Financial Statement Analysis Essay Example | Topics and Well Written Essays - 4000 words

Financial Statement Analysis - Essay Example 10 2.5 Comparison with competitor 10 Conclusion 11 Appendix I 12 Appendix II 13 Appendix III 14 References 17 Executive Summary This report discusses the finance performance and position of Tesco Plc for the recent 5 years (2006-2010), analyzes the short term and long term prospects of Tesco Plc and the investment attractiveness in its equity shares. Based on the analysis, Tesco Plc showed a strong past track record with continuous expansion through acquisitions and new selling space. Growth was slow in 2008-2009 due to the economic storm experienced but has resumed quickly. The balance sheet is strong with healthy solvency position and shareholder returns are encouraging with 5 consecutive years of enhanced dividend and increased Group Earnings per Share. Comparison with its UK retail peer, Morrisons is conducted and the result revealed that Tesco Plc is still ahead of its competitor. It is discovered that Tesco Plc is currently facing challenge from the intense competition in the U K due to the great promotional offers and price cut from the discount retailers such as Asda and Aldi. However, strong growth is expected from its international retail and the future outlook of the Company remains positive. A strong buy recommendation is proposed after reviewing broker’s recommendations and the performance of the Company. 1. Introduction 1.1 Aims and Objectives of the report The aims and objectives of this report include: To obtain an overview of the financial performance and position of Tesco Plc for the recent 5 years (2006-2010). To analyze the short term and long term prospects of Tesco Plc and the investment attractiveness in its equity shares. This report would begin with the historical evolution of Tesco Plc followed by an in depth analysis on its financial performance for the recent 5 years (2006-2010) together with a comparison against its competitor and calculation on beta discussing on how the returns of the share is correlated to the returns of th e stock market. Recommendation on whether to invest in its equity shares is suggested at the end of the report based on the comprehensive analysis done in terms on its short and long term prospects. 1.2 Historical evolution of Tesco Plc Tesco Plc is one of the world’s leading retailers founded by Jack Cohen when he started selling surplus groceries from a stall in the East End of London in 1919 and opened his first stall in 1929 in Burnt Oak, Edgware, North London. It was listed in the Stock Exchange with a share price of 25p in 1947 and continued to grow through acquisitions and opening of new stores in the 1960s with a chain of over 212 stores in the North of England. Tesco started to diversify its business by opening petrol stations in 1974. The first international retail unit was launched in Hungary in 1995 and today, its international operations cover China, Czech Republic, Hungary, India, Japan, Malaysia, Poland, Republic of Ireland, Slovakia, South Korea, Thailand, Tur key and United States. (Tesco Plc, 2011) The core purpose of Tesco Plc is to create value for customers to earn their lifetime loyalty and its success depends on people, both customers and employees and emphasize on a sustainable long term growth