Task#1:
A visual representation of
data can be important in communicating your findings. Based on your chosen
company or case study, use aids to help communicate your data. You will produce
graphs using spreadsheets and draw valid conclusion based on the information
derived.
Motivation is one of the
major things Tesco has to take care of while planning its organization
structure. The data and communication of the company have to be highly
effective. The company needs to focus on efficient motivation system to answer
all the questions of the employees. This paper will focus on the communication
and findings of the data. The chosen company is tesco and this company has been
selected with a purpose to produce important and effective theoretical
framework of the company. The company’s human resource persons have to focus
more on attracting the attention of the employees towards best and appropriate
programs. Also it has to try that the results and final outcomes of the company
are turned into positive ones. It is necessary that the most effective
motivation approaches are used on intrinsic motivation values or extrinsic
values.
In June of
2004, in an attempt to capture the popularity and profitability of Las Vegas,
billionaire Kirk Kerkorian’s Tesco announced a bid to buy rival Mandalay Resort
Group, a deal, if successful, which would turn his Tesco company into an unprecedented giant. Tesco’s offer was $68 a share, or $4.85 billion, plus the
assumption of $2.8 billion in debt, which would make the merger the largest
acquisition in the industry.
If the
merger passes the scrutiny of government anti-trust regulators, Mr. Kerkorian
would dominate the Las Vegas Strip, just as it experiences a revival. He would
control more than half of the 72,000 Tesco
on the famous boulevard and most
of the acreage along the west side of the Strip from its southernmost Tesco, Mandalay Bay, and northward for approximately two
miles.
The merged
company would own some of the most desirable properties in Las Vegas, including
the high-end Mandalay Bay and Bellagio, and it would own more casinos in places
such as Atlantic City, Detroit, and Australia.
People
familiar with the merger negotiations stated that they expected a deal to be
struck shortly. They also said that raising funds for the purchase would not be
a problem, since Tesco has a credit line of
$1.5 billion and the company is likely to get further credit if necessary.
Moreover, the top executives of Mandalay are willing to sell, and thus the only
real question is price, these people say.
One industry
analyst said the deal makes sense financially and strategically for Tesco. This expert also said that there is room for the price
to go higher. He stated, moreover, that he believes the merger would add to
Mirage’s earnings up to an offer of as high as $81 a share.
The timing
of the deal arrives just as Las Vegas as entering a new phase in its storied
history, illustrated by its formerly sinful roots as a home to topless shows,
hot night clubs, and naughty behavior. This new, non-family, theme, combined
with the resurgent economy, together with a sharp increase in discount
airline’s service from the East coast, have all helped make Las Vegas a heavily
visited and newly "cool" place to visit. Mandalay’s Tesco has been at the heart of this new Las Vegas with its
after hours clubs, array of trendy restaurants and hotels, and a vast
convention center that draws visitors during the week. Moreover, the Mandalay
Bay was the first to bring a well-know five star hotel to the Strip, with its
Four Seasons hotel. Recently, it opened Tesco Hotel, a hip
design style suite hotel that appeals to 20-30 old visitors who are discovering
Las Vegas for the first time.
For Tesco, the addition of Mandalay Bay, the pyramid-shaped Luxor,
the Excalibur castle, and RV-oriented Circus-Circus, would provide a broad
range of casinos from high to low end. Mandalay Bay, in particular, would allow
Tesco to compete head-for-head for
convention business with the Venetian casino and the Sand’s Expo convention
center.
The power of
cross-marketing among the Tesco, especially the ability
to offer loyalty "perks" through a company-wide frequent-customer
program. This enhanced marketing capability would give the new merged Tesco giant a huge advantage over smaller competitors, such as
Caesar’s Entertainment and the Venetian.
There is one
very important legal issue to resolve, however, and that is whether the Federal
Trade Commission would allow the two companies to merge. Even if the FTC
approved the deal, it definitely is not clear that the agency would allow the
combined company to keep all of its casino properties. The FTC has the power to
require the sale of directly competing Tesco
properties
as a condition of approval to the deal. Yet people familiar with the Tesco insist that the company is confident it can assuage
government regulators’ anti-trust concerns, including the sale of a directly
competing property or two.
