• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Unit 2 M3 Interpret the content of trading and profit and loss account and balance sheet for a selected company, explaining grow accounting ratios can be used to monitor the financial performance of the organisation.

Extracts from this document...

Introduction

M3: interpret the content of trading and profit and loss account and balance sheet for a selected company, explaining grow accounting ratios can be used to monitor the financial performance of the organisation. This report is going to illustrate state of given business. The business that this report is going to illustrate the finance state is Tesco plc, the report will compare and explain each aspects of the Tesco plc?s balance sheet. Profitability A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well. Gross profit margin The gross profit margin is the overall profit that Tesco plc has made in a year. This is calculated by the gross profit divided by the sales and then multiplied by the 100 to change in to a percentage. For example: Gross profit/sales x 100 = gross profit margin This is because it shows the shareholder what Tesco plc?s profit is in a percentage, as this will make it easier for shareholder to know if the business is right organisation to invest in. ...read more.

Middle

This is by £1146 million of money that Tesco were supposed to make in 2013. Return on capital employed Return on capital employed (ROCE) is a measure of the returns that a business is achieving from the capital employed, Capital employed equals a company's Equity plus Non-current liabilities (or Total Assets − Current Liabilities), the long-term funds used by the company. ROCE indicates the efficiency and profitability of a company's capital investments. Net profit/capital employed x 100 = Return on capital employed This will allow Tesco plc to show an overall loss and profit taken into account on their balance sheet, this the actual profit after working expenses not included in the calculation of gross profit have been paid. 2013 Final result 2012 Final result £120m/£31.144m x100 0.39% £2814m/£31532m x 100 8.92% In comparisons from the calculation in 2012 to 2013 their Return on capital employed has gone down in 2013 than in 2012, this is because Tesco plc.’s current assets have increased and the net profit have decreased in 2013, Solvency ratios The solvency ratio is a measure of the risk an insurer faces of claims that it cannot absorb. The amount of premium written is a better measure than the total amount insured because the level of premiums is linked to the likelihood of claims. ...read more.

Conclusion

2013 Final result 2012 Final result £14483m/£31.144m x 100 46.50% £13731m/£31532m x 100 43.55% In comparisons from the calculation in 2012 to 2013 their Return on capital employed has gone down in 2013 than in 2012, this is because Tesco plc.’s current assets have increased and the net profit have decreased in 2013. Shareholders A shareholder or stockholder is an individual or institution that legally owns a share of stock in a public or private corporation. Shareholders are the owners of a limited company. They buy shares which represent part ownership of a company. Dividend per share (DPS) The DPS shows the amount of shares that shareholders get 2013 2012 14.76p 14.76p The dividend per share in Tesco plc is hasn’t changed in 2013 and 2012 at 14.76p. This indicates that Tesco plc has maintained the dividends between their shareholders as they want to keep their shareholders In conclusion, the aspects of each finance statement used on the balance sheet gives indication of what Tesco plc uses to calculate their finance in to a ratio to get a more precise result from the calculation. From the calculation from the aspect on the balance sheet in 2013 and 2012, shows a clearer visual of what has decreased and increased for example, Tesco plc current ratios has increased in 2013 than in 2012, however profit margins has decreased in 2013 than in 2012 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Case Studies and Analysis section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Case Studies and Analysis essays

  1. Marked by a teacher

    Aims of tesco

    5 star(s)

    their store rather than any other as they are getting more for their money. Currently �1 sterling is worth about �1.25 making prices a lot more attractive to the customer spending sterling in store. Paul told me that in order to try and maintain their competitive position in Monaghan they

  2. btec business unit 3

    Although this is also a non-personal form of communication, many sales promotion themes are intended to spark personal interest in the product or service being promoted. Sales promotions are not directed solely toward the end user. Often, there is an underlying promotion directed toward company employees and TRADE FACTORS (distribution channel members), using the same promotion theme.

  1. (P4) Describe the Functional Activities and the Independencies of Tesco Plc and Coleraine Borough ...

    minimum of 172 programmed inspections * submit a minimum of 416 samples of food for bacteriological and chemical analysis * Any complaints made about food and food premises should be followed up with an investigation including alleged food poisoning incidents in accordance with approved procedures * Input specialist lecturing to the courses on food hygiene.

  2. Unit 2 P5 Interpret the contents of a trading and profit and loss account ...

    The Gross profit is the company's remaining profit after selling a product or service and deducting the cost related with its production and sale. For example Tesco plc has an overall gross profit of £4,089m in 2012, and in 2013 they made £737m, this is from selling their products from remaining profit.

  1. Unit 2 M2 Assess the importance of employability skills and personal skills in the ...

    is hardworking will show consistency and improvements to Tesco plc stores for example having hardworking employees by having a high level of customer service, working at a fast pace such as filling shelves, etc. This indicates that having a hardworking employee shows that those employees will be willing to do anything in the job.

  2. Describe the performance of a selected business by its trading, prot and loss, ...

    I see this as an improvement because despite spending more money, they have spent money on making their shop look presentable and current which positively leads to more customers. The increase in customers will allow them to sell and repair more TV?s and DVD players leading to more sale revenue and an increase in profits.

  1. Unit 2 D2 Evaluate the adequacy of accounting ratios as a means of monitoring ...

    This indicates that Tesco plc is a good business even though they aren?t doing well financially. Actual figure is used in Tesco plc in marketing. For example, if Tesco plc were to strengthen their brand Tesco plc will need to invest in to promotion and advertisement for a particular brand they want strengthen.

  2. LEGO's Management Accounting Decision

    Bromwich stated that this may require some organizational restructuring to enable the accounting and finance functions to be situated closer to the function that require and work with this new information. In a later work, Bromwich explained that attribute costing was quite distinct from ABC and ABM: ABC/ABM costs the

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work