Demonstrate the following:
Critically analyse and interpret the key financial statements
Interpret budgeting and performance appraisal techniques used for
managerial planning and control
Critique the appropriateness of the main capital investment appraisal
techniques for decision making.
Advise on the potential suitability of available sources of funds to finance
a business.
Using Harvard cite them right referencing
Part 1
Produce a critical analysis of the financial performance of Tesco Plc for the
year 2020. This analysis should consider the role that budgeting, and performance appraisal might play in improving this performance in future years.
Part 1 answer outline
Introduction
Explain what you will do. 1 or 2 paragraphs. (Do not describe Tesco).
Critical analysis of the financial performance of Tesco (about 900 words max)
The 2020 performance reflects the Tesco 5 Year turnaround strategy
Competition, poor performance reduced profit.
Read the Tesco Annual Reports for explanation of how Tesco has turned around it’s financial performance.
Operating Profit Margin
Definition and explanation of turnover, operating profit, and operating profit margin from the text books. Dyson (2020)
Tesco operating profit margin
Tesco Annual Report 2020.
Income Statement Explanation of content Dyson 2020
Ratio Analysis Atrill & McLaney 2020
Figures to be used
FY 2020 £2,959m/£56,500m =5.2%
FY 2019 £2,607m/£56,900m=4.6%
Explain that sales declined by 0.7% for Tesco (see annual report)
Explain that operating profit grew 13.5% for Tesco (see annual report)
Reasons for 60bps improvement in operating profit margin
Cost savings (£207m over last 5 years)
Stock control (less wastage)
In store self-service tills (reduced staff costs)
Product mix improvement (selling higher margin products)
Compare this to Carrefour.
The roll that budgeting and performance appraisal might play in improving this performance in future years (Max about 900 words)
Define what a budget is (Dyson 2020) (Atrill & McLaney 2018)
Define what performance appraisal is & balanced score card (Atrill & McLaney 2018)
Discuss how budgeting might improve the performance of Tesco plc. Use the following sub-headings to write underneath.
Planning
Co-ordinating
Controlling
Motivating
Discuss some of the behavioural drawbacks of budgets (Atrill & McLaney 2018)
Discuss how budgets are still used by many large organisations despite the drawbacks
Variance analysis could be used to improve performance
Revenue variances could be investigated in a timely manner so that Tesco can respond to either volume or price drivers of this variance.
Price matching competitors
Stocking appropriate items
80% of large businesses use variance analysis (text books referencing)
Use of the balanced score card at Tesco (give examples from annual report)
Improve performance by Links long term strategy directly to performance measurement. (discuss examples)
Can be used to both measure performance of divisions and drive strategic change through KPIs linked to bonus/compensation.
Conclusion
This is where you give your own balanced conclusion on Tesco’s financial performance and on how it might be improved using budgeting and financial performance appraisal.
Suggested Bibliography (this is excluded from your word count, please try to have at least 15-20 references for part 1 and cite them frequently in your answer to support your work)
Main Textbooks must include the following
J.Dyson 2020 Accounting for non-accounting students. 10th Edition Pearson.
P Atrill, E McLaney 2018 Management Accounting for Decision Makers. 9th Edition Pearson
P Atrill 2020 Financial Management for Decision makers 9th Edition Pearson
Part 2
For Tesco Plc evaluate what would be the most appropriate investment appraisal techniques to use in reaching a decision as to whether to invest in the acquisition of a large-scale competitor company.
Critically discuss the factors you would take into account in reaching a decision on the most appropriate sources of finance for this project.
