Financial Performance Assignment Example | Topics and Well Written Essays - 3000 words

Financial Performance - Assignment Example It is an important section of the companies' annual report, which contains acknowledgement from the external auditors that the company's accounts and financial statements reported present a true and fair view of the company's affairs. This satisfies the government about the accuracy of financial information presented in the Tesco and Sainsbury's financial statements. This section represents the financial performance of both the companies for the current year and also the previous year. This section helps the investors, lenders, employees and general public to compare the companies' income and expense condition of the current year against the previous year and predict the future of the company. This reveals the companies' financial position for the current year-end. It shows the companies' asset and equity position for the current and previous year. This contains the information on companies' liquidity, solvency, efficiency and investment prospects. This is helpful for investors, lenders, suppliers, employees, customers and general public. This section reveals the companies' position in terms of availability of cash and shows the cash inflow and outflow for the current and previous years. Again, this section is very important for various stakeholders of the company. The Operating and Financial Review (OFR) statement of both the companie... This section contains information necessary to read between the lines of financial statements. This section is very important for a true and complete analysis of the companies' financial statements. THE OPERATING AND FINANCIAL REVIEW (OFR) STATEMENT The Operating and Financial Review (OFR) statement of both the companies show the summary of the companies' financial statements, their financial performance, their segmented financial results and the profitability of the companies reflecting their financial statements. Both the companies have provided a thorough analysis of their company's major operations and results obtained from these operations. The statement also emphasises the major risks faced by the company, which enables a reader to get an insight of the companies' present condition and evaluate any future risks. TESCO PLC-- RATIO ANALYSIS The financial performance and position of Tesco Plc can be assessed with the help of ratio analysis for the last three years. This analysis is broken down into sections so as to be helpful for all the groups interested in the financial performance of the company i.e., the management, the investors, the lenders, the analysts etc. PERFORMANCE The performance of Tesco Plc over the last three years can be assessed by the following ratio: Return on Investment (ROI) 2005 2004 2003 14.95% 14.04% 13.85% The Return on Investment ratio is used to analyse a company's position in terms of the return or profit it gains on the funds invested. It shows the effectiveness and performance of the company's management to obtain more returns on the company's investment. Tesco Ltd's Return on Investment ratio has almost been stable over the last three years, showing that the company's management has been utilising its