Financial Ratio Analysis of Morrison in Comparison with Tesco Essay

Words: 2119
Pages: 9

Financial Ratio Analysis of Morrison in Comparison with Tesco


The purpose of this report is to critically analyse the financial ratio results of Morrison 2008 and 2009 as an equity analyst and compare it with like for like by using Tesco supermarket. To achieve this report will be looked at in four main areas. Firstly, we will use financial ratios obtained from annual reports of 2008 and 2009 to analysis and appraise Morrison’s financial performance. This would be followed by a comparative analysis with Tesco, for the same period. In addition, a trend analysis will be done to show the pattern of Morrison’s financial performance over the years 2006 to 2009. Furthermore, a comparison will be made with industry average
…show more content…
Although this number is insignificant, the low results for the two years are good and indicate that they have good policies in place at recovering debts even in the economic downturn when debtors may not have the finances to make disbursements There is an improvement in stock turnover by 0.04days from 2008 to 2009. Creditor days have increased from 2008 to 2009 by approximately 4 days

Tesco has gone down in stock turnover from 20 days to 19 which is an improvement.
Although Tesco had a fall in ratio as well, their ratio is not as good as Morrison’s. So based on these ratios Morrison has done better in shifting stock, however, if we look more closely it may be because Tesco sells more hardware and electrical gadgets than Morrison.

Overall the ratio is good when compared to the major players in the industry like Sainsbury and Tesco. This could mean that control over stock level is being managed better by Morrison. These ratios are a bit high for a supermarket but the fact that they also sell non-perishables and hardware should be taken into consideration.
Tesco has even better debtor days of 0. These figures have to be looked at very closely.

nclusion that the trade receivables is a smaller figure and may not be that useful as a performance indicator of Tesco/ supermarkets anyway, as credit sales are not part of their business