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Financial Forecasting TESCO Plc - Essay Example

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With the help of the information presented in the financial statements, the ratios are computed which can be compared with the past figures to highlight any improvement or deterioration. A fall in the…
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Financial Forecasting TESCO Plc
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Financial Forecasting TESCO Plc

Download file to see previous pages... For estimating the revenues earned by the business, the Compounded Annual Growth Rate (CAGR) over the last four years has been used. The revenue earned by the company during the year 2005 was £33974 million. This increased at a CAGR of 12% to £54327 million in the year 2009. Assuming that the rate of growth remains the same in 2010, the estimated revenue of the company for this year is estimated to be £61091.81 million. The cost of sales is taken as a percentage of revenue at 0.92. Therefore the estimated cost of sales of the company for 2010 is £56348.58 million. The “Normal Operating Expenses” of £31845 million for the year 2005 is assumed to be the ‘cost of sales’ for the year. The operating costs of the company depend on the level of sales. Higher the sales level, higher is the amount of operating expenses of the company. This ratio is calculated as 0.02. Based on this ratio the operating cost of the company is estimated as £1403.40 million. It has been assumed that the net interest payable of the company grows at a compounding rate of return. Based on the net interest expense of £170 million in 2005, the CAGR for the four year period is calculated as 21% making the estimated net interest payable of the company for 2010 to be £437.29 million.
Taxation and dividend- In the year 2005 and 2010, Tesco Plc paid taxes at a rate of 20% and 40% respectively. The CAGR of taxes is calculated as 19% making 48% as the forecasted tax rate for 2010. Therefore the estimated taxation of Tesco Plc is £1386.44 million. The dividend paid by the company has increased at a CAGR of 19% from £587 million in 2005 to £883 million in 2009. From this the forecasted dividend of Tesco Plc is estimated as £977.89 million.
The revenue of Tesco Plc is expected to grow in 2010 by £6765 million. For this the company will need total funds of £5734.52 million. As a ...Download file to see next pagesRead More
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