FINANCIAL RATIO ANALYSIS OF TESCO PLC Essay Example | Topics and Well Written Essays - 3000 words

FINANCIAL RATIO ANALYSIS OF TESCO PLC - Essay Example In UK, Tesco is the largest retailer and in UK, it serves about 66% of the retailer market and occupies about 33% of the selling space. Jack marketed his own brand tea as Tesco tea as early as 1924 and he opened the first Tesco store in North London in 1929. The first ever modern food warehouse was established in UK by Jack Cohen in 1934. Jack expanded his business by buying stores in London suburbs in 1937. In 1947, the Tesco Stores (Holdings) was registered in London Stock Exchange with a share price of as low as 25 pence with today’s price of  £318. Headquartered at Cheshunt, UK, today, Tesco is engaged in retail grocery operations through 5000 retail stores both in UK and around the world. In 2012, Tesco’s turnover is  £ 72 billion, its revenue is  £ 42.8 bn and its UK revenue is  £2.5bn. Tesco stores offers groceries, food items, electrical and electronic products, apparels, general merchandisers and also engaged in insurance and financial services , retail banking , distribution , data analysis and property operations . â€Å"The Form and Content of Annual Report† Tesco Plc form of the annual report for the year 2012 is easily accessible and can be downloaded from their websites. It facilitates the researchers to look for general and exhaustive info about the company. The annual report is well structured and designed and includes 158 pages .It starts with the financial indicators for the year 2012. It commences with the Chairman’s statement, CEO’s review, directors report on corporate governance, Director’s remuneration report, and auditor’s report. For arriving at revenue prior tax from continuing business operations, the company employed IAS 32 and IAS 39 fair value remeasurements of financial instruments, IAS 17 for impacts annual increase in rents in leases transactions, IAS 19 for charge for pension for employee benefits, IFRS for amortisation charges for business combinations and IFRIC 13 for fair value of customer loyalty schemes. (Tesco’s Annual Report 2012:89). Auditors from PricewaterhouseCoopers LL P confirm that the financial statements are prepared in tune with applicable laws of United Kingdom and as per International Financial Reporting Standards (IFRS) as espoused by the European Union. The consolidated statements are also formed in accordance with the Article 4 of the IAS Regulation and Companies Act 2006. Besides, there are 35 notes to the financial statements in the annual report that elaborates all financial indicators in the statements. The annual report continues with the Tesco PLC parent company financial statements, and then with the short financial narration that covers the last five years. The annual report last page is devoted to shareholders. In their section, shareholders may get exhaustive information about annual meetings, financial calendar, dividends, record date, interim financial announcement date, interim management statement and so on. An Analysis of Financial Position, Performance and Prospects of the Company Financial ratios will trounce absolute va lue distortions and help to evaluate the company’s performance and hence ratios are very popular tools in the capital market analysis. As per Beaver (1966), if a company is in financial trouble, then one can identify the same from the financial ratios. As per Beaver, financial ratios help to predict the failure of corporate well before five years of their failure. Jen (1963) identified the capability to obtain credit is directly connected with some financial ratios. Financial ratios are also having direct impact on the stock prices of a company and it also impacts the investment decisions. As per Gibson (1997) , when analysts were asked to which they would