However we can exhale that the
company can progress as and when the following years after the agreement they
have signed with Booker.
To conclude we can say that the
company has repaired its fall during the year 2015. However, the new values of
profitability ratios in 2017 show a further decline, which could suggest that
the company could not yet find the exact solution to have a stable level in the
British March, and the direction of The company needs to work on improving
strategies that could increase the profit margin on sales, lower operating
costs, and also improve product offerings in its stores to attract customers
who Expect the differentiation of products and prices at the same time. The
company’s liquidity and solvency situation showed major weaknesses. In
addition, the company has not paid dividends in recent years but has promised
to take it back in the coming year. Therefore, it is recommended not to invest
in the company’s shares to avoid any potential capital loss.
As seen in the media the agreement
between Booker and Tesco means that Tesco can enrich itself even faster in the
world market and in the UK, which has been the fastest part of the grocery
industry for a number of years. The tie-up with Booker would add 5400 stores to
the existing Tesco network of 2 900 small stores, operating under the brands
Tesco Express, Metro and One Stop.
2. THE TESCO-BOOKER PROJECT
A gearing ratio is a type of financial ratio that compares company debt relative to different
financial metrics, such as total equity. A gearing ratio would be considered
normal if it is between 25% to 50% and low gearing would be under 25% and over
50% would mean that it is highly geared. It is important for a large business
like Tesco to have a normal gearing as it is not for them to be in long term
1.4 GEARING RATIO
Cash flow is the total amount of cash other anything that is
cash equilivant that is flowing in and out of the business. A cash flow
statement enables us to evaluate how much cash is generated into the business
and how much has been taken out for operations. When liquid assets are
increased this means that are there are more positive cash flow in the business
and when there is a decrease in liquid assets this means the company is facing
negative cash flow. The below image
shows us the summary of retail cash flow. As you can see the performance of
Tesco Plc was higher and profitable in the year 2016/2017 than 2015/2016. The table shows that there are significance
amount of cash flow in the year 2015/2016 than 2016/2017 and the end movement
of in net debt for 215/2016 is higher than 2016/2017. This can explain to us
that there has been more profitability in the year of 2016/2017.
1.3 CASH FLOW STATEMENT
However if we are referring to the
figures for the stock turnover we can see that the figures are constant during this three years and become slightly
higher in 2017 with 24.3%.
We can see in the liquidity ratios
table that the acid test ratio and the current ratio have got the same figures
for the year of 2016 and 2017 which is 0.75 for the current ratio and 0.63 for
the acid test ratio. But we also see that Tesco had a big decrease in 2015 for
those two elements which was 0.60% for the current ratio and 0.45% for the acid
ratio is a measure of a company’s
ability to meet its
short-term obligations using its most liquid assets. It is calculated by subtracting inventories from current assets and dividing
the quantity by its
acid-test ratio is commonly known as the quick
ratio but the main consideration should be gaining a realistic
view of the company’s liquid assets.
Ratio = Current Assets / Current Liabilities
The current ratio is a liquidity
ratio that measures a company’s ability to pay short-term and
long-term obligations also knows as working capital ratio. It’s mainly used to
give an idea of a company’s ability to pay back its liabilities (debt and accounts
payable) with its assets (cash, marketable
securities, inventory, accounts
However the liquidity ratios measure a company’s ability
to pay debt obligations and its margin
of safety through the calculation of metrics including the current
ratio and operating
cash flow ratio.The other terms used for liquid ratio are ‘Quick
ratio’ and ‘Acid Test Ratio’.
Liquidity ratio is constituted into two words which has
different meanings the liquidity describes the degree to which an asset or
security can be quickly bought or sold in the market without affecting the
1.2 LIQUIDITY RATIOS
However to conclude on this part,
we can see that the year 2016 was in economic boost for the company Tesco.
This shows that Tesco was not
making profit for the year 2015(businessdictionary2018).
In the report of the performance
ratios, we can observe that the pre-tax profit margin, the return on total
assets and the return on capital are increased during the years 2016 and 2017
but this is not the case for 2015, this year was a big loss for Tesco for each
segments they had a negative figures.
Net income x 100 ÷ Sales revenue
Measure of profitability in relation to sales revenue, this ratio determines the net income earned on the sales revenue generated.
This one has put impress customers by bringing
new technologies, products and its own ranges, Tesco continued to grow at a
fast pace and in 2000, launched its own website or customers can order online
and be delivered the Next day (Tesco. com) completing its dominance of the UK
Tesco’s gradual expansion continued in the years
70 and 80, and Tesco’s position at the top of the supermarket industry shows
its progress. In 1992, the Tesco we know today was born, creating its slogan,
“Every Little Help”.
Tesco has been increasingly known and has
continued its expansion quickly by selling more products in department stores
such as Booker, Aldi, etc…
Subsequently Tesco became a limited company in
the years 1932, and then in 1950 and 1960, Tesco began to integrate into the
purchase of rival stores for the purpose of monopolizing the market of grocery
Jack Cohen used the initials and letters to form
TES-Co, before the Tesco flagship store in Burnt Oak, north of London.
The Tesco brand provides for the purchase of a
shipment of tea from Mr. T. E Stock well in 1924.
The first name of Tesco was found in 1919, when
Jack Cohen started selling groceries from his stand in the East End of London.
Cohen made a profit of £1 on sales of £4 on the first day.
It was the first company in the UK to make £2
000 000 000 000 in profits when it announced the exploit at the beginning of
2005, and the third largest worldwide retailer based on UK revenue. Over the
years, the grocery sector represents the largest industry in the UK offering
jobs for millions of people living in the UK either in the manufacture of food,
in the appliances or in clothing section.
Tesco is a limited company that is one of the
largest that is known for British recipes. This one is currently one of the
first in the list of the top 10 groceries in the UK.