TESCO Strategic Financial Management

The report seeks to explain and identify three forms of stakeholders who are associated with Tesco as an organization. The paper will evaluate the way in which the environment-based, social review, and the corporate governance document helps Tesco to show its performance regarding social and corporate responsibilities to the stakeholders. This report also seeks to analyze the financial state of Benedict Co. through the use of various financial ratios. The report will also utilize the financial ratios to identify any elements of Benedict Co. Types of Stakeholders in Tesco Customers The customers are the major and the most pressing externally-available stakeholders to an organization. In Tesco, the company’s consumers are its customers. Therefore, Lawrence and Weber (2014, p. 14) postulate that the organization is necessitated to do its best to ensure that it attracts, retains, and generates loyalty from the major consumer markets.

The rationale for such actions is that the customers are vital stakeholders who contribute significantly towards the company’s long-term financial success and achievements. They are responsible and have a duty to attend annual general meetings, agree on the strategic plan for the firm, and steer the firm to achieve its goals and objectives. The Government The government is considered a crucial stakeholder in the firm because it influences the activities of the organization in different ways. For example, the firm has to pay various forms of taxes to the England authorities in the U. K. The taxes are such as value-added tax, business rates, corporate taxes, and business rates (Freeman, 2016 p. This is based on the assertion that the organization’s customers should purchase quality commodities that are manufactured safely without causing adverse outcomes to the environment.

By protecting the human rights, the company makes sure that it can provide its customers the appropriate confidence (Ferrell & Fraedrich, 2015 p. According to the corporate governance report, it is evident that Tesco has strong as well as consistent organizational policies created to make it a vital place where its clients are welcome without any form of discrimination. This means that the company’s customers are treated fairly regardless of their diversities including race, socio-economic status, color, education, political affiliation, or religion. Further, the report shows that Tesco has transformed from the element of compliance to due diligence. Such partnerships enable the firm to combine efforts with other medical health professionals to reach the different consumer in the UK. Engagement in partnerships and other charity works indicates that Tesco demonstrates corporate social responsibility to its clients.

To the government The AR report portrays instances in the perspective that the UK government has formulated specific policies and regulations which require companies to provide analysis on their gender pay gap. These elements makes Tesco perceive that determining the pay gap between its male and female employees is a critical step to ensure that each employee gets fair compensation for tasks carried out. This aspect also helps the company to make sure that the employees embrace equal chances as required by the government authorities (Cooper, 2017 p. Purpose and relevance of chosen ratios Debt-to-equity Ratio This is a form of financial ration which is attained through the division of a company’s total liabilities by the total shareholders’ equity. The importance of using the debt-to-equity ratio is that it evaluates a company’s financial leverage (Bekaert & Hodrick, 2017 p.

In this context, financial leverage refers to the aspect of a company’s application of debt to acquire additional assets. D/E Ratio = Total liabilities/shareholders’ equity Debt Ratio This is a form of a ratio that evaluates the extent of a company’s leverage. This form of financial ration indicates the level of a firm’s assets obtained through debt. Quick Ratio = (Current assets less inventories)/Current liabilities Net Profit Margin Net profit margin is the proportion of the company’s income which remains, after other components have been deducted from an organization’s total revenue (Brigham et al. , 2016 p. It is worth to note that net profit margin does not entail the deduction of the common stock dividends from the total revenue.

Net Profit Margin = Net profit/Net sales Results and reason for the movement of the ratios between 20x0 and 20x1 The Debt equity ratio for Benedict Co. rose from 1. Benedict Co. ’s current ratio decrease from 1. 25 in 20x0 to 1. 19 in 20x1. The shift was associated with the firm’s rise in its current liabilities. For instance, there was a sharp increase in the company’s finance costs, administration expenses, and distribution costs. Possible cause for concern in Benedict Co. The company should consider its components which influence leverage in its activities. It is formulated on the outcomes of the company’s debt ratio in the periods between 20x0 and 20x1. The debt ratio rose from 0. , 2014 p. If the organization does not deal with this issue appropriately, it may lead to the short-term financial crisis in the company.

The other cause for concern is associated with the company’s net profit margin element. This assertion is justified in that there be a significant decline in Benedict Co. ’s net profit margin. In a perfect scenario, the quick ratio is 1 and in the case is much more than one, it shows that the firm may have a lot of liquid cash Pilbeam, 2018 p. This indicates that the company can cater to the current financial requirements through its current assets. On the other hand, having a quick ratio of far less than one illustrates that the company has challenges in collecting its accounts receivables from the various debtors. A debt/equity proportion below one demonstrates that the component of assets provided through shares is greater than the value offered by the external creditors.

If the D/E ratio is greater than 1, the indication is that the value of the assets provided by the lenders is bigger than the values of assets provided by the company’s shareholders (Ehrhardt & Brigham, 2016 p. On the contrary, a company with a low net profit margin shows a firm which is not competent in maintaining and upholding its cost variables. Conclusion From the illustration above regarding Tesco and Benedict Co. it is clear that there exists a connection between the performance of a company and involvement of its stakeholders. It is also clear that there is a lot of importance associated with the elements of corporate and strategic governance reporting. Financial ratios play crucial roles in the operations of companies and help to simplify financial statements.