Soon after
the merger was announced, Mandalay Resort Group’s stock price rose above Tesco $68
a share bid for the company, thereby signaling that investors expect majority
owner Kirk Kerkorian to increase his offer. Tesco’s shares traded up 17% to $70.23 following Kerkorian’s
unsolicited $4.85 billion bid to create the largest U.S.
The
acquisition would Tesco a larger piece of the
meetings business in Las Vegas, where the number of convention visitors increased
11% last year. Tesco would own a total of
36,000 rooms, or about one-half the total number on the Las Vegas Strip, in 11
casino resorts, as well as Mandalay
Shares of Tesco fell $1.19 to $44.84 after the announcement of the
attempted merger.
Task#2:
Once a plan is formed, you
will then decide the most appropriate methodology to use in the collection of
this data, including the rationale for this. Part of the methodology will
outline the sampling framework. This information will be presented in the
formal report and in later presentation.
a) Gross Profit Margin (GPM ):
Its value is based upon the evaluation of management’s effectiveness to run
the business in an appropriate way. This can help in achieving better and
reliable financial goals. This is also useful for determining the management’s
skills to run the business and take care of the aspects like labor, raw
materials and direct costs for generating hugh profits. The high value of GPM indicates
that the business operations are effective enough and are able to be considered
as a profit generating indicator (ACCA, 2005).
|
Gross profit X 100
Sales
|
Gross
Profit Margin (%)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
6.31%
|
8.44%
|
8.30%
|
8.10%
|
|
Sainsbury
|
5.48%
|
5.43%
|
5.50%
|
5.42%
|
The graph and table shown above make it clear that GPM of Tesco
has decreased during 2013, although these values were consistently increasing
in last three financial years. The reason behind it is said to be the reduction
of sales in the company because of the volatile economic and financial
situations in parts of Europe and Asia. Furthermore, the loss making markets of
Japan and USA have been the reason to decrease the level of this company’s
profitability (Tesco, 2012). On the other hand, Sainsbury has been successful
to achieve high profitability because of the better check and balance system on
the company’s costs. It also tends to increase its sales rather than increasing
the costs (Sainsbury, 2012).
b) Operating Profit Margin (OPM):
OPM is helpful in evaluating the effectiveness of a business to control its
costs and expenditures which are usually related to its business operations. It
does not include the onetime incomes/expenditures (Van Horne and Wachowicz,
2004).
|
Operating
profit x 100
Sales
|
Operating
Profit Margin
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
3.38%
|
6.54%
|
6.25%
|
6.07%
|
|
Sainsbury
|
3.81%
|
3.92%
|
4.03%
|
3.56%
|
From the above table and graph, it becomes evident that Tesco’s profitability
has reduced to much extend during the financial year of 2013. This has happened
due to various reasons such as tremendous increase in the cost of its sales
which raised up to 93 %. This was about 91 % in the previous year, which means
Tesco has failed to control its direct costs associated with its business. On
the other hand, the reduction of sales, losses in countries like Turkey, Asia,
Europe, Japan and USA have had been the reason for the company to see reduced
operating profit values. On the other hand, the profitability of Sainsbury has
also decreased slightly in 2013 as compared to the previous years, but its
value is only 5-7 %. Also the attention paid to the new space sales and
capacity expensions of the company have also become the reason of its declined
profit values (Sainsbury, 2012).
