Document Text Contents
Page 1
OXFORD BROOKES
UNIVERSITY
Research and Analysis Project
Report
Topic 8
The Business and Financial Performance of
Tesco Plc
Period 2006 to 2008
Submitted By: Syed Fahad Amjad
ACCA Reg.No: 1346741
Mentoring By: Colin Biggs
The project is submitted as part of the requirements for the award of the BSc
in Applied Accounting, Oxford Brookes University
November 2009
6458 words
Page 2
Oxford Brookes University
Research and Analysis Project
Page 2
Acknowledgements
I am grateful to my mentor Mr. Colin Biggs for his guidance and patience throughout the
preparation of this project report.
I would also like to thank my friends and family who supported me during the year.
Page 18
Oxford Brookes University
Research and Analysis Project
Page 18
The table below shows the percentage increase/decrease in return on equity
Return on Equity 2006 2007 2008
Net Income 1576 1899 2130
Equity 9444 10571 11902
Percentage Increase/Decrease 16.70% 18% 18%
Tesco
Tesco’s return on equity has been consistent throughout the period of 2006-08. There has
also been a increase in the ratio during 2007 when the ratio increased from 16.70% in 2006
to 18% in 2007. The increase in the ratio was resulted due to the increase in the net income
by 20% as compare to 2006 net income. One of the main non-financial factors that boost
the return on equity was Tesco’s participation in a number of charity campaign. Tesco
donated £8.7 million to sports for school and cancer research UK which helped them raise
£53 million in equity (Business in the community, 2008). While in 2008, they were able to
maintained the same percentage which represents good performance and shows further
increase in future as the investment matures.
Return on Equity 2006 2007 2008
Net Income 58 324 329
Equity 3965 4349 4935
Percentage Inc/Dec 1.46% 7.45% 6.67%
Sainsbury
Sainsbury increased its return on equity ratio significantly in 2007 when its percentage was
climb from 1.46% in 2006 to 7.44% in 2007. The reason behind the increase of this ratio was
due to the massive increase in their net income.
Page 19
Oxford Brookes University
Research and Analysis Project
Page 19
Earnings per Share
It should be noted that last year’s EPS would be actual, while current year and forward year
EPS would be estimates.
The table below shows the EPS of Tesco for the period 2006-08.
Earnings Per Share 2006 2007 2008
Ordinary Shares 1570 1874 2124
Weighted Ave. No. Of Shares 7823 7936 7881
EPS 20.07 23.61 26.95
Tesco
Tesco earnings per share have been increased during 2006-08 periods on a consistent basis.
In 2006 the earnings per share was 20.07p which was increased during 2007 by 19% to
23.84p, and in 2008 it was further increased by 13% to 26.95 showing Tesco’s strong
earnings and increasing return for investors every year.
The table below shows share price of Tesco analysed from year 2006 to year 2008.
There was a decrease in share price during 2008. Recession has been the main reason
behind the decrease of its share price as it hits all the largest retailers during 2008.
However, by the end of 2008, Tesco share price started to boost up again as the graph
shows.
Earnings Per Share 2006 2007 2008
Ordinary Shares 176 249 337
Weighted Ave. No. of
Shares 1692.2 1719.8 1767.2
EPS 10.40 14.48 19.07
ACE
Highlight
ACE
Highlight
ACE
Highlight
Page 35
Oxford Brookes University
Research and Analysis Project
Page 35
APPENDIX 2.0
FORMULA’S
Net Profit Margin
Net Income
Sales
Operating Income Margin
Operating Income
Sales
Gross Profit Margin
Gross Profit
Sales
Return on Investments
Net Income
Long-term Liability+Equity
Return on Equity
Net Income
Equity
Earnings Per Share
Ordinary Shares
Weighted Ave. Number of Shares
Current Ratio
Current Assets
Current Liabilities
Acid Test Ratio
Current Assets-Stocks
Current Liabilities
Total Debt to Assets
Total Liabilities
Total Assets
Debt to Equity
Total Debt
Total Equity
Interest Cover
Earnings before Interest & Tax
Interest Expense
Asset Turnover
Sales
Total Assets
Page 36
Oxford Brookes University
Research and Analysis Project
Page 36
Stock Turnover Period
Average Inventory
Cost of Goods Sold/365
Debtors Turnover Period
Average Gross Receivables
Sales/365
Creditors Turnover Period
Creditors
Cost of Goods Sold/365
OXFORD BROOKES
UNIVERSITY
Research and Analysis Project
Report
Topic 8
The Business and Financial Performance of
Tesco Plc
Period 2006 to 2008
Submitted By: Syed Fahad Amjad
ACCA Reg.No: 1346741
Mentoring By: Colin Biggs
The project is submitted as part of the requirements for the award of the BSc
in Applied Accounting, Oxford Brookes University
November 2009
6458 words
Page 2
Oxford Brookes University
Research and Analysis Project
Page 2
Acknowledgements
I am grateful to my mentor Mr. Colin Biggs for his guidance and patience throughout the
preparation of this project report.
