Financial Analysis Assignment Sample

Financial Analysis of Sainsbury PLC and Mark & Spencer PLC

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Introduction of Financial Analysis Assignment 

Investment activity in the capital market required proper identification of the financial performance of an organization with a comparative analysis to identify the current financial status and future business prospects. Investment prospect identification Sainsbury PLC has been chosen as the primary company for the investment that is going to be analyzed with competitors Mark and Spencer PLC. Performance analysis from FY 2018 to 2022 is going to present financial factors like profitability, return on investment, and dividend-based financial aspects to convey a compact financial presentation for suggestions for investment benefits in Sainsbury PLC. Comparative analysis with Mark and Spencer PLC is going to evaluate the performance of Sainsbury PLC with the poppet benchmark because Mark and Spencer is also the listed leading retail company. 

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Performance in FY 2018 to 2022 of Sainsbury PLC     

 

Net Profit Ratio

Formula

 Amount

Ratio

Growth

Year

Net Profit

(Net Profit/Sales)*100

55177

4.92%

-0.37%

2022

Sales

1122153

 

Net Profit

64110

5.29%

0.11%

2021

Sales

1212135

 

Net Profit

70153

5.18%

-2.20%

2020

Sales

1355132

 

Net Profit

81135

7.37%

4.72%

2019

Sales

1100165

 

Net Profit

40177

2.66%

 

2018

Sales

1512130

 

 

 

 

 

 

Year

Earnings per Share                   

Formula

 Amount

Ratio

Growth

2022

profit after tax

(profit after tax - preference dividend )/ total number of ordinary shares

12110

0.02

0.03

preference dividend

5800

total number of ordinary shares

311150

2021

profit after tax

20157

0.05

0.01

preference dividend

6300

total number of ordinary shares

298150

2020

profit after tax

20173

0.06

0.02

preference dividend

5000

total number of ordinary shares

255163

2019

profit after tax

20155

0.08

0.02

preference dividend

2100

total number of ordinary shares

218153

2018

profit after tax

21163

0.10

 

preference dividend

900

total number of ordinary shares

2,03,170

M&S

ROCE

Formula

 Amount

Ratio

Growth

Year

Operating profit

(operating profit / turnover)*100

55134

23.65%

15.83%

2022

capital employed

233153

 

Operating profit

18154

7.82%

-0.60%

2021

capital employed

232156

 

Operating profit

22156

8.42%

-1.62%

2020

capital employed

263133

 

Operating profit

31132

10.04%

-2.60%

2019

capital employed

310153

 

Operating profit

40199

12.64%

 

2018

capital employed

318136

 

 

 

 

 

 

 

Return on equity

Formula

 Amount

Ratio

Growth

 

Profit after tax

Profit after tax - Preference Dividends

                                                     Shareholders' Funds

  Turnover

12110

0.04

-0.02

2022

Shareholders' Funds

290145

 

Profit after tax

20157

0.06

0.01

2021

Shareholders' Funds

311153

 

Profit after tax

20173

0.05

-0.02

2020

Shareholders' Funds

370153

 

Profit after tax

20155

0.08

0.02

2019

Shareholders' Funds

255110

 

Profit after tax

21163

0.05

 

2018

Shareholders' Funds

390145

 

 

 

 

 

 

 

payout ratio

Formula

 Amount

Ratio

Growth

2022

Total ordinary dividend

Total ordinary dividend

                                 Earnings after tax and preference dividends

                                                     Shareholders' Funds

  Turnover

3212

0.27

0.04

Earnings after tax and preference dividends

12110

2021

Total ordinary dividend

4512

0.22

0.20

Earnings after tax and preference dividends

20157

2020

Total ordinary dividend

512

0.03

-0.19

Earnings after tax and preference dividends

20173

2019

Total ordinary dividend

4252

0.21

0.06

Earnings after tax and preference dividends

20155

2018

Total ordinary dividend

3134

0.15

 

Earnings after tax and preference dividends

21163

 

 

 

 

 

 

 

