Managerial Finance- Financial comparison between Morrisons and Sainsbury

Thèmes abordés

Morrisons and Sainsbury

Résumé du document

The ratio analysis is the way to find information about a company's financial organisation. Most of financial information are available on the website of companies. They are easily available by everyone.

Ratios are calculated in order to compare the company to an other company (same kind of company and direct competitors) and to compare these results to the previous years to see the health of it ; and they can also see in the company does better or not than before. We can also make forecasts with these ratios.

Ratios judges the company's capability to be succesful or not. Moreover, it can help investor to know to financial situation of the company to invest in. The differents ratios can predict the company's economic situation for the forthcoming years and can see if company's objectives are acomplished. We can divided the ratios analysis by 3 different steps as : the profitability analysis, the liquidity ratios analysis, and the investment ratios analysis.

I decided to compare Morrisons with its most look-a-like competitor : Sainsbury. Both of them are in UK and propose the same range of products anf have mostly similar finance.

Extraits

[...] Net Profit Margin = Net Profit before interest and Tax x 100 Sales Morrisons' net profit margin is in expansion since 2009. In 2009, Morrisons had a net profit margin of and in This increase means than Morrisons makes higher net profit per pound of sale. One of the reason of this growth is, their sales volume is increasing and they kept their costs as they were. For Sainsbury as well, net profit margin is increasing but less than Morrisons. [...]

[...] 10- Fuel price war Morrisons entered in a cost-cut on fuel. This result by a hard war in fuel retailing. Tesco started this war by giving vouchers to customers paying more an amount for shopping. Asda and Sainsbury followed this trend. Morrison had to do the same or something similar to follow the competion, and keep customers. Morrisons priced-cut the price of both petrol and diesel. Morrison sis the first to cut-price for diesel. There are several effects of these cut-prices for the company. [...]

[...] Financial ratios are tools, used by professionals in order to assess a company, and compare companies. By using ratios, you need to use the financial statements of the company, that is complicated when you never analysed one. You need to know exactly in each term what it represents. Moreover, financialy assessing a need a lot of skills and practice. But in the end, managerial finance are very important in order to understand how companies work, what they need to work and how company's problems come from and can be solve. [...]

[...] To change that, the company has to increase gross profit or decrease costs of good solds. As we can see for Morrisons' gross profit margin increase years and years. ( A gros scan means two things for the company : Morrisons has a favorable pricing power. Morrisons is getting more efficient in sales. (www.ezinearticles.com) - NPM (Net Profit Margin) The net profit margin shows the profitability after all the costs are included. It shows what % of turnover is outlined by net profit. [...]

[...] The operating profit of Morrisons was £904m (approximately $ 1394.2 m ) in FY2011, a decrease of compared with FY2010. The net profit was £632m (approximately $ 974.7 in FY2011, an increase of over FY2010” (Datamonitor, 2011) The trend of Morrisons' revenue since 2005 is increasing. 2bn). Morrisons made a better increase than the market average. The market increase average is This figures can be justified: The United Kingdom food retail industry is grewing years and years and will continue to grow. [...]