Company's Financial Statement Essay

Length: 15 pages Sources: 1+ Subject: Business Type: Essay Paper: #48248054 Related Topics: Financial Statement Analysis, Income Statement, Supermarket, Companies
Excerpt from Essay :

Financial Statement Analysis

In this particular essay, I undertake the financial analysis of five companies, all of which are set in the retail industry. Three of the companies, Tesco Plc, Sainsbury's and Wm Morrison Supermarkets plc are some of the largest food retailers in the United Kingdom. Ocado which is the fourth company is the largest online food retailer in the whole world and lastly Crawshaw Group PLC is also in the business of operating a chain of retail food stores. Every company will be discussed individually and it will encompass information regarding the history of the company, the products and the services, the consumers and also other information.

Tesco Plc is a company that is based in Britain and is the largest food retailer in the United Kingdom. It is one of the biggest retailers in the globe as it is the third in position in the retail industry below Carrefour which is based in France and Wal-Mart which is based in the United States. At the outset, Tesco begun its business operations with grocery retailing but at the present moment has massively expanded and also retails health and beauty products, electrical goods, household goods, stationary and also intermittent products that are sold seasonally such as garden furniture during summer periods. Tesco has its business operations in over fourteen nations with over three thousand retail store outlets. The company has its largest geographical market base in the United Kingdom as more than two thirds of its retail stores are located in the U.K. Tesco operates by means of different forms of its stores which encompass hypermarkets, supermarkets, Metro, and also Express. It has to be said that Tesco has grown immensely to become one of the largest independent retailers of oil in the United Kingdom. More so, the company has also started offering financial services as well to the consumers as it made a joint venture agreement with the Royal Bank of Scotland which in turn has grown to become a successful venture for the operations of the company. The main purpose of the company as pointed out on the company website is to create value for consumers and to earn their lifelong loyalty (Tesco PLC Website).

Sainsbury plc, which was established in the year 1896 is one of the main competitors of Tesco and is also deemed to be one of the leading retailers of food in the United Kingdom being ranked third. It is a publicly traded company that is registered in the FTSE 100 and also the London Stock Exchange. Aside from being a major player in the food retailing sector, the company has also played a part in the property sector and also the financial sector. However, on the basis of the amount of turnover generated by the company, it has to be agreed that the retail food chain is the major operation of business. At the present moment, Sainsbury plc consists of over five hundred supermarkets and just about three hundred practicality necessities. The company is also the partial owner of Sainsbury's Bank with the other owner being Lloyds Banking Compilation. In addition, the company also has possession of twofold ventures with Ground Securities Collection PLC and also the British Soil Corporation Plc. Being the third largest retailing company for food in the United Kingdom, Sainsbury currently boasts of having about seventeen percent of the total market share. Having been the main leading food retail company in the United Kingdom for several years, the company experienced a decline during the 90s period and is at the present day making an attempt to reclaim its position and status in the United Kingdom market as well as expand its market share internationally. It is actually during that when Tesco claimed the number one position and Asda became second in the food retailing industry (Sainsburry, 2015).

Morrison Supermarkets is another company that operates as a food retailer in the United Kingdom. However, the company deals with online selling of groceries and selling of groceries in-store. The company has over five hundred stores and also undertakes home retail delivery services for the consumers that purchase the products online. The Company has its business operations in 7 regional distribution centers which usually service its main supermarkets, and two convenience distribution centers (Bloomberg, 2015). Ocado is the biggest online supermarket in the whole world and not just in the United Kingdom. It is an independent business operation but is registered on the London Stock Exchange (Ocado Group Website, 2015). Crawshaw Company Information together with its branches undertake business operations of a business chain of retail food stores that are purely focused on delivering all kinds of...

...

The company offers fresh, raw and cooked meats and also hot meals. These encompass beef, lamb, chicken and also pork meat. The company only has two centers for distribution which service all of its 20 retail locations in the different expanses of the United Kingdom (Bloomberg, 2015).

