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The topic I have chosen is the Business and financial analysis of a company for previous three years. The organization chosen for the analysis is Tesco Plc

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´╗┐CONTENTS Page No. 1 Introduction--------------------------------------------------------------------------------- 3 1. 1.1 Reason for choosing this topic-------------------------------------- 3 2. 1.2 Reason for choosing the organisation---------------------------- 3 3. 1.3 Background of the organisation --------------------------------- 3 4. 1.4 Aims and objectives of my project ------------------------------- 3 1.4.1 Financial Analysis ----------------------------------------- 4 1.4.2 Non Financial Analysis------------------------------------ 4 2 Information gathering and business techniques------------------------------- 4 1. 2.1 Information Source----------------------------------------------------- 4 2.1.1 Primary Sources ------------------------------------------- 4 2.1.2 Secondary Sources---------------------------------------- 5 1. 2.2 Method used-------------------------------------------------------------- 5 2.2.1 Secondary Sources used--------------------------------- 5 1. 2.3 Limitation of Information Gathering --------------------------------- 6 2. 2.4 Ethical Issues------------------------------------------------------------- 7 3. 2.5 Framework ---------------------------------------------------------------- 7 2.5.1 Financial Analysis Framework--------------------------- 7 2.5.2 Non Financial Analysis Framework--------------------- 8 2.5.3 Limitation of Techniques ---------------------------------- 9 1. Business Analysis ---------------------------------------------------------------------- 9 1. 3.1 Company Overview------------------------------------------------------ 9 1. 3.2 Future Strategy------------------------------------------------------------ 10 2. 3.3 SWOT Analysis----------------------------------------------------------- 12 3.3.1 Strengths ------------------------------------------------------- 12 3.3.2 Weakness ------------------------------------------------------ 13 3.3.3 Opportunities--------------------------------------------------- 13 3.3.4 Threats----------------------------------------------------------- 14 1. 3.4 Porter?s Five Forces ----------------------------------------------------- 15 1. Financial Analysis------------------------------------------------------------------------ 17 1. 4.1 Revenue Analysis--------------------------------------------------------- 17 2. 4.2 Ratio Analysis--------------------------------------------------------------- 18 4.2.1 Profitability Ratios-------------------------------------------- 18 4.2.2 Working Capital Ratios-------------------------------------- 20 4.2.3 Risk Ratios----------------------------------------------------- 21 5 Conclusions------------------------------------------------------------------------------------- 23 1. 5.1 Recommendations ------------------------------------------------------- 23 6 Reference list------------------------------------------------------------------------------------ 23 1.0 INTRODUCTION The topic I have chosen is the ?Business and financial analysis of a company for previous three years?. The organization chosen for the analysis is Tesco Plc (Period Feb 2008 to Feb 2010). 1.1 Reason for choosing this topic I have been studying finance and accounting since my intermediate days, and due to my liking of these subject areas I decided to progress on to ACCA and after studying papers of ACCA I developed an inclination towards analyzing companies from financial and strategic perspective. Financial analysis has been an area of my prime interest and it is highly related to my studies. This project will help me to explore my financial and business analysis skills in more depth and apply my theoretical knowledge gained in the class into practical situation. ...read more.


Tesco.com is selling grocery items and it is one of the world largest online grocers and they are also growing the sales of their non-food item through direct.tesco.com. 3.3.2 WEAKNESSES High reliance on UK market- UK Revenue excluding VAT (Source: Annual Report of Tesco plc 2010) Tesco has high dependency on UK market. Therefore the failure in UK market can cause serious damage to its revenue and hence profit. In 2010 Tesco made revenue of £38,558m in U.K, £8,695m in Europe, £349m and 8,432m in U.S and Asia respectively i.e. 68.8% the total revenue came from the UK In 2010. It was 69.8% in 2009 and 73.4% in 2008. One of Tesco’s strategy objectives is to become a successful retailer internationally and it is clear from this assessment that it is growing in the international market and may eventually become a successful international retail. Tesco has reduced its dependency by 4.6% from 2008 to 2010. Product Recalls -Tesco has recalled few of its products in 2010.It has recalled Baby Boutique Sequin Dress that went on sale in February 2010 because of sharp edges on some sequins of the dress. Tesco has also recalled Hovis Hearty Oats Loaf, 800g and Nescafe Collection Range 100g JAR due to containment of pieces of glass in them. Recall of these products suggests lack of quality control and may discourage customers from buying. This may result in loss of customers and brand image. This could also be the reason for reduced dependency by 4.6 % from 2008 to 2010. 3.3.3 OPPORTUNITIES Strategic alliance with other companies -Strategic alliance can help Tesco to deal with the threat of multinationals and compete on an international scale. In this way Tesco will be able to get access to better locations and reach out to its customers. Tesco can improve their services and overcome their weaknesses by merging or forming a strategic alliance with another company .It can reduce the cost of investment needed for expanding in an international market and it can also be used to confront competition. ...read more.


