco performed better than Sainsbury in this ratio. The market to book ratio of Sainsbury is much higher than Tesco on both years because its stock is valued higher in the market.
Appendix A
Tesco Ratios
2013
2012
Sainsbury Ratios
2013
2012
EPS
£1.54
£34.98
EPS
£32.6
£32
Dividend per share
£14.76
£14.72
Dividend per share
£16.7
£16.1
Dividend cover
0.10
2.38
Dividend cover
1.95
1.99
Dividend yield
117.14%
102.15%
Dividend yield
4.60%
5.31%
Price earnings ratio
8.18
0.41
Price earnings ratio
11.13
9.47
Book value per share
213.60
221.27
Book value per share
3.03
2.26
Market to book ratio
0.06
0.07
Market to book ratio
119.71
133.96
Appendix B: Tesco Income Statement
(Annual Report: Tesco, 2013)
Appendix C: Tesco Balance Sheet 2013
(Annual Report: Tesco, 2013)
Appendix D: Sainsbury Income Statement 2013
(Annual Report: Sainsbury, 2013)
Appendix E: Sainsbury Balance Sheet 2013
(Annual Report: Sainsbury, 2013)
References
Accounting-simplified.com (2013). Dividend Coverage Ratio. Files.the-group.net (2013). Tesco 2013 Annual Report. Ft.com. Definition of price/earnings ratio. Garrison, R., Noreen, E. (2003). Managerial Accounting (10th ed.). Boston: McGraw-Hill Irwin.
Investopedia.com (2015). Dividend Per Share (DPS). Sainsbury.co.uk (2013). Sainsbury Annual Report 2013. Read More
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