Ratio Analysis

Return on Net Operating Assets

Return on net operating assets (RNOA) is a financial ratio that not only measures the profitability of a company but also its financial health. This ratio, in particular, places emphasis on measuring the profitability of the assets that are only used to generate revenue for the company. RNOA is calculated through dividing Net Operating Profit After Taxes (NOPAT) by the Average Net Operating Assets (NOA) subsequent to the separation of the operating activities from the financing activities in the statement of comprehensive income and the statement of financial position and recognize their distinct efficiency.

Return on Net Operating Assets

2014

2013

2012

2011

Tesco

6.00%

1.53%

11.96%

12.22%

Sainsbury

10.96%

9.02%

9.13%

9.81%

Ocado

5.78%

-2.22%

0.49%

2.00%

Crawshaw

8.34%

0.79%

0.19%

4.69%

Morrison

-2.18%

9.92%

11.02%

10.93%

In the year 2012 and 2011, the return on net operating assets for Tesco which is the main company was the highest compared to the other companies being analyzed. However, in the year 2013 the RNOA of Tesco declined in a considerable manner to 1.53%. The rate did rise up to 6.00% in the subsequent year 2014. In the analysis of the other companies, Sainsbury which is the main competitor of Tesco can be seen to be the most consistent in terms of the returns generated with the RNOA ranging between 9% and 11%. Morrison has also been consistent over the years but in 2014, the return of the company dropped in an alarming rate from 9.92% to -2.18% and making negative returns which are losses to the underlying assets. Ocado and Crawshaw have shown considerable growth as the return on net operating assets between 2013 and 2014 rose from -2.22% to 5.78% and from 0.79% to 8.34% respectively.

Operating Profit Margin

The operating profit is also referred to as the Earnings Before Interest and Tax (EBIT) as would be perceived in the income statement. In addition, the operating profit margin is also referred to as the profit margin which is obtained by dividing the earnings generated by the company before the deduction of interest as well as taxation by the net sales of the company which can also be attained from the statement of comprehensive income which considers EBIT to be included in the sales revenue. This particular ratio is employed in measuring and analyzing the efficiency level of a company's operating activities by relating all of the costs of the average business activity. In addition, the operating profit margin demonstrates the revenue and the costs of the company that are incorporated and defines the operating income as a proportion of the net revenue. This therefore implies that the higher or the more superior the operating profit margin, the more profitable the company is and the better it is for the users of the financial statements.

Operating Profit Margin

2014

2013

2012

2011

Tesco

2.21%

0.60%

4.69%

4.84%

Sainsbury

3.44%

3.00%

3.05%

3.21%

Ocado

1.74%

-0.72%

0.16%

0.47%

Crawshaw

3.95%

0.43%

0.11%

2.57%

Morrison

-0.92%

3.90%

4.09%

4.01%

The operating profit margin of Tesco though slightly decreased was the highest compared to the other companies in the years 2011 and 2012 with 4.84% and 4.69% respectively. This basically implies that for every dollar that was invested in Tesco, the company made a return of 4.84 cents in 2011 and 4.69 cents in 2012. However, in the subsequent year 2013, the profit margin of Tesco dropped considerably to 0.60%. However, the company's profit margin did improve as it rose to 2.21%. On the other hand, Sainsbury which is the main competitor of Tesco maintained a steady operating profit margin throughout the four-year period. In general, it shows that the two companies are making profit and between the four years never made any losses. However, it can be said that Sainsbury has generated more profit compared to Tesco in the past four years. This cannot be said for Ocado and Morrison which made losses in the year 2013 and 2014 respectively. Ocado's profit margin declined considerably between 2011…

Sources Used in Documents:

References

Accounting for Management. (2014). Return on common stockholders' equity ratio. Available: http://www.accountingformanagement.org/return-on-common-stockholders-equity-ratio/

Bloomberg. (2015). Crawshaw Group Plc company information. Retrieved from: http://www.bloomberg.com/research/stocks/snapshot/snapshot.asp?ticker=CRAW:LN

Bloomberg. (2015). Wm Morrisons Supermarket plc. Retrieved from: http://www.bloomberg.com/research/stocks/snapshot/snapshot.asp?ticker=MRW:LN