The rapid decline of Tesco’s interest cover can be criticised compare to a small decline in the Sainsbury’s ratio. 5.0 Conclusion: The recession has created a very competitive climate in UK and had made consumers more price sensitive and vigilant, in this environment Tesco has maintained a strong market share and has shown increase in revenue and profits. However, Tesco’s dependency in the UK market is always in question and the product recalls in 2010 is a major cause of concern. The Venturing of Tesco in the international market and its decision to enter growing economies of Asia are an indication that Tesco is tackling well with its weaknesses. For example in 2009 when Tesco’s gearing went up to 74% it brought it down to 54% by repayment of debt of £1671m in 2010 resulting in less finance cost which will have a positive effect on its profit. 5.1 Recommendation: 1. Tesco is growing internationally but it should avoid classic growth risks such as high borrowing and policy mistakes. 2. Tesco’s should work on improving its product quality, investigate its reason for product recalls in 2009 and eliminate the activities that caused the product recalls. 3. Tesco should improve its profit margin and asset utilisation in order to improve its ROCE which has reduced over the years. 4. In UK the VAT would be increased to 20% from Jan 2011 therefore Tesco should align its UK retailing policies accordingly in order to averse the negative impact of VAT increase on product demands. 6.0 Reference list Academics books: F5 Performance Management (Kaplan publishing), F7-Financial Reporting (Kaplan financial), F9-Financial Management (Kaplan publishing), P1-Professional Accountant (Kaplan financial). P3- Business analysis (Kaplan financial). ‘Cite them right’ which provided in-depth explanation of Harvard referencing system. The sources for E-news papers, journals and articles used include : http://www.morningstar.co.uk http://www.ft.com http://www.telegraph.co.uk/ http://money.cnn.com/ www.time.com http://www.businessweek.com/ http://www.nytimes.com/ http://europe.wsj.com http://www.bbc.co.uk/ http://uk.reuters.com/ http://www.guardian.co.uk/ OTHERS: http://ar2010.tescoplc.com/downloads.aspx(Tesco Plc annual report for 2008, 2009 and 2010.) http://www.j-sainsbury.co.uk/index.asp?pageid=20# (J Sainsbury Annual report for 2008, 2009 and 2010.) http://en.wikipedia.org/wiki/Tesco http://www.tescoplc.com/ http://www.tescoplc.com/plc/about_us/strategy http://libguides.library.cofc.edu/primarysources http://www.somegreymatter.com/primaryvssecondarysources.htm http://www.maxi-pedia.com/web_files/images/Swot_Matrix.png http://www.maxi-pedia.com/Five+Forces+model+by+Michael+Porter http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/2789827/Tesco-brand-is-UKs-most-valuable.html http://www.independent.co.uk/news/business/news/tesco-enters-india-with-cashandcarry-891979.html http://www.thepaypers.com/news/e-commerce/uk-e-commerce-on-the-rise-online-individual-spending-rate-hits-gbp-71-research/741728-25) http://www.marketresearchworld.net/index.php?option=com_content&task=view&id=1129&Itemid=48 http://www.telegraph.co.uk/finance/financetopics/budget/7852544/Budget-2010-VAT-rise-to-hit-spending-says-Tesco-chief-Terry-Leahy.html ________________ | Page ...read more.

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