Dividend Cover

Formula

 Amount

Ratio

Growth

2022

Earnings per Share

Total ordinary dividend

                                 Earnings after tax and preference dividends

                                                     Shareholders' Funds

  Turnover

0.15

1.25

0.00

Dividend per Share

0.12

2021

Earnings per Share

0.15

1.25

0.17

Dividend per Share

0.12

2020

Earnings per Share

0.13

1.08

-0.08

Dividend per Share

0.12

2019

Earnings per Share

0.14

1.17

-0.03

Dividend per Share

0.12

2018

Earnings per Share

0.12

1.20

 

Dividend per Share

0.1

 

 

 

 

 

 

Year

Earnings per Share                   

Formula

 Amount

Ratio

Growth

2022

profit after tax

(profit after tax - preference dividend )/ total number of ordinary shares

12110

0.02

0.03

preference dividend

5800

total number of ordinary shares

311150

2021

profit after tax

20157

0.05

0.00

preference dividend

6300

total number of ordinary shares

298150

2020

profit after tax

20173

0.05

0.03

preference dividend

5000

total number of ordinary shares

298150

2019

profit after tax

20155

0.08

0.02

preference dividend

2100

total number of ordinary shares

218153

2018

profit after tax

21163

0.10

 

preference dividend

900

total number of ordinary shares

203170

Table 2: ratio analysis of Sainsbury PLC

Additionally analyze the financial performance of Sainsbury plc is computer financial ratio over the five years period. In order to calculate the net profit ratio identifies the sales margin and net profit over the five years period which is almost 4.92% and 5.29% in the financial year 2020 and 2021 while its growth rate is -0.37% (Khomariah, 2021). The needed sale is 1122153 while the net profit is 55177 and the growth of the ratios is - 0.37%. On the other hand, preference dividend and profit after tax were also calculated for the same financial year of Sainsbury plc which is approximately 0.02 and 0.05 while its growth rate is 0.03 respectively in the same financial year (Restianti & Agustina, 2018). In order to compare the current financial position of an individual business organization the ratio analysis has been computed by the individual business organization and that clearly describes the competitor's current financial performance.

Profitability and asset utilization of Sainsbury

In order to calculate the profitability of the individual business organization, earnings per share and net profit ratio are considered useful financial tools that compare the current financial position with the individual competitors. The net profit ratio is 2.6% and 7.37% in the financial year of 2018 and 2019 while its growth rate is 4.72% respectively which is computed for the same Sainsbury PLC (Kimmel et al. 2020). In order to calculate earnings per share the company also considers the total number of ordinary shares and preference dividends and the ratio is 0.10 and 0.08 in the financial year 2018 and 2019, while its growth rate is 0.02 respectively. Apart from that, profitability ratios assess companies' ability to earn more profit by improving sales or operational efficiency and that indicates how the company efficiently generates profit for shareholders' value.

Implications of profitability and asset utilization ratios  

In order to determine the positive or negative financial value of the company, compute the ratio analysis and identify how to expand the current market position of the retail industry. In order to expand the basic demands of the organization, 5 years ratio analysis also identifies the current market position and describes a particular road map that continuously improves operational efficiency (Mowen et al. 2022). The 5-year ratio analysis method is important to identify how current implications are improving but the net profit ratio has described the profitability as increased as compared to the competitor. The operating profit and capital employed have been calculated by the return on capital employed and the ratio is 23.65% and 7.82% in the financial year 2020 and 2022 while its growth rate is 15.83% respectively.

Financial factors affecting the performance

The company's profitability ratios across the board are all rising daily, and business is booming. The performance of the business, operating costs for all employees, and use of all technology are all impacted by financial variables. All of the company's expenses and the diversity of net margin are managed financial elements. Every month and every year, the business computed its revenue and all other income data (Miransyah & Dempo, 2021). Due to the fact that each task is broken down into a number of smaller ones that are simple to solve, all financial aspects improve a company's performance. Another important financial aspect of the organization is cash flow, which is necessary for expansion. The company's income and expense schedule should be displayed.

