Portfolio 1:
You work as a finance supervisor in the head office of a retail company. Finance executive of the
company is interested in buying shares in one of two companies (Sainsbury and Tesco PLC). You have
been asked to assist the finance executive in making such decision.
(i) Sainsbury PLC
Sainsbury’s is the third largest chain of supermarkets in the United Kingdom and it was founded in 1869,
by John James Sainsbury with a shop in Drury Lane, London. The company became the largest retailer
of groceries in 1922 and was an early adopter of self-service retailing in the United Kingdom.
Sainsbury’s ranges from groceries and clothing to homewares, electricals and more. More information
can be found through Sainsbury’s website and a recent annual report at the link below:
https://www.about.sainsburys.co.uk/~/media/Files/S/Sainsburys/documents/reports-andpresentations/annual-reports/sainsburys-ar2019.pdf
1 The grade is provisional until confirmed by the relevant assessment board(s). Your work will be marked in grades
rather than percentages. This is considered to deliver the most accurate and fair outcomes for students. Each
assessment that you undertake will be assessed using the common grading system. Information about the grading
system can be found in your Student Handbook, Section 10.
The Grade Criteria can be found in Appendix C of your Student Handbook.
Assessment Brief: LSBM203 – 2020-21 Page 3
(ii) Tesco PLC
Tesco Plc trading as Tesco, is a British multinational groceries and general merchandise retailer with
headquarters in the United Kingdom. It is the third-largest retailer in the world measured by gross
revenues and ninth-largest retailer in the world measured by revenues. It has shops in seven countries
across Asia and Europe and is the market leader of groceries in the UK, Ireland, Hungary and Thailand.
Tesco was founded in 1919 by Jack Cohen as a group of market stalls. The first Tesco shop opened in
1931 in Burnt Oak, Barnet. His business expanded rapidly, and by 1939 he had over 100 Tesco shops
across the country. More information can be found through the Tesco website and a recent annual
report at the link below:
https://www.tescoplc.com/media/476423/tesco_ar_2019.pdf
Required:
Prepare a report for potential investors which analyses the financial information for both companies and
give recommendations which company would be a suitable option for investment.
a) Calculate 10 financial ratios as given below for two years (2018 and 2019)
Current ratios P/E ratio
Quick ratios Earnings per share
Net Profit Margin Return on capital employed
Gross Profit margin Average inventories turnover period
Gearing ratios Dividend pay-out ratio
(15marks)
b) Analyse performance, financial position and investment potential of both companies. You
should use charts to compare performance of two companies. You will need to look at the
audited financial statements and carry out further research to explain the performance of each
company for two years. (35 marks)
c) Provide recommendations of how the financial performance of the poorly performing business
can be improved (10 marks)
d) Discuss the limitations of relying on financial ratios to interpret a company’s performance
(10 marks)
(Total: 70 marks)
(You are expected to search for more information on both companies and cite the material
correctly)
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