I would also like to thank my friends and family who supported me during the year.
Page 18
Oxford Brookes University
Research and Analysis Project
Page 18
The table below shows the percentage increase/decrease in return on equity
Return on Equity 2006 2007 2008
Net Income 1576 1899 2130
Equity 9444 10571 11902
Percentage Increase/Decrease 16.70% 18% 18%
Tesco
Tesco’s return on equity has been consistent throughout the period of 2006-08. There has
also been a increase in the ratio during 2007 when the ratio increased from 16.70% in 2006
to 18% in 2007. The increase in the ratio was resulted due to the increase in the net income
by 20% as compare to 2006 net income. One of the main non-financial factors that boost
the return on equity was Tesco’s participation in a number of charity campaign. Tesco
donated £8.7 million to sports for school and cancer research UK which helped them raise
£53 million in equity (Business in the community, 2008). While in 2008, they were able to
maintained the same percentage which represents good performance and shows further
increase in future as the investment matures.
Return on Equity 2006 2007 2008
Net Income 58 324 329
Equity 3965 4349 4935
Percentage Inc/Dec 1.46% 7.45% 6.67%
Sainsbury
Sainsbury increased its return on equity ratio significantly in 2007 when its percentage was
climb from 1.46% in 2006 to 7.44% in 2007. The reason behind the increase of this ratio was
due to the massive increase in their net income.
Page 19
Oxford Brookes University
Research and Analysis Project
Page 19
Earnings per Share
It should be noted that last year’s EPS would be actual, while current year and forward year
EPS would be estimates.
The table below shows the EPS of Tesco for the period 2006-08.
Earnings Per Share 2006 2007 2008
Ordinary Shares 1570 1874 2124
Weighted Ave. No. Of Shares 7823 7936 7881
EPS 20.07 23.61 26.95
Tesco
Tesco earnings per share have been increased during 2006-08 periods on a consistent basis.
In 2006 the earnings per share was 20.07p which was increased during 2007 by 19% to
23.84p, and in 2008 it was further increased by 13% to 26.95 showing Tesco’s strong
earnings and increasing return for investors every year.
The table below shows share price of Tesco analysed from year 2006 to year 2008.
There was a decrease in share price during 2008. Recession has been the main reason
behind the decrease of its share price as it hits all the largest retailers during 2008.
However, by the end of 2008, Tesco share price started to boost up again as the graph
shows.
Earnings Per Share 2006 2007 2008
Ordinary Shares 176 249 337
Weighted Ave. No. of
Shares 1692.2 1719.8 1767.2
EPS 10.40 14.48 19.07
ACE
Highlight
ACE
Highlight
ACE
Highlight
Page 35
Oxford Brookes University
Research and Analysis Project
Page 35
APPENDIX 2.0
FORMULA’S
Net Profit Margin
Net Income
Sales
Operating Income Margin
Operating Income
Sales
Gross Profit Margin
Gross Profit
Sales
Return on Investments
Net Income
Long-term Liability+Equity
Return on Equity
Net Income
Equity
Earnings Per Share
Ordinary Shares
Weighted Ave. Number of Shares
Current Ratio
Current Assets
Current Liabilities
Acid Test Ratio
Current Assets-Stocks
Current Liabilities
Total Debt to Assets
Total Liabilities
Total Assets
Debt to Equity
Total Debt
Total Equity
Interest Cover
Earnings before Interest & Tax
Interest Expense
Asset Turnover
Sales
Total Assets
Page 36
Oxford Brookes University
Research and Analysis Project
Page 36
Stock Turnover Period
Average Inventory
Cost of Goods Sold/365
Debtors Turnover Period
Average Gross Receivables
Sales/365
Creditors Turnover Period
Creditors
Cost of Goods Sold/365