Non-financial factors affecting performance

This company has numerous stakeholders who work together to improve performance, thus it is not dependent on a single one. Because Covid had such a negative impact on society, the pandemic negatively impacted its performance and destroyed the company's market. The business was able to improve productivity thanks to the adoption of current technologies, which helped them generate more revenue (Sari et al. 2020). Therefore, these non-financial aspects are in charge of affecting Sainsbury's performance. It is a large, international supermarket that produces goods in its own factories and sells products that are both sustainable and fresh. It delivers high-quality goods that are wholesome and recent. It upholds its ideals and ethics while producing goods. The company has a large global network of suppliers and clients.

Performance of Mark and Spencer over FY 2018 to 2021

Year

Net Profit Ratio

Formula

 Amount

Ratio

Growth

Net Profit

(Net Profit/Sales)*100

306600

2.82%

4.98%

2022

Sales

10885100

 

Net Profit

-198000

-2.16%

-2.40%

2021

Sales

9155700

 

Net Profit

23700

0.23%

-0.09%

2020

Sales

10181900

 

Net Profit

33500

0.32%

0.12%

2019

Sales

10377300

 

Net Profit

41500

0.20%

 

2018

Sales

20327100

 

 

 

 

 

 

Year

Earnings per Share                   

Formula

 Amount

Ratio

Growth

2022

profit after tax

(profit after tax - preference dividend )/ total number of ordinary shares

306600

0.10

-0.19

preference dividend

4200

total number of ordinary shares

2913700

2021

profit after tax

-198000

-0.09

0.09

preference dividend

2800

total number of ordinary shares

2283000

2020

profit after tax

23700

0.00

0.01

preference dividend

6000

total number of ordinary shares

3702500

2019

profit after tax

33500

0.01

0.00

preference dividend

-100

total number of ordinary shares

2681000

2018

profit after tax

21500

0.01

 

preference dividend

-800

total number of ordinary shares

2585000

 

ROCE

Formula

 Amount

Ratio

Growth

Year

Operating profit

(operating profit / turnover)*100

590800

8.35%

9.85%

2022

capital employed

7072600

 

Operating profit

-94900

-1.50%

-8.55%

2021

capital employed

6341600

 

Operating profit

588100

7.06%

-5.03%

2020

capital employed

8334500

 

Operating profit

601000

12.09%

5.61%

2019

capital employed

4971800

 

Operating profit

400800

6.48%

 

2018

capital employed

6185000

 

 

 

 

 

 

M&S

Return on equity

Formula

 Amount

Ratio

Growth

 

Profit after tax

Profit after tax - Preference Dividends

                                                     Shareholders' Funds

  Turnover

306600

0.11

0.19

2022

Shareholders' Funds

2913700

 

Profit after tax

-198000

-0.09

-0.09

2021

Shareholders' Funds

2283000

 

Profit after tax

23700

0.01

-0.01

2020

Shareholders' Funds

3702500

 

Profit after tax

33500

0.01

0.01

2019

Shareholders' Funds

2681000

 

Profit after tax

21500

0.01

 

2018

Shareholders' Funds

3884000

 

 

 

 

 

 

 

payout ratio

Formula

 Amount

Ratio

Growth

2022

Total ordinary dividend

Total ordinary dividend

                                 Earnings after tax and preference dividends

                                                             Shareholders' Funds

  Turnover

58274

0.19

0.42

Earnings after tax and preference dividends

306600

2021

Total ordinary dividend

45660

-0.23

-3.36

Earnings after tax and preference dividends

-198000

2020

Total ordinary dividend

74050

3.12

1.52

Earnings after tax and preference dividends

23700

2019

Total ordinary dividend

53620

1.60

-2.01

Earnings after tax and preference dividends

33500

2018

Total ordinary dividend

77680

3.61

 

Earnings after tax and preference dividends

21500

 

 

 

 

 

 

 