Investigating Answers. (2014). Operating Leverage. Available: http://www.investinganswers.com/financial-dictionary/ratio-analysis/operating-leverage-2795
Kesavan, Balasubramaniam. (2009). What are the risks of having both high operating leverage and high financial leverage? Available: http://www.investopedia.com/ask/answers/06/highleverage.asp. Last accessed 24th Mar 2014.
Lincoln indicators. (2013). Financial Ratios. Available: http://www.lincolnindicators.com.au/content/filestore/research/top-15-financial-ratios.pdf
Ocado Group. (2015). Who we are. Retrieved from: http://www.ocadogroup.com/who-we-are/ocado-at-a-glance.aspx
Sainsbury Website. (2015). About Us. Retrieved from: http://www.sainsburys.co.uk/sol/index.jsp
Tesco PLC Website. (2015). Our History. Retrieved from: http://www.tescoplc.com/index.asp?pageid=11
Wilkinson, J. (2013). Return on Common Equity (ROCE). Available: http://strategiccfo.com/wikicfo/return-on-common-equity-roce/


Cite this Document:

"Company's Financial Statement" (2015, March 31) Retrieved January 23, 2022, from
https://www.paperdue.com/essay/company-financial-statement-2149203

"Company's Financial Statement" 31 March 2015. Web.23 January. 2022. <
https://www.paperdue.com/essay/company-financial-statement-2149203>

"Company's Financial Statement", 31 March 2015, Accessed.23 January. 2022,
https://www.paperdue.com/essay/company-financial-statement-2149203

Related Documents
Hay and Barnabas Company: Financial Statements
Words: 604 Length: 2 Pages Topic: Accounting Paper #: 47357989

Financial Statements: Hay and Barnabas Company There are five adjustments that need to be made before the financial statements of Hay and Barnabas Company are prepared at year end. Show the effect of each of the following (a -- e) on the accounting equation The accounting equation is essentially indicative of the relationship between assets, liabilities, and the owner's equity in a particular business. According to Clarke (2011), the three components reflect

Financial Statement of Sainsbury PLC
Words: 2870 Length: 9 Pages Topic: Business Paper #: 69807589

Financial statements are produced in order to help stakeholders understand the financial condition of the entity in question. Different types of entities, however, have different reporting requirements. A self-employed individual has very different needs from a limited company, and these are different from not-for-profit organisations as well. This paper will examine some of these differences. The first class of business is the self-employed individual. There are no reporting standards for self-employed

Financial Statements Identify the Four Basic Financial
Words: 850 Length: 3 Pages Topic: Accounting Paper #: 15761804

Financial Statements Identify the four basic financial statements. The four basic financial statements include: the balance sheet, income statement, owners' equity and cash flows. The balance sheet is when there is a focus on the current financial strengths or weaknesses inside a firm. This gives managers, employees, investors and regulators the ability to determine what issues are impacting the company. (Ingram, 2011) ("Four Financial Statements," 2010) The income statement is concentrating on the

Financial Statement Differentiation Analysis of the Use
Words: 793 Length: 3 Pages Topic: Accounting Paper #: 66280290

Financial Statement Differentiation Analysis of the Use of Four Types of Financial Statements The four fundamental types of financial statements include the balance sheet, income statement, statement of retained earnings and statement of cash flows and each meets a very specific series of needs within a business. Investors are most interested in the risk profiles of companies they are interested in investing in more than any other information element. Creditors are most

Financial Statements and Ethics Mcdonald's
Words: 917 Length: 3 Pages Topic: Economics Paper #: 4227870

The former deducts the inventory figure from the current assets value. In the years under consideration, both the current ratio and the quick ratio of McDonald's decreased (see table 1). In that regard, the company's ability to settle its debts in the short run seems to have been impaired within the period under consideration. It is however important to note that with a current ratio and quick ratio of more

Financial Statement Fraud Report - Enron Financial
Words: 2227 Length: 6 Pages Topic: Economics Paper #: 426955

Financial Statement Fraud Report - Enron Financial Statement Fraud Report: Enron The Enron case made the news when investors and employees realized that the company's accounting practices were not in line with what the company was actually telling them. Eventually, the dishonest accounting practices led to the bankruptcy of the Enron corporation and the dissolution of their accounting firm, Arthur Andersen (Foerstel, 2002). That accounting firm was among the five largest in