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B202 Accounting & Finance - Essay Example

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Currently Tesco is the third largest global retailer based on revenue, behind Wal-Mart and Frances Carrefour, but second largest based on profit,…
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B202 Accounting & Finance
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Download file to see previous pages While analyzing the company financials certain parameters were kept in mind. The analysis is conducted in two segments .The first segment would focus on the comparison of financial ratios of the company among different periods. The later segment would be of the comparison of company financials vis a vis the ratios of the respective industry. The ratios those would take part in this analysis are briefly portrayed below.
While calculating for the above ratios ‘revenue figures’ represents ‘sales’.Net profit margin ignores the profit those are paid out to its debt investors as interest and because of it, this ratio is not so effective while comparing between firms having different capital structures .
The liquidity ratios come next. It’s very much important for a firm to keep a certain level of liquidity in its portfolio, so that if needed it can lay its hand on the liquid assets. These ratios may change rapidly as its components i.e. both the short terms assets and liabilities can get easily changed over time periods.
Current assets consist of cash and other assets which can be turned into cash within very short period of time. Firm’s current liabilities consist of payments which is payable in near future. Thus current ratio tells us how much current assets is available to cover up the current liabilities.
Some assets are closer to cash more than other assets. In difficult times, these more liquid assets can be used to repay the current liabilities. These kinds of assets mainly consist of cash and cash equivalents, short term securities and receivables from customers. Thus quick ratio is measured as
The table below takes care of the liquidiy ratios. Though the current ratios had dropped by a certain amount in 2006 but thereafter the company has taken care of the same. This is very much visible by the stable growth in current ratio from ...Download file to see next pagesRead More
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