Dividend Cover

Formula

 Amount

Ratio

Growth

2022

Earnings per Share

Total ordinary dividend

                                 Earnings after tax and preference dividends

                                                     Shareholders' Funds

  Turnover

0.15

1.25

0.00

Dividend per Share

0.12

2021

Earnings per Share

0.15

1.25

0.17

Dividend per Share

0.12

2020

Earnings per Share

0.13

1.08

-0.08

Dividend per Share

0.12

2019

Earnings per Share

0.14

1.17

-0.03

Dividend per Share

0.12

2018

Earnings per Share

0.12

1.20

 

Dividend per Share

0.1

 

 

 

 

 

 

Year

Earnings per Share                   

Formula

 Amount

Ratio

Growth

2022

profit after tax

(profit after tax - preference dividend )/ total number of ordinary shares

306600

0.10

-0.19

preference dividend

4200

total number of ordinary shares

2913700

2021

profit after tax

-198000

-0.09

0.10

preference dividend

2800

total number of ordinary shares

2283000

2020

profit after tax

23700

0.01

0.00

preference dividend

6000

total number of ordinary shares

2283000

2019

profit after tax

33500

0.01

0.00

preference dividend

-100

total number of ordinary shares

2681000

2018

profit after tax

21500

0.01

 

preference dividend

-800

total number of ordinary shares

2585000

Table 2: ratio analysis of M&S PLC

Performance analysis of Mark and Spencer has been presented through profitability and return on capital employed identification, where the Net profit margin of Mark and Spencer has indicated profitability from 2018 has continuously grown in 2018 to 2020.         The financial year 2021 NP margin is -2.16%. The ROCE of this organization has been calculated at 12.09% in FY 2019 which has been changed to a negative outcome of around -1.50% in FY 2021. Continuous rotation of the business is required to perform effective growth in profitability, where the negative outcome of ROCE is impacted adversely on earrings (Nugroho, 2022). Additional information has been identified that in the financial year 2022 earnings of Mark and Spencer PLC have turned to 8.35% because of the positive flow of revenue.

Return on equity (ROE) Mark and Spencer PLC has presented continuous growth of business activity impact positive to business development. Hence, the fall in FY 2021 -0.09 has raised financial issues due to the continuous fall in revenue during the pandemic situation.

Dividend payout ratio identification is required due to investors' financial benefits for long-term investment would be identified, where the 3.61 dividend payout ratio in the financial year 2018 indicates an organizational positive impact on investors (Suriyanti et al.2022). Additional information regarding the dividend payout ratio is the continent's fall has been identified due to the financial performance of Mark and Spencer has been affected by internal and external factors. Earnings per share of this organization indicate the progression of EPS is not sufficient to gain financial benefit by long-term investment (Daryanto et al. 2021). EPS of M&S PLC has been identified as negative -0.09 due to a continuous fall in revenue with a continuous increase in the cost of production.

Comparison between Sainsbury and Mark and Spencer

Comparative analysis of Sainsbury with Mark and Spencer has evaluated the profitability of Sainsbury PLC as positive due to continuous progression in business activity with cost minimization strategies. Comparative analysis has presented the revenue growth of Sainsbury PLC continuation corporate to Mark and Spencer PLC's efficiency growth of the dividend payout to shareholders (Heck et al. 2018). Mark and Spencer PLC is a listed retail organization whereas Sainsbury PLC has not listed Organisation in the capital market their investment in this organization is Angel investors regarding investment approach. The dividend payout office organization has also been a positive Mark and Spencer PLC that could be positive for long-term investment in this organization (Patel et al. 2020). Additional prospects also identify that the Return on equity of Mark and Spencer PLC is constantly providing positive results investors expect in the financial year 2021, where Sainsbury PLC is positive and continuously effective for investment activities in these organizations because of the positive way up ratio provided financial benefits to investors that encourage investors to remain invested (Arsyad et al. 2021). Comparative analysis between the two organizations has stated that changed Sainsbury PLC positivity in profitability is encouraging investors to invest whereas what is denser profitability growth is not sufficient to pay out recent dividend investors. Financial stability in Mark and Spencer PLC has been identified as positive; however, Sainsbury PLC positive growth is vulnerable due to continuous consumption of external debts.

