Stakeholders of Tesco

Document Type:Thesis

Subject Area:Business

Document 1

Tesco operates a chain of retail stores which deal with both general merchandise and groceries. In the recent past, Tesco has been in pursuit to achieve sustainable development not only focusing on financial goals, but also social, environmental and corporate social responsibility towards its stakeholders. The term stakeholder refers to a single individual or a group of individuals who can influence or be affected by the actions and policies of an organization. A stakeholder can also be defined as a party of concern or interest in a particular business or any other undertaking. A stakeholder can either be internal or external to the business. Being a retail business, Tesco relies on direct sales to the customers in order to earn revenue and keep the business running smoothly.

Sign up to view the full document!

This therefore makes customers key stakeholders of Tesco. Tesco as an organization has had the responsibility of ensuring that they focus on improving the service to their customers day in day out. Employees are the people behind ensuring that the customer needs are satisfied and well met in terms of quality service and effective service. The suppliers are the people that supply the retail products to Tesco. Secondly, the respective reviews have been used to show that Tesco has honored the rights of their customers. Tesco has been in the forefront in ensuring that the rights of both employees and customers are respected. They have done this by ensuring that the products that they offer to the customers are safe and secure for consumption.

Sign up to view the full document!

They have also gone to the extend of ensuring the products have been produced through responsible and safe processes In addition, Tesco has demonstrated its performance by ensuring healthy living of their customers. The organization has partnered with other health experts to ensure that their customers are treated and have support prevention from illness. Secondly, Tesco has also put in place favorable work policies. When employees are comfortable with the work policies, they are able to deliver well to the customers. Tesco has demonstrated this by ensuring that the policies that they set can easily be accepted by the employees because they are not harsh on the employees. The organization also has a flexible working schedule which in addition is a good way of motivating the employees (Jones et al,2014,129-132).

Sign up to view the full document!

In addition, Tesco empowers its employees through training. 255 Current ratio for year 20X1=12,800/10,800=1. 185 ii)Acid test ratio Acid test ratio= (Current assets-inventory)/current liabilities Acid test ratio for 20X0= (6,400-2,600)/5,100=3,800/5,100=0. 745 Acid test ratio for 20X1= (12,800-52,00)/10,800=0. 704 b) Efficiency or Activity ratios i) inventory turnover ratio Inventory turnover ratio=Cost of goods/average inventory Inventory turnover ratio for 20X0=14,500/2,600=5. 577 times Inventory turnover ratio for 20X1=16,000/ (2600 +5,200)/2=4. 814 ii)Debt/asset ratio Debt-asset ratio=Total debt/Total assets Debt-asset ratio for the year 20X0=13,100/39,000=0. 336 Debt-asset ratio for 20X1=22,800/50,800=0. 449 e) Other ratios Earnings per share=Net income/ number of outstanding shares. EPS for 20X0=$7000,000/18M shares=$0. 3889 per share EPS for 20X1=$6,600,000/18M shares=$0. All other current assets can easily be converted into cash. The ratio shows to what extent are the more liquid assets available to meet obligations when they fall due.

Sign up to view the full document!

An acid test ratio of less one is an indicator that the firm may not comfortably meet its short-term liabilities using the near cash assets. The relevance of this ratios is that, before suppliers sell goods to the organization on credit, they are interested in knowing whether the company is capable of paying the obligation when it matures. This is also true for other creditors who lend to the company on short term basis. The higher the number of days in inventory, the longer the inventory takes before being sold. The relevance of the activity ratios is that it helps shareholders to evaluate whether management is utilizing the company assets in the best way possible to generate cash and revenues. Profitability ratios are used to measure the ability of the firm to generate profits.

Sign up to view the full document!

The purpose of the Return on Equity ratio is to measure how the company will use shareholders investment to generate income. A higher Return on Equity ratio indicates that the shareholders earn a higher net income per unit of equity. A lower debt-equity ratio is more preferable to both the lenders and the investors. The company should try to strike a balance between both debt and equity. The Debt to asset ratio indicates the amount of assets that financed through borrowing. A low debt to asset ratio is an indicator of good performance. The solvency ratios are very relevant to lenders. The inventory turnover ratio also decreased from 5. 57 times to 4. 1 times. The possible reasons for this decrease could be overstocking, reduced sales or stocking outdated merchandise.

Sign up to view the full document!

In addition, the number of days in inventory increased from 64. The return on asset ratio decreased from 0. 1772 to 0. This was caused by decrease in the net profit and the increase in total assets over the two years. For the solvency ratios, Debt-Equity ratio increased from 0. 506 to 0. 11% to 21. 43% is an area of concern since it indicates that the company is not performing as expected (Zairi,2013, p. Secondly, increased borrowing is yet another cause of concern in this company. Borrowing might be a signal that the company is not generating enough revenue to meets its spending. As much as borrowing may be cheaper, there ought to be a balance between debt and equity. In addition, while using ratios to measure and interpret performance other factors should also be put to in play (Yalcin et al, 2012, p.

Sign up to view the full document!

There are several advantages that come with using ratio analysis to measure and interpret performance. Firstly, ratios enable a company to carry out trend analysis. Trend analysis involves comparing the performance of a company over different financial periods. For instance, using the Benedict company, the financial ratios that have been calculated can be used to compare the performance of the company in the year 20X0 and 20X1. Secondly, ratios only give the numbers and not the cause. This makes it difficult to exclusively rely only on ratios to determine the performance of an organization. Therefore, ratios have to be used with other indicators of performance in order to make meaningful sense. Lastly, ratio analysis depends on the information contained in the financial statements.

Sign up to view the full document!

From $10 to earn access

Only on Studyloop

Original template

Downloadable