Financial Statement Analysis Using the ROE Model: International

Presented below are the consolidated balance sheets and income statements for the Tesco, PLC$,$ the world$$s third largest retailer, for the years $2016$ and $2015.$ Tesco is based in the United Kingdom.

TESCO, PLC

Group Income Statement

For the years ended February $2016$ and $2015$

$20162015$

Continuing operations:

Revenue $54,43356,925$

Cost of sales $(51,579)(59,128)$

Gross profit $2,854(2,203)$

Administrative expenses $(1,852)(2,574)$

Profit on property$-$related items $44(973)$

Operating profit $1,046(5,750)$

Share of post$-$tax profits of joint ventures and associates $(21)(13)$

Finance income $2980$

Finance costs $(892)(651)$

Profit before tax $162(6,334)$

Taxation $54670$

Profit for the year from continuing operations $216(5,664)$

Discontinued operations:

Loss for the year from discontinued operations $(87)(102)$

Profit for the year $129(5,766)$

Attributed to:

Owners of the parent $138(5,741)$

Non$-$controlling interests $(9)(25)$

$129(5,766)$

TESCO, PLC

Group Balance Sheet

As of February $27,2016$ and February $28,2015$

$20162015$

Non$-$current assets

Goodwill and other intangible assets $2,8743,771$

Property, plant, and equipment $17,90020,440$

Investment property $78164$

Investment in joint ventures and associates $785940$

Other investments $1,135975$

Loans and advances to customers $4,7233,906$

Derivative financial instruments $1,5321,546$

Deferred tax assets $49514$

$29,07632,256$

Current assets

Inventories $2,4302,957$

Trade and other receivables $1,6072,121$

Loans and advances to customers $3,8193,814$

Derivative financial instruments $176153$

Current tax assets $1516$

Short$-$term investments $3,463593$

Cash and cash equivalents $3,0822,165$

$14,59211,819$

Assets of the disposal group and non$-$current assets classified as held for sale $236139$

$14,82811,958$

Current liabilities

Trade and other payables $(8,568)(9,922)$

Financial liabilities:

Borrowings $(2,826)(2,008)$

Derivative financial instruments and other liabilities $(62)(89)$

Customer deposits and deposits by banks $(7,479)(7,020)$

Current tax liabilities $(419)(95)$

Provisions $(360)(671)$

$(19,714)(19,805)$

Liabilities of the disposal group classified as held for sale $--(5)$

Net current liabilities $(4,886)(7,852)$

Non$-$current liabilities

Financial liabilities:

Borrowings $(10,711)(10,651)$

Derivative financial instruments and other liabilities $(889)(946)$

Post$-$employment benefit obligations $(3,175)(4,842)$

Deferred tax liabilities $(135)(199)$

Provisions $(664)(695)$

$(15,574)(17,333)$

Net assets $8,6167,071$

Equity

Share capital $407406$

Share premium $5,0955,094$

Other reserves $(141)(414)$

Retained earnings $3,2651,985$

Equity attributable to owners of the parent $8,6267,071$

Non$-$controlling interests $(10)--$

Total equity $8,6167,071$

Calculate the following ratios for Tesco, PLC

Round all answers to two decimal places. Use a negative sign with ratios below $($a$.$ through n$.$ only$)$ when appropriate. Loss in $2015$ will cause some ratios to be negative.

$20162015$

Profitability

a$.$ Return on equity Answer $\%$ Answer $\%$

b$.$ Return on assets$-$unlevered Answer $\%$ Answer $\%$

c$.$ Return on sales$-$levered Answer $\%$ Answer $\%$

Leverage

d$.$ Financial leverage Answer Answer

e$.$ Total debt$-$to$-$equity ratio Answer Answer

f$.$ Long$-$term debt$-$to$-$equity Answer Answer

Solvency$/$Liquidity

g$.$ Current ratio Answer Answer

h$.$ Quick ratio Answer Answer

i$.$ Interest coverage$*$ Answer Answer

j$.$ Accounts payable turnover Answer Answer

Asset turnover

k$.$ Receivable turnover Answer Answer

l$.$ Inventory turnover Answer Answer

m$.$ Fixed asset turnover Answer Answer

n$.$ Asset turnover Answer Answer

$*$ For this calculation, use profit from continuing operations

o$.$ Common$-$size income statements.

Round to one decimal place. Do not use negative signs with answers below.

TESCO, PLC

Group Income Statement

For the years ended February $2016$ and $2015$

$2016201520162015$

Continuing operations:

Revenue $54,43356,925$ Answer$\%$ Answer$\%$

Cost of sales $(51,579)(59,128)$ Answer$\%$ Answer$\%$

Gross profit $2,854(2,203)$ Answer$\%$ Answer$\%$

Administrative expenses $(1,852)(2,574)$ Answer$\%$ Answer$\%$

Profit on property$-$related items $44(973)$ Answer$\%$ Answer$\%$

Operating profit $1,046(5,750)$ Answer$\%$ Answer$\%$

Share of post$-$tax profits of joint ventures and associates $(21)(13)$ Answer$\%$ Answer$\%$

Finance income $2980$ Answer$\%$ Answer$\%$

Finance costs $(892)(651)$ Answer$\%$ Answer$\%$

Profit before tax $162(6,334)$ Answer$\%$ Answer$\%$

Taxation $(54)(670)$ Answer$\%$ Answer$\%$

Profit for the year from continuing operations $216(5,664)$ Answer$\%$ Answer$\%$

Discontinued operations:

Loss for the year from discontinued operations $(87)(102)$ Answer$\%$ Answer$\%$

Profit for the year $129(5,766)$ Answer$\%$ Answer$\%$

Attributed to:

Owners of the parent $138(5,741)$ Answer$\%$ Answer$\%$

Non$-$controlling interests $(9)(25)$ Answer$\%$ Answer$\%$

p$.$ Common$-$size balance sheets.

Round to one decimal place. Do not use negative signs with answers below.

TESCO, PLC

Group Balance Sheet

As of February $27,2016$ and February $28,2015$

$2016201520162015$

N