ACCOUTING TESCO FINANCIAL REPORT ANALYSIS

INTRODUCTION TO ACCOUNTING ACCOUNTING REPORT

Tesco’s 2013 Annual Report

Word Counts: 2061

Contents

1. Narrative Reports and Presentation (1)

1.1. Brief Overview to Tesco’s Business (1)

1.2. Tesco’s Top Competitors (1)

1.3. Three significant issues in chief executive’s report (2)

2. The Audit Report (3)

3. Tesco’s Performance Analysis-Earnings Per Share (EPS) (3)

3.1. The Necessity of Earnings Per Share Disclosure (4)

3.2. The Difference between Earnings and Dividends - Book Value (4)

3.3. Interest Cover, Quick Ratio and Gear (5)

3.4. Performance Comparison among Companies – Ratio Analysis (7)

4. Analysis on Tesco’s Consolidated Cash Flow Statement 2013 (8)

4.1. Cash Generation and Cash Use (8)

4.2. Cash and Cash Equivalents and Its Meanings (9)

5. The Notes to Financial Statements (9)

5.1. The Influence of Provisions on Financial Statements (10)

5.2. The Irrationality of ‘Estimate-Free’ (10)

6. Limitation of Financial Reports (11)

Reference (13)

1.Narrative Reports and Presentation

In order to have expensive understandings on Tesco’s performance, it is necessary to provide a brief narrative on Tesco’s business activities, competitors and its market position.

1.1.Brief Overview to Tesco’s Business

Tesco is one of the world’s biggest giants in retail and grocery industry. Currently, it is operating around 6784 stores worldwide, across the United Kingdom, the rest Europe and Asia. The business foundations of Tesco are brand development, online retailing () and glabalisation.

Tesco is experiencing a stable growth. In 2013, Tesco has achieved £72.4 billion pounds revenue (Tesco, 2013). The major market of Tesco is still in the UK, produced £43.6 billion pounds of revenue for Tesco group, occupied more than 60% of its total group revenue. Tesco is operating four sub-brands in the UK, including Tesco Extra, Superstore, Metro and Express. Furthermore, Tesco is the UK’s largest online food retailer, providing more than forty thousand food products to customers. Moreover, Tesco Bank also begins to provide bank and financial services to its customers, selling mortgage products for stimulating sells and earning accrual interest.

1.2.Tesco’s Top Competitors

Tesco’s key competitors include ASDA Group Limited, J Sainsbury plc., Marks and Spencer Group plc, and Morrisons.

After Tesco, Asda is the UK’s second largest grocery retailer. J Sainsbury plc is founded in 1869 and has been developed as the UK’s third largest retailer. Sainsbury’s has occupied more than 16% market share and providing similar product categories with Tesco, even the banking services (Shannon, 2011). While, Morrisons had approximately 13% market share in the UK (BBC, 2013)

1.3.Three significant issues in chief executive’s report

In Tesco’s annual report 2013, Mr. Philip Clarke, the chief executive, demonstrated Tesco’s future development will focus on developing multichannel retailing which combines physical stores, digital retailing and e-commerce. Moreover, a disciplined financial framework will be established, for the purpose of shifting investments from bold worldwide expansion to existing markets; and from large stores to highly focused multichannel retailing (Tesco, 2014).

“The Tesco of the future will pursue more focused growth, consume less

capital and generate more free cash flow.” (Tesco, 2014)

Overall, three most important issues pointed out by the chief executive of Tesco are considered to be concentrating on developing multichannel retailing, optimizing investments for achieving sustainable growth, setting disciplined financial framework to produce surplus in free cash flow.