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                                                                                              

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1 Introduction---------------------------------------------------------------------------------           3

  • 1.1 Reason for choosing this topic--------------------------------------           3
  • 1.2 Reason for choosing the organisation----------------------------            3
  • 1.3 Background of the organisation    ---------------------------------            3
  • 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

  • 2.1 Information Source-----------------------------------------------------           4

2.1.1 Primary Sources -------------------------------------------           4

2.1.2 Secondary Sources----------------------------------------           5

  • 2.2 Method used--------------------------------------------------------------           5

2.2.1 Secondary Sources used---------------------------------          5

  • 2.3 Limitation of Information Gathering ---------------------------------         6
  • 2.4 Ethical Issues-------------------------------------------------------------           7
  • 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
  • 3.1 Company Overview------------------------------------------------------         9
  • 3.2 Future Strategy------------------------------------------------------------         10
  • 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

  • 3.4 Porter’s Five Forces -----------------------------------------------------         15

  1. Financial Analysis------------------------------------------------------------------------      17
  • 4.1 Revenue Analysis---------------------------------------------------------      17
  • 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

  • 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. The various models that I have used in my report such as ratio and SWOT analyses are all part of my studies.

Furthermore this project will not only help me in enhancing my report writing skills and interpretation skills but also appreciate the better use of financial statement which will further direct me on how to asses any company if the analysis is to be done in the future.

1.2   Reason for choosing the organisation

The company that I have chosen for the analysis is the Tesco plc. Tesco is the largest retailer in UK and third largest in the world with a group sale of £62,5bn (in 2010) and operates in 14 countries with 5008 stores worldwide. According to TNS Worldpanel over £1 in every £7 (14.3%) of UK retail sales is spent at Tesco. It has wide ranges of services and products which would help me to analyse different aspect of the business.

In addition many similar businesses are taking steps to establish their influence against the giants Tesco in recent years and I would like to compare the business and financial performances of such competitor, for which I have chosen Sainsbury and to see its progress and impact on Tesco Plc.

1.3  Background of organisation

Tesco plc is a British international grocery and general merchandising retail chain. It is the largest British retailer by both global sales and domestic market share, with profits exceeding £3 billion, and the third largest global retailer based on revenue, behind Wal-Mart and Carrefour. Jack Cohen is the founder of Tesco and founded in 1919. Tesco was listed on the London Stock Exchange in 1947 as Tesco Stores (Holdings) Limited. During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores. Originally specialising in food and drink, it has diversified into areas such as clothing, consumer electronics, financial services, telecoms, home, health and car insurance dental plans, retailing and renting DVDs, CDs, music downloads, internet services and software.( )

1.4   Aims and Objectives of my project

The ultimate aim of my report is to evaluate the Business and Financial position of Tesco plc through different business models and accounting techniques and to identify resulting implication and the future prospects of business.

This report will also evaluate the going concern nature of the Tesco plc and its ability to make profits in future and its future strategies to achieve its objectives.

1.4.1     Financial Analysis

Financial Analysis would be done by evaluating different financial ratios calculated from financial statements of Tesco Plc.

The analysis will be based on the following framework:

  • Profitability ratios
  • Working capital ratios
  • Risk ratios

1.4.2     Non-Financial Analysis

To analyze the non financial performance of Tesco plc the Business models that I have selected are SWOT analysis and PORTERS five forces model. SWOT will be used to analyze the internal strength and weaknesses of the company and opportunities and threats outside the business while Porter’s five forces analysis will be used to analyze the factors outside an industry that influence the nature of competition within it, the forces inside the industry that influence the way in which firms compete.

2.0  INFORMATION GATHERING AND ACCOUNTING/BUSINESS TECHNIQUES

2.1  Sources of information

Information gathering is a key part of any research because it is the only way we can clearly understand the nature and function of an organisation. For this reason, information should be ‘ACCURATE’. Otherwise the whole project is meaningless.

(Kaplan Financial 2010, ACCA Paper P1, Professional Accountant)

•        A uthentic

•        C omplete

•        C omparable

•        U nderstandable

•        R eliable

•        A uthorised

•        T imely

•        E ffecient

To make research more effective, it is important to know the information gathering techniques so that no information is overlooked and only relevant information is gathered.

Information can be gathered from, books, articles, personal experiences, expert opinions, encyclopaedias, and the WEB.

There are two types of sources from where the information can be gathered, they are as follows:-

1. Primary sources

2. Secondary sources

2.1.1 Primary sources:

A primary source is a source that was created during or immediately after the event or period that it documents. Primary sources enable researchers to get as close as possible to what actually happened during an historical event and or time period. A primary source is a first-hand account of an event.

Primary sources may include Original documents (excerpts or translations acceptable): Diaries, speeches, manuscripts, letters, interviews, news film footage, autobiographies, and official records.

(Source:  )

2.1.2 Secondary sources:

A secondary source is any item that was created significantly after the events it describes or is related to, or that was created by someone who was not directly involved in or an eye-witness to the events. Secondary sources also include simple descriptions of primary sources that do not reproduce the original "word-for-word."

Secondary sources my include Publications: Textbooks, magazine articles, histories, criticisms, commentaries, and encyclopaedia.

(Source: )

2.2  Method Used

As can be seen from the above comparisons between primary research and secondary research, as constrained by time and resources, I chose to carry out secondary research when gathering information about Tesco Plc.

2.2.1  Secondary Sources used:

Information could be obtained from variety of sources but as a professional we have to make sure that we should not be involved in any kind of unethical issues and the information that we gather should be reliable and useful in our report. I used variety of sources, such as:

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  • Financial statements of Tesco plc and J Sainsbury plc for years 2008, 2009 and 2010

This is one of the ideal sources to get the financial information required in carrying out a Business and Financial analysis of a company and which also helps in predicting the future performance of a company. They contain both the quantitative and qualitative data which is required for this report. Using annual reports as a source of information is of maximum advantage, because they contain all the reports of chairman, directors and CEO and also they contain all the financial and non-financial data which ...

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