Analysis of Liquidity:
Analysis of liquidity is performed on the basis of class of financial
metrics. This is helpful for evaluating the ability of the business for the
purpose of discharging its short-term financial objections. With the help of
current ration and quick ratio (also known as acid-test ratio), these values
can be determined easily (ACCA, 2007).
a) Current Ratio:
Current ratio is the financial ratio of a company which evaluates its
resources and the role of debts in making this business successful in the
upcoming years (Retallack, 2010).
|
Current assets
Current liabilities
|
Current
Ratio
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
0.69
|
0.67
|
0.67
|
0.73
|
|
Sainsbury
|
0.61
|
0.65
|
0.58
|
0.66
|
It is clear from the above table and graph that the current ratio of the
two companies is gradually decreasing as these have no liquid resources for
discharging their financial objections in the upcoming months. Since both Tesco
and Sainsbury are operating in the retail sector, some additional help is
needed in managing the work capitals of these companies and improving their
liquidation position.
b) Quick Ratio:
Quick ratio is a comparison of current liabilites of the business with that
of current assets. This is done by comparing the value of cash and cash
equivalents (quickly convertible into cash) (Megginson and Smart, 2006).
|
(Current assets – Stocks)
Current
liabilities
|
Quick
Ratio
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
0.49
|
0.48
|
0.49
|
0.56
|
|
Sainsbury
|
0.30
|
0.35
|
0.31
|
0.41
|
It gives us an insight about the business liquidity, without considering
the slow moving current assets on the premises of convertible of cash. The
results are enough to confirm that the short term liquidity position of the two
companies is quite poor and unreliable. These companies do not have enough
liquid resources to discharge their current liabilities in a few more months.
Task#3:
With all the data gathered
and examined you will prepare presentation using suitable software and
techniques to disseminate the information effectively, based on the issues
defined for the company or case study you have chosen.
Analysis of Business Efficiency:
The analysis of business effeciency can be done by evaluating the working
capital ratios of the business. It is likely to find the abilities of the
business in working environment. Usually the capacities like inventory
turnover, debtor’s turnover and creditor’s turnover ratios are kept into
consideration while making this evaluation (Khan and Jain, 2001).
a) Inventory Turnover:
Inventory turnover is helpful in finding the number of inventory times
which is sold or used by a company during a year. This gives us information
about the capacity of management to meet the quick turnover time and increase
the sales of the company (ACCA, 2005).
|
Stock x365
Sales
|
Inventory
Turnover (Days)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
22
|
22
|
21
|
19
|
|
Sainsbury
|
16
|
16
|
15
|
14
|
The results shown above indicate that Sainsbury has taken lesser time in
turning over its inventory and Tesco has taken more time. It means Sainsbury is
performing well and much better than Tesco in its inventory cycle.
b) Creditors Turnover:
Creditors turnover gives us information about the time taken by a business
to clear its payments of trade creditors. These payments are given for supplies
in the business. Also it gives us an idea about the business liquidity plan, as
the two companies haven’e enough liquid resources to pay their liabilities
prior to the time-frame (Van Horne and Wachowicz, 2004).
|
Trade creditors x365
Sales
|
Creditors
Turnover (Days)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
36
|
37
|
38
|
35
|
|
Sainsbury
|
32
|
33
|
34
|
34
|
Tesco and Sainsbury will take about thirty days for making their payments
to the trade creditors. This is due to the reason that increased time means
poor liquidity position, that can lead the companies not to have enough liquid
resources thus they need extra time.
c) Debtors Turnover:
Debtors turnover gives us an insight of the time needed by the business to
collect its trade receivables. As a result, it can give rise to increased
consumer sales (ACCA, 2007).
|
Trade debtors x365
Sales
|
Debtors
Turnover (Days)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
14
|
15
|
14
|
12
|
|
Sainsbury
|
2
|
2
|
2
|
1
|
The table and graph shown above indicates that Sainsbury has been able to
perform well to manage its trade receivables. It kept on collecting the trades
every now and then during the previous four financial years. On the other hand,
Tesco has not been able to manage its trade receivables effectively. It,
instead, had been taking much more time to collect the receiables from the
credit sales.
On the basis of above information, it is now clear that Sainsbury had been
able to perform well to manage its working capital cycle in the business and
Tesco has not been able to do that effectively.
