The main goal of this paper is preparing a financial ratio analysis of the company Sainsbury's. The financial ratio analysis constitutes the most typical and broaden measurement to investigate the financial position of the company. The ratio examination is utilized to present the performance of the enterprise or compare its results with other firms over the time. Nevertheless, the ratio analysis is just a simple calculation of the firm’s financial state and does not embrace details for instance the business’ size.
Sainsbury’s is the second largest supermarket chain with the 16.9% share in the retail sector in the United Kingdom. The enterprise was established in 1869 by John James Sainsbury and in 1922 it became the largest grocery store in the UK. Furthermore, the company was an early adopter in the self-service in Britain. In 1995, the Sainsbury’s position dropped to the third place with the Tesco as a leader on the market and Asda in the second place. However, in 2014 Sainsbury’s regained its position and came in the second place.
The holding firm (J Sainsbury plc) is consisted of three departments such as Sainsbury’s Bank, Sainsbury’s Argos and Sainsbury’s Supermarkets Ltd with the headquarter in Holborn Circus in London. The greatest number of company’s shares has Qatar Investment Authority (25.9%); Lord Sainsbury of Turville holds 4.99% of the stake; Judith Portrait (trustee of charitable trust) holds 3.92% of the shares and Sainsbury’s family has 15% of the stake. The company runs under three formats such as supermarket, convenient store- Sainsbury’s Local and online shopping service. The present CEO of the enterprise is Mike Cope. The Sainsbury’s presence is visible in London Stock Exchange and FTSE 100 Index.
Inhaltsverzeichnis (Table of Contents)
- 1. Introduction of the company
- 2. Financial ratio analysis
- 3. Profitability ratios
- a) Gross margin ratio
- b) Net margin ratio
- c) Return on assets (ROA)
- d) Return on capital employed (ROCE)
- e) Return on equity (ROE)
- 4. Liquidity ratios
- a) Current ratio
- b) Quick ratio
- 5. Efficiency ratios
- a) Inventory holding period
- b) Receivables period
- c) Payables period
- 6. Capital structure ratios
- a) Gearing ratio
- b) Interest cover
- c) Dividend cover
- 7. Stock market performance ratios
- a) Earnings per share (EPS)
- b) Dividend payout ratio
- c) Dividend yield
- d) Price earnings (PE)
- 8. Limitations of the analysis
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The objective of this analysis is to evaluate the financial health of Sainsbury's, the second largest supermarket chain in the UK, by examining key financial ratios over several years. This involves assessing profitability, liquidity, efficiency, capital structure, and stock market performance.
- Profitability and efficiency of Sainsbury's operations.
- Analysis of Sainsbury's liquidity and solvency.
- Evaluation of Sainsbury's capital structure and financial risk.
- Assessment of Sainsbury's stock market performance.
- Limitations inherent in financial ratio analysis.
Zusammenfassung der Kapitel (Chapter Summaries)
1. Introduction of the company: This chapter provides background information on Sainsbury's, highlighting its history, market position within the UK retail sector, organizational structure (including Sainsbury's Bank, Sainsbury's Argos, and Sainsbury's Supermarkets Ltd), major shareholders (such as Qatar Investment Authority and the Sainsbury family), and various operational formats (supermarkets, convenience stores, and online shopping).
2. Financial ratio analysis: This chapter introduces financial ratio analysis as a key method for assessing a company's financial standing. It emphasizes the use of ratios to evaluate performance, compare results with competitors over time, and identify areas for improvement. The chapter acknowledges the limitations of ratio analysis, noting its simplicity and inability to capture certain aspects of a business's complexities, while stressing its value to creditors and investors in providing directional insights and pinpointing strengths and weaknesses.
3. Profitability ratios: This chapter delves into the profitability of Sainsbury's by examining several key ratios including gross margin, net margin, return on assets (ROA), return on capital employed (ROCE), and return on equity (ROE). The analysis covers a period of several years (2012-2016), comparing performance across these years and identifying significant fluctuations. The chapter likely includes detailed explanations of individual ratio calculations and their implications for understanding Sainsbury's financial health. It likely discusses the causes and consequences of significant changes in these ratios, particularly the dramatic drop in 2015 and the recovery in 2016.
Schlüsselwörter (Keywords)
Sainsbury's, financial ratio analysis, profitability ratios, liquidity ratios, efficiency ratios, capital structure ratios, stock market performance ratios, gross margin, net margin, ROA, ROCE, ROE, financial performance, UK retail sector.
Sainsbury's Financial Performance Analysis: Frequently Asked Questions
What is this document about?
This document is a comprehensive preview of a financial analysis of Sainsbury's, a major UK supermarket chain. It includes a table of contents, objectives, key themes, chapter summaries, and keywords. The analysis uses financial ratio analysis to evaluate Sainsbury's financial health over several years, focusing on profitability, liquidity, efficiency, capital structure, and stock market performance.
What are the key objectives of this analysis?
The main objective is to evaluate the financial health of Sainsbury's by examining key financial ratios over a period of years. This involves assessing its profitability, liquidity, efficiency, capital structure, and stock market performance to understand its overall financial standing and identify areas of strength and weakness.
What key themes are explored in the analysis?
The analysis explores several key themes, including the profitability and efficiency of Sainsbury's operations, its liquidity and solvency, its capital structure and financial risk, its stock market performance, and the limitations of financial ratio analysis itself.
What types of financial ratios are used in the analysis?
The analysis employs a range of financial ratios, categorized as follows: profitability ratios (gross margin, net margin, ROA, ROCE, ROE), liquidity ratios (current ratio, quick ratio), efficiency ratios (inventory holding period, receivables period, payables period), capital structure ratios (gearing ratio, interest cover, dividend cover), and stock market performance ratios (EPS, dividend payout ratio, dividend yield, P/E ratio).
What is covered in the introduction chapter?
The introduction provides background information on Sainsbury's, including its history, market position, organizational structure (Sainsbury's Bank, Argos, Supermarkets Ltd), major shareholders (like Qatar Investment Authority and the Sainsbury family), and operational formats (supermarkets, convenience stores, online).
What does the chapter on financial ratio analysis explain?
This chapter explains financial ratio analysis as a method for assessing a company's financial health. It highlights how ratios are used to evaluate performance, compare results over time and with competitors, and identify areas for improvement. It also acknowledges the limitations of ratio analysis.
What profitability ratios are analyzed, and what period is covered?
The analysis of profitability ratios covers the period from 2012-2016 and includes gross margin, net margin, return on assets (ROA), return on capital employed (ROCE), and return on equity (ROE). The chapter details the calculations and implications of these ratios, discussing fluctuations and their potential causes.
What are the key limitations of the analysis acknowledged in the document?
The document acknowledges that financial ratio analysis has limitations. It is a simplified approach that might not capture all aspects of a business's complexities. The analysis likely discusses these limitations in a dedicated chapter.
What are some key words associated with this analysis?
Key words include: Sainsbury's, financial ratio analysis, profitability ratios, liquidity ratios, efficiency ratios, capital structure ratios, stock market performance ratios, gross margin, net margin, ROA, ROCE, ROE, financial performance, UK retail sector.
- Quote paper
- MBA graduate Katarzyna Szydlowska (Author), 2017, The Company "Sainsbury's". A Financial Ratio Analysis, Munich, GRIN Verlag, https://www.grin.com/document/512512
