TESCO PLC.

Financial Ratio Analysis

Liquidity Ratio
-

200 8

term that refers to an asset's ability to be easily converted through an act of buying or selling without causing a significant movement in the price and with minimum loss of value. An act of exchange of a less liquid asset with a more liquid asset is called liquidation. Liquidity also refers both to that quality of a business which enables it to meet its payment obligations, in terms of possessing sufficient liquid assets; and to such assets themselves.

1. The Current Ratio - which is also called working capital ratio, measures the number of

times that the current liabilities could be paid with the available current assets. Current ratio = Current Assets / Current Liabilities 2008 43,147,133/ 27,949,750= 1.54 2007 24,539,096/ 13,415,568= 1.82 2006 22,445,564/ 11,453,148= 1.95

2. Quick Ratio - This is a rigid test of the liquidity of a firm by excluding inventories and

prepayments. Quick Assets (cash + marketable securities +receivables) / Current liabilities 2008 2007 2006 1.39 = (43,147,133 4,236,060) / 27,949,750 1.67 = (24,539,096 2,051,746) / 13,415,568 1.78 = (22,445,564 1,975,579) / 11,453,148

13

TESCO PLC. Financial Ratio Analysis

3. Cash Ratio
Cash and Cash Equivalents / Current Liabilities 2008 2007 2006 0.11 0.14 0.16 = = = 3,129,913 /27,949,750 1,952,724/ 13,415,568 1,853,586/11,453,148

200 8

4. Net Sales to working capital ratio

Sales/Current Assets-Current Liabilities

2008 2007 2006

4.94 4.88 3.68

= = =

75,203,328/ 15,197,383 54,292,056/ 11,123,528 40,495,820/ 10,992,416

5. Inventory Turnover Ratio

This ratio indicates that for how long does a company holds its stock or inventory. Cost of sales/Inventory

2008 2007 2006

11.73 = 17.85 = 13.31 =

49,716,267/4,236,060 36,627,763/2,051,746 26,304,340/1,975,579

14

TESCO PLC. Financial Ratio Analysis

200 8

15

TESCO PLC. Financial Ratio Analysis

Profitability Ratio -

200 8

generally is the making of gain in business activity for the benefit of the owners of the business. The word comes from Latin meaning "to make progress," is defined in two different ways, one for economics and one for accounting.

1. Return on Asset Ratio

it is a measurement that everything owned by a person or company (all tangible and intangible property) that can be converted into cash.
Net Income / Average total Assets

2008 2007

0.24 =10,612,245/ 42,715,457.5 0.19 = 5,644,283/ 28,347,805

2. Return on Equity Ratio

Measures the rate of return on the ownership interest (shareholders' equity) of the common stock owners. ROE is viewed as one of the most important financial ratios. It measures a firm's efficiency at generating profits from every dollar of net assets (assets minus liabilities), and shows how well a company uses investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income (after preferred stock dividends but before common stock dividends) divided by total equity (excluding preferred shares), expressed as a percentage. Net Income / Average Owners Equity
16

TESCO PLC. Financial Ratio Analysis

2008 2007 2006 0.48 = 10,612,245/ 21,759,152 0.35 = 5,644,283/ 15,991,474 0.28= 4,242,521 / 14,873,695

200 8

3. Profit

Margin Ratio
The profit margin is mostly used for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. Individual businesses' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss. Net Income / Total Sales 0.14 = 10,612,245/ 75,203,328 0.10 = 5,644,283/ 54,292,056 0.10 = 4,242,521 / 40,495,820

2008 2007 2006

4. Basic Earning Power Ratio - Measures of earning power of your money in the business.
- Earnings Before Interest and Taxes / Total Assets

2008 2007 2006

0.22 = 12,241,272/ 55,379,567 0.24 =7,422,727/ 30,051,348 0.21 = 5,855,674 / 26,644,262

17

TESCO PLC. Financial Ratio Analysis

Solvency Ratio
1. Debt Ratio - Measures the proportion of assets finance by debt.
- Total Liabilities/Total Assets

200 8

2008 2007 2006

0.60 = 33,620,415/ 55,379,567 0.46 =14,059,875/ 30,051,348 0.44 = 11,770,567/ 26,644,262

2. Total Liabilities to Net worth Ratio - This ratio directly compares the amount of debt financing to the amount of equity
financing. - Total Liabilities/Net Worth

2008 2007 2006

1.54 = 33,620,415/ 21,759,152 0.87 =14,059,875/ 15,991,473 0.79 =11,770,567/ 14,873,695

18

TESCO PLC. Financial Ratio Analysis

200 8

19