Question
Tesco Plc are a group of companies that was founded in 1920 in London. Its four different divisions operate as stand-alone investment centres and are
Tesco Plc are a group of companies that was founded in 1920 in London. Its four different divisions operate as stand-alone investment centres and are managed by four different teams. The group pays 20% corporation Tax on its Profit. It also paid an after-tax-dividend of 10m in 2020 and 2021. Any profits left over after paying taxation and dividends are added to the opening bank balance and this is rolled forward. The management decided to invest 20% of the y2021 cash flow bank balance in either one or two divisions. The figure should be rounded to the nearest whole 10,000. The balance can be split in half or in any range of weighting. The Board of Directors have the following target returns for the global firm i) ROCE Target 10% ii) Net Profit 35% and iii) Asset Turnover 0.4 times. Part of their audited reports are presented in the table below. All sales and costs are in 000:
| TESCO | TESCO Retail UK | TESCO Retail Ireland | TESCO Retail Central Europe | Tesco Bank | Tesco Group PLC | |||||
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |
| 000 | 000 | 000 | 000 | 000 | 000 | 000 | 000 | 000 | 000 | |
| Output in Units | 85.000 | 70.000 | 10.000 | 9.000 | 9.000 | 7.000 | 7.000 | 6.000 | ||
| Sales | 90.000 | 70.000 | 25.000 | 23.000 | 8.000 | 7.000 | 7.800 | 6.700 | 130.800 | 106.700 |
| Variable Costs | 20.000 | 18.000 | 6.000 | 5.000 | 2.500 | 1.500 | 1.800 | 1.600 | 30.300 | 26.100 |
| Fixed Costs | 20.000 | 20.000 | 16.000 | 16.000 | 5.000 | 5.000 | 5.000 | 5.000 | 46.000 | 46.000 |
| Average Capital Value | 180.000 | 180.000 | 80.000 | 80.000 | 9.000 | 9.000 | 7.500 | 75.000 | 276.500 | 344.000 |
- Calculate and evaluate the comparative financial performance of the four divisions and implications for Tesco Group plc. as a whole. In detail: Calculate the opening balance for 2020, calculate for 2021 the previous year's profit, then round the numbers and make some comments on the targets.
- Without doing further calculations, comment on the relevant performance measures calculated in Q1 and discuss whether there are more ratios that could help you evaluate a divisions performance. Highlight positive and negative points that relate to the ratios discussed and calculated in Q1and Q2.
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Finite Mathematics For Business Economics Life Sciences And Social Sciences
Authors: Raymond Barnett, Michael Ziegler, Karl Byleen, Christopher Stocker
14th Edition
9780134862620