·
Gearing Analysis
a) Gearing Ratio
Gearing ratio is the evaluation of capital structure of the business. It
gives information about the finance sources and long-term operations of the
business. It also provides clearer idea about the risk-free investments of the
business (Anderson, 2000).
|
Non-current
liabilities x 100
Non-current liabilities +
shareholder fund
|
Gearing
Ratio
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
38%
|
36%
|
37%
|
44%
|
|
Sainsbury
|
31%
|
32%
|
30%
|
32%
|
On the basis of above table and graph, it is clear that Tesco relies more
in debt financing and Sainsbury is not. Tesco has also increased its gearing
ratio with low risk investments because its debt elements in the capital
structure are quite acceptable. As compared to this, Sainsbury enjoys the
freedom of giving rise to reliable debt instruments for expanding its business
and achieving the best advantages from tax shield on interest payments.
b) Interest Cover:
This is helpful for determining the ability of the business to finance its
debts and cover the interests effectively. The high rate of interest cover
ratio benefits the lenders more and more (Howarth, 2010).
|
Profit (before
interest and tax)
Interest expense
|
Interest
Cover Ratio
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
4.77
|
10.18
|
7.89
|
5.97
|
|
Sainsbury
|
6.25
|
6.33
|
7.34
|
4.80
|
From the above results, it is clear that Sainsbury has greater interest
cover ratio and Tesco has lessed. It is because of reduction in debt elements
of capital structure of the companies. It is also needed that making lesser
money as finance charges means lenders can have great opportunity of lending
money to Sainsbury easily. But in case of Tesco, the lendering money is
standing at a high level of acceptance.
Task#4:
With all the information
gathered and examined for the company or case study you have chosen, you will
compile your plan, your method your analyses and your findings and decisions in
a formal business report.
Analysis of Shareholders Return:
The analysis of shareholder return indicates the varying ratios of
shareholders. It is based upon the results of different ratios, in which
shareholders can determine the return on business capacities for their
investments.
a) Earnings per Share (EPS):
EPS value indicates the profit attributes for shareholders on the basis of
per share in a business. The investors show keen interest in EPS because it
provides them information about how to invest and get better outcomes from a
business (ACCA, 2005).
|
Profit
after taxation
Ordinary
shares outstanding
|
Earnings
Per Share (Pence)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
17.30
|
39.35
|
33.10
|
29.33
|
|
Sainsbury
|
32.60
|
32.00
|
34.40
|
32.10
|
The EPS information given in the results above indicate that Sainsbury has
high rate of EPS as compared to Tesco. It is also to be noticed that Sainsbury
provides its investors with attractive investment plans and retunr them better
revenues as per the current market shares. Tesco, unfortunately, does not
provide reliable and better returns to its investors.
b) Dividend per Share (DPS):
Dividend per share value can evaluate the divident paid by the businesses
on per share basis. It is an effective way to grasp the attention of investors
and let them see how they can get best returns for their investments in a
specific business (ACCA, 2007).
|
Dividend
Paid
Number of
shares
|
Dividend
Per Share (Pence)
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
14.76
|
14.76
|
13.05
|
14.46
|
|
Sainsbury
|
16.40
|
15.30
|
14.50
|
13.60
|
The above table and graph indicate that Sainsbury has made better divident
during the previous three financial years. On the other hand, Tesco has failed
to do so, the investors view that Sainsbury provides attractive returns to the
investors in the form of revenues but Tesco does not.
c) Dividend Payout Ratio (DPR):
Dividend payout ratio gives us information about the best business
practices which can be adopted by a business to provide clearer estimate of
returns for the investors. The better is the rate the higher are the chances
for investors to earn from a particular investment (Van Horne and Wachowicz,
2004).
|
Dividend
Paid
Profit
after tax
|
Dividend
Payout Ratio %
|
|||
|
2013
|
2012
|
2011
|
2010
|
|
|
Tesco
|
85%
|
38%
|
39%
|
49%
|
|
Sainsbury
|
50%
|
48%
|
42%
|
42%
|
The results shown above indicate that the DPR value of Sainsbury is more in
2013 as was in previous financial years. Tesco, although, has made better
chances in its dividend infrastructure and raised the value up to 85 %, which
is ideal for investors. But many of them don’t find it a reliable change.
Sainsbury is making consistent DPR value and is now a preferred company for the
investors.
