Managerial Accounting: Morrisons and Tesco - Essay Example

Both companies offer huge car parking spaces for the convenience of its busy clients. Competition. Both Morrisons and Tesco are two of the four major supermarket chains in the United Kingdom market segment. Tesco is one of the stalwart competitors of Morrisons. There are smaller competitors serving the grocery needs of individuals within the Morrisons retail stores. Morrisons stores are the least of the “big four” grocery chain market segment competitors. Tesco stores occupies the top spot in the grocery chain market segment.

Asda follows close behind Tesco. Sainsbury follows behind Asda. Another upcoming competitor is Safeway Plc. Financial Overview. In terms of 2011’s overall financial performance, both Morrisons and Tesco generated a financially profitable picture of its 2011 supermarket chain operations. Both Companies generated net profits for 2011. Both companies generated overall favorable financial statements. Both companies distributed favorable dividend yields for the year. Overview Morrison The Morrison’s Company performed well in 2011.

The dividend cover increased to 2.49. The interest cover increased to 20. The gearing increased to 69%. The current ration rose to .55. The quick ratio remained favorably at 0.24. The Earnings per share increased to 23.93 p. The price earnings ratio climbed to 16. The dividend per share reached 9.6 p. The Dividend yield rose to 3.64%. The Net Assets Turnover is 3.04. Budget food and nonfood Industry. The budget includes both the short term as well as long term budgets. The 2012 budget is grounded on the actual expenses and revenues generated during two accounting periods.

The two accounting periods are 2010 and 2011. William Droms (1997) observed “Capital budgeting is. From the research it can be comprehended that the investment and growth picture of the United Kingdom economy remains stable; it has been shifting away from the manufacturing sector to the services sector, a sunrise industry. The service industry makes up 75% of the output (GDP). The business service and financial service rose from 25% to 34% of (GDP) from 1996 to 2006 as a whole. The global recession encroached into Britain’s formidable shores in 2008.

Consequently, Tesco, Asda, Sainsbury and Morrisons continue are exerting extra efforts to reduce the debilitating economic crisis. According to the Ansoff Matrix, there are four possible strategies available to a firm such as Morrison’s. The strategies are product development, marketing presentation, diversification and market development. In addition porter suggests that firms can adopt one of three strategies. The strategies are differentiation, focus and cost leadership. Morrison’s marketing strategy, one of the market leaders, focuses on grocery products.

Morrisons sells food and non-food products. It can be assumed that the four strategies were chosen because the firm expects the economic environment to continue on its unstable and challenging course. Tesco company has greater market power with suppliers, with its favourable cost leadership strategy. The dividend cover indicates that Morrisons’ 3.76 dividend cover for 2010 unfavourably declined to only 2.49 in 2011. One of the major features of the trend is that the dividend cover never rose above 5.

0, when it really should be 10.