Factors affecting differences    

Factor affecting an organization has been considered as external factors of economic and internal factors of Management, where mark and spenders PLC affects the growth of business activities due to continuous Business expansion on the Global stage. Sainsbury PLC productivity growth in the Cooperative market is effective internal management of this organization has fewer years of business experience which could be inducted as a negative sign of investment in this organization. The market capital of Mark and Spencer PLC is much higher than Sainsbury PLC which needs to be considered for investment activities (Husain & Sunardi, 2020). Continuous progression of business is effective to gain financial benefit by global market capturing approach, where Sainsbury PLC has Limited financial activities has been effective growth in future business activity is positive (Abdel-Basset et al. 2020). The elements that affect an organization have been classified as internal management factors and external economic factors, with Mark and Spencer's PLC affecting business activity growth as a result of ongoing global business expansion. Sainsbury PLC productivity development in the cooperative market is efficient, but the company's internal management has fewer years of business expertise, which could be seen as a warning against investing in this company. The market capital of Marks & Spencer PLC should be taken into account for investment operations because it is significantly higher than Sainsbury PLC (Kamaluddin et al. 2019). Continuous business expansion is useful for gaining financial benefit through a global market-capturing strategy, where Sainsbury PLC Limited financial actions have been successful in fostering positive future company activity.

In order to properly evaluate an organization's financial performance and determine its current financial situation and future business prospects, investment activity in the capital market was necessary. Identification of the investment potential Sainsbury PLC has been selected as the main company for the investment that will be compared to rival Mark and Spencer PLC. To provide a concise financial presentation for recommendations for investment benefits in Sainsbury PLC, performance analysis for the fiscal years 2018 through 2022 will present financial elements such profitability, return on investment, and dividend-based financial features. Sainsbury PLC's performance will be compared to Mark and Spencer PLC's using the poppet benchmark since Mark & Spencer is likewise a publicly traded top retailer.

Recommendations to Auntie Betty and Uncle Bill

Auntie Betty and uncle bill are considered by the investing activity of the company that depends on the crucial customers. The current investment portfolio is concerned about the drop value of the overall investment portfolio by the pricing information. The first recommended topic is depending on M&S investors should try to focus on companies' growth by improving more loyal customers. Secondly, the recommended topic is depending on whether a company could adopt a digital marketing strategy to improve capitalization in the business. The business was able to improve productivity thanks to the adoption of current technologies, which helped them generate more revenue. Therefore, these non-financial aspects are in charge of affecting Sainsbury's performance. The current investment portfolio is concerned about the total investment portfolio's value dropping as a result of the price data. 

Conclusion

Based on the above discussion it can be concluded that the first item that is advised is that M&S investors try to concentrate on the expansion of their companies by attracting more devoted clients. The suggested topic revolves around whether a business may use a digital marketing strategy to increase capitalization. Calculate the ratio analysis and identify ways to strengthen the current market position of the retail sector to evaluate if the company has a positive or negative financial value. The 5 years ratio study also analyzes the present market position and outlines a specific road map that consistently raises operational efficiency in order to grow the organization's fundamental requirements.  

References

Abdel-Basset, M., Ding, W., Mohamed, R., & Metawa, N. (2020). An integrated pathogenic MCDM approach for financial performance evaluation of manufacturing industries. Risk Management, 22(3), 192-218. https://link.springer.com/article/10.1057/s41283-020-00061-4

Arsyad, M., Haeruddin, S. H., Muslim, M., & Pelu, M. F. A. (2021). The effect of activity ratios, liquidity, and profitability on the dividend payout ratio. Indonesia Accounting Journal, 3(1), 36-44. https://ejournal.unsrat.ac.id/v3/index.php/iaj/article/view/30119

Daryanto, W. M., Maharani, A. P., & Wiradjaja, N. (2021). Profitability Ratio Analysis Before and During Covid-19: Case Study in PT Japfa Comfeed Indonesia. Life, 8, 30. https://seajbel.com/wp-content/uploads/2021/06/SEAJBEL24_712.pdf

