Accounting: Financial Statements and Tesco Profit Margin Essay
Submitted By ollief16
Words: 1612
Pages: 7
Accounting for Managers
It is the purpose of this report to demonstrate an understanding of key areas of accounting for managers. It will be looking at accounting processes such as producing financial statements and auditing, reviewing and comparing supermarket accounts and producing budgets and explaining the processes and finally looking at the supermarkets future growth potential
1.
Published finance statements
Published finance statements are statements which are produced and provided by a company or organisation for anybody wishing to view in relation to accounts and finances of the company. Finance statements can also be produced for management decision making purposes which don’t have to become open to the public.
Limited companies, which are owned by shareholders, are required by law to produce finance statements on a yearly basis. It also allows the shareholders and others that have interest in the statements to look at the performance and strategy of the company. The three main finance statements that are offered are the balance sheet, profit and loss account and the cash flow statement.
The financial statements must be checked by an external audit, this is where the company hires a firm of accountants to verify that it provides a true and fair record and complies with legal requirements. ‘The exact statutory requirements for limited companies to prepare and publish accounts are laid down for limited companies through the Companies Act 1985, regulated by Companies House, and for publicly listed companies through European law, the Listings Rules, regulated by Financial Services Authority (FSA).’ (Reference 1).
2. The 2011 Tesco financial statements for Tesco stores indicate an increase in turnover for the year 2011 in comparison to the previous year 2010. The profit for the year 2011 shows a figure of £2,671m pounds in comparison to the previous year’s 2,336 million pound profit figure. That is a 14.34% increase in profit from the previous year. The 2011 financial report also shows that in comparison to 2010 figures Tesco stores spent a further £3,568m on sales costs.
The 2011 return on capital employment from Tesco stores is 23% which is a slight fall from the 2010 figure of 23.5%, this shows that 2010 produced a less profitable year with a higher return on capital employment although the cost of sales was smaller in the previous year. In comparison to the return on capital employment from Sainsbury’s 2011 accounts which were at a smaller 20%. However Tesco’s cost of sales was far greater at £55,871m than the spend of Sainsbury’s at a smaller £19,942m.
The Tesco profit margin was a average of 6.25% in year end 2011 which is a higher profit margin the the competition store Sainsbury’s which sat at an average of only 4.03% for the year ending 2011. The previous year (2010) Tesco stores operated a slightly reduced average profit margin of 6.07%. Tesco have managed to increase their profit margin from 2010 to 2011 by not only adding small increases to sales but by spending less on liabilities and expenses, for example, yearend 2010 Tesco spent £579m on finance costs but in yearend 2011 that finance cost was reduced to £483m. By spending less money on other areas of the business Tesco have managed to increase their profit margin by almost ½%. There are other things Tesco have done along with reduce costs to increase profit margins for yearend 2011 in comparison to yearend 2010, these include increased turnover, grater profit on property related items, reduced borrowings, increased customer deposits and increased provisions. By completing these management decisions Tesco stores were able to produce a yearly profit gain of roughly 15%.
The current ratio for Tesco stores is 0.67:1, which is a fairly poor financial position generally, a current ratio of a stable business is generally between 1.5 and 3. Clearly Tesco does not achieve this based on the specific industry which is fast turnover, this means that they
Related Documents: Accounting: Financial Statements and Tesco Profit Margin Essay
Carrefour case is a financial analysis case. Carrefour S.A. is one of the world’s largest retailers. During the first half of the 2000s, the company’s share prices steadily declined, despite the fact that the company reported above-average returns on equity. Students are asked to analyze Carrefour’s financial statements and segment data to find explanations for the company’s poor share price performance and to make recommendations for the future. The discussion of the financial analysis is preceded…
There are three main financial statements of a business; cash flow, balance sheet, and profit and lose. Each of these is divided into three separate financial statements. Firstly it is important to understand each one. The profit and loss account is a statement that summarises revenues, costs and expenses incurred during a specific period of time – usually quarter or year (investopedia,2011). The purpose of a profit and loss account is to demonstrate if a company has made a profit or a loss over the…
Financial Ratio Analysis of Morrison in Comparison with Tesco Introduction The purpose of this report is to critically analyse the financial ratio results of Morrison 2008 and 2009 as an equity analyst and compare it with like for like by using Tesco supermarket. To achieve this report will be looked at in four main areas. Firstly, we will use financial ratios obtained from annual reports of 2008 and 2009 to analysis and appraise Morrison’s financial performance. This would be followed…
Business and Financial Performance of Tesco Plc over three years THE BUSINESS AND FINANCIAL PERFORMANCE OF TESCO PLC OVER A THREE YEAR PERIOD Oxford Brooks University Submitted by: TAHIR GHAFOOR ACCA Registration # 1969183 Date Submitted: 21 Nov, 2011 Word count: 6495 approximately. 1|Page Business and Financial Performance of Tesco Plc over three years Table of Contents Table of Contents .................................................................................................. 2 .…
Executive Summary This is a statistical investigation into the profitability and growth of UK supermarkets over a period spanning the last 30 years. In compiling this research I have made use of the following data sources. Firstly two sources of company financial data. The first is collected by Thompson’s DataStream and runs from 1980 to the present. The second is collected by Orbis and runs from 1998 to the present. In addition I have used the Competition Commission reports into the UK grocery sector from 2008…
United Kingdom’s largest retailer, Tesco PLC broke through in 1995 and has become not only the largest retailer in the UK, but also the world’s 4th largest retailer, trailing only Wal-Mart, Carrefour and Germany’s Metro AG. Originally, Tesco’s soul focus was the retail grocery market. As of February 2010, the grocery market continues to be Tesco’s largest source of revenue and it has accounted for more than 50% of Tesco’s £ 59.4 billion of sales. Further, Tesco does not limit its operation strictly…
| 2009 – 2010 | | Masters in Business Administration |By- Tesar Singh Chauhan [DOMINO’s PIZZA UK & IRL FINANCIAL PERFORMANCE ANALYSIS] | Submitted as a part of module assessment for Accounting and Control | CONTENTS: Page Number 1. INTRODUCTION 2 1.1 DOMINO’s at LONDON STOCK EXCHANGE And Trading Information 2 2. FINANCIAL RATIO ANALYSIS ON DOMINO’s PIZZA UK & IRL PLC’s PERFORMANCE 3 3.1 PROFITABILITY RATIOS 3-4 3.2 LIQUIDITY…
OXFORD BROOKES UNIVERSITY BSc in Applied Accounting Research and Analysis Project The Business and Financial Performance Of Marks & Spencer Plc Financial year ending 2009 to 2011 Fayzul Hasan Chowdhury ACCA Registration Number: 1456371 November 2011 (Approximate Total Words: 6450) Research Report Contents Page 1. Introduction ............................................................................................................................. 3 1.1.1 The Topic area and Global economy…
Takeover-this is when a business takes over another business. There are three types of takeovers; friendly, hostile and reverse. The Morrison takeover is considered as a friendly takeover because the Safeway was being offered bids by its rivals such as Asda, Tesco and Morrisons. Morrison’s seals Safeway takeover | Morrisons tabled its initial bid for Safeway in January 2003 | Britain's supermarket landscape has undergone sweeping change on Monday as Morrison’s completes its £3bn ($5.2bn) takeover of…
Objective To study the marketing strategy and gain an insight on Samsung Mobile India Samsung Group The Samsung Group is South Korea's largest company or chaebol and the world's second largest conglomerate by revenue, leading several industries in the world. It is composed of numerous international businesses, all united under the Samsung brand, including Samsung Electronics, the world's largest electronics company, Samsung Heavy Industries, one of the world's…