Heck, D. W., Thielmann, I., Moshagen, M., & Hilbig, B. E. (2018). Who lies? A large-scale reanalysis linking basic personality traits to unethical decision making. Judgment and Decision making, 13(4), 356. https://journal.sjdm.org/18/18322/jdm18322.pdf

Husain, T., & Sunardi, N. (2020). Firm's Value Prediction Based on Profitability Ratios and Dividend Policy. Finance & Economics Review, 2(2), 13-26. http://www.riiopenjournals.com/index.php/finance-economics-review/article/view/102

Kamaluddin, A., Ishak, N., & Mohammed, N. F. (2019). Financial distress prediction through cash flow ratios analysis. International Journal of Financial Research, 10(3), 63-76. https://ideas.repec.org/a/jfr/ijfr11/v10y2019i3p63-76.html

Khomariah, S.N., 2021. Analysis of the Effect Between Operating Cash Flow, Profitability Ratio and Earnings Per Share on Share Price in the Banking Sector in 2015-2019. Journal of Contemporary Information Technology, Management, and Accounting, 2(2), pp.61-68. http://journal.p2ai.or.id/index.php/JCITMA/article/view/148

Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2020). Financial accounting: tools for business decision-making. John Wiley & Sons. https://books.google.com/books?hl=en&lr=&id=oPdPEAAAQBAJ&oi=fnd&pg=PA5&dq=accounting+ratios+in+decision+making&ots=237veoojTm&sig=-vjPlFx4GbGkw2Xtlla2NN6CfWI

Miranshah, G. G., & Dempo, S. R. S. (2021). Profitability Ratio Analysis at PT. Medikaloka Hermina, TBK. BINA BANGSA INTERNATIONAL JOURNAL OF BUSINESS AND MANAGEMENT, 1(1), 60-67. http://bbijbm.lppmbinabangsa.id/index.php/home/article/view/7

Mowen, M. M., Hansen, D. R., & Heitger, D. L. (2022). Managerial accounting: The cornerstone of business decision-making. Cengage learning. https://books.google.com/books?hl=en&lr=&id=cpNaEAAAQBAJ&oi=fnd&pg=PP1&dq=accounting+ratios+in+decision+making&ots=tl2WfBn1Az&sig=e_DbwLZPxpIAFniSOI7H7JtUUDk

Nugroho, L. (2022). The Relationship between Maqasid Shariah and Profitability Ratio in Islamic Banking Industries Performance. Sosyoekonomi, 30(53), 243-259. https://dergipark.org.tr/en/pub/sosyoekonomi/issue/71480/1021551

Patel, A. K., Sharma, S., & Kumar, S. (2020). Impact of Determinants of Profitability Ratios among Private, Public and Foreign Banks in India. International Journal of Financial Management, 10(4), 16. https://www.researchgate.net/profile/Ajay-Patel-10/publication/346888462_Impact_of_Determinants_of_Profitability_Ratios_among_Private_Public_and_Foreign_Banks_in_India/links/5fd22839a6fdcc697bf58741/Impact-of-Determinants-of-Profitability-Ratios-among-Private-Public-and-Foreign-Banks-in-India.pdf

Restianti, T., & Agustina, L. (2018). The effect of financial ratios on financial distress conditions in sub industrial sector companies. Accounting Analysis Journal, 7(1), 25-33. https://journal.unnes.ac.id/sju/index.php/aaj/article/view/18996

Sari, Y., Nofinawati, S. B., & Alfadri, F. (2020). The Effect Of profitability Ratios On financial distress in Islamic commercial Banks in Indonesia. Journal Sharia Of Banking, 14. https://srinivaspublication.com/journal/index.php/ijcsbe/article/view/1421

Suriyanti, S., Priadana, S., & Astuty, P. (2022). Analysis Of Liquidity Ratio, Solvency Ratio, And Profitability Ratio To Bond Ratings In Food And Beverages Companies Listed On The Indonesia Stock. Jurnal Pendidikan Nusantara, 2(2), 57-63. http://e-journal.stkipnutegal.ac.id/index.php/jpnu/article/view/60 

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