The net profit margin ratio helps to analyse the profit earning level of the business in the case of Sainsbury. It can be seen that the net profit margin of the company is fluctuating from 2018 to 2022 (SakinaI, 2018). The net profit margin trends to be 1.09, 0.64, 0.52, -.69 and 2.26 in the year from 2018 to 2022. This shows the profit earning level of the business is highest in the year 2022.
Return on Assets
Table 2: Return on asset ratio
The return on assets of the company tends to be helpful in analysing the efficiency of the company. The ability of the company in converting the asset company to a higher revenue level can be measured by the return on asset ratio. As per the analysis of the ratio, it can be seen that the return on the investments or the asset tends to be 1.48% in the year 2018 which tends to be reduced to 0.74% in the year 2019 and to 0.54% in the year 2020. The ratio also decreased to 0.76% in the year 2021 (Talitha, 2020). The ratio also increased in the year 2022 to the level of 2.6%. This shows the highly efficient management of the company in the year 2022.
Return on Equity
Table 3: Return on Equity ratio
The valuation of the shareholders is measured from the analysis of the return on Equity ratio in the business. The value of the equity tends to be reduced from the level of 4.33% in the year 2018 to the level of 2.45% in 2019, 1.95% in 2020, and -2.77% in the year 2021. The ratio tends to be rising again in the year 2020 to the level of 8.95%. B this shows the firm is efficient in managing and converting the equity to revenue in the business process.
Earnings Per Share Ratio
Table 4: Earning per share ratio
The earnings ratio of the company tends to be decreasing as per the company record of Sainsbury. The earning per share of the business tends to be decreasing with the time period of 32018 as the level of earning per share ratio is 7.6 which decreased to the level of -9.4 in 2021 (Liahmad, et al. 2021). The performance to the business again seems to improve in the year 2022 to 21.80.
Price earnings Ratio
Table 5: Basic earnings ratio
The willing mines of the investors can be easily measured by the price-earnings ratio of the company. The ratio tends to be analysed in the decreasing aspects from the level of 61.50 in the year 2018 and decreased to 5.46 in the year 2022. This shows the earning level of Sainsbury is financially decreasing in the time period after 20118.
Dividend Paid Ratio
Table 6: Dividend paid ratio
“The dividend playout ratio is the ratio of the total amount of dividends paid out to shareholders relative to the net income of the company”. It helps to measure the percentage of the earning level to the shareholders of the company. The dividend paid ratio tends to be decreasing as compared to 2018 to the level in the year 2021 and it started to decrease in the year 2022 to the level of 0.0%
B) Interpretation Of The Earnings And Impacts
Net Profit Margin
As per the analysis, the net profit margin tends to decrease from 2018 to 2021 and again tends to increase in the year 2022. Thai shows the management process of the company is efficient in managing the cost of the operational activities. The inventory system and the cost management system of the business are efficient throughout the business process and hence result in the increase of the earning of the business (Caputo, et al. 2019). The high level of profit value shows that the company is successful in achieving a high level of working capital. To mitigate the level of short-term debts in the business. As per the increase in the profit-making level of the business Sainsbury is required to ensure the debt-equity level in the business is at normal. The sufficiency in the level of working capital is required to mitigate debt capital. The flexibility of the company in the purpose of the investment is also one of the major concerns of the business. The external factors are also responsible for the company's performance. The constant increase in the profit level of the business is one of the major aspects of the earning level of the business. The sustainability of the business and the daily operational activities are required to be maintained as well to maintain the profitability level of the company.
Return on Assets
The return on the assets of the business seems to be decreasing from the year 2018 to 2022. The increase in the asset level of the business shows the efficient management of the business of the conversions of the assets for the generation of the level of revenue to manage its cost. This shows the business is successful in mitigating the obligations and is more efficient in the economic activities for generating a high level of capital (Supriantikasari & Utami, 2019). Therefore, the management is much more efficient for the business to retain high development of capital.
Return On Equity
The management of the company tends to increase with the decrease in the equity return ratio. The ratio tends to decline after 2018 to the year 2021 and again an improved level can be observed in the year 2022. The company is efficient to convert its shareholder's equity to the creation of revenue. As per the analysis, the increase in the level of stock, share valuation, and the accessibility of the capital helped in launching the projects required by the investors.
Earnings Per Share Ratio
The analysis shows an increase in the level of earnings per share of the business in the year 2022 as compared to the previous years. This may also result in an increase in the equity finance level. This may also increase the level of investors in the business process.
Price Earnings Ratio
The valuation of the price-earnings shared in the business process tends to be increased in the year 2022. As the increase in the dollar valuation results in a high level of payments and earnings with the increase of the demand of the shares of the company (Estiasih, et al. 2020). This may result in the increase in the market capitalization of the business.
Dividend Paid Ratio
The high level of the dividend paid ratio shows that the company is investing less amount of funds in the process with the inclusion of the high payment level of the earning as dividends in the business process. This also helps in attracting valuable investors in the business to invest in the business projects. This also depicts the high level of growth in the share price of the equity of the company.
C) Analysis Of Financial And Non-financial Factors
Financial Factors
Cost Savings programs
The business process of Sainsbury tends to be implementing different 5 cost saving programs that are responsible for the reduction of the operational cost of the business process. The reduction of the cost sales was depicted by 83 points as per the analysis of the Fiscal year 2019-20. The company also gets to reduce the cost of sales by the level of 200 points. In the next three years, the savings were increased to £150m. The program also helps to enhance the investments of the different offers to the customers.
Efficient working capital management practices and alternative financing options:
The free cash flow recorded in the business process of Sainsbury tends to be £503 (Purba, 2019). As per the last three-year analysis, the cash generated was at the level of £633 and targeted to the level of £500 m. The non-lease debt for 2021-2022 tends to be £141m. The net debt of thebusiness was analysed as 3.1 times its leverage ratio.
Pocket-Friendly Pricing Models
The reduction of cost is the primary aim of the business including the introduction of new products in the market and enhancing the quality of the services. As per the analysis, the bvuhsi8mness shows a revenue level of 7.6% as compared to its competitors.
Non-financial Factors
Improved Staff Morale-
The morel or the motivation of the business employees is one of the important factors that is required to enhance the performance of the work process of the business. Different acts are implemented to improvise the safety measure of the employees. The implementation of Equality Act 2006 has also been implemented to create equal importance for employees. This helps to create a positive effect to increase performance.
Reduction Of Obsolete Inventory
The food packaging methods or the inventory system is responsible for the obstacle-free work process in the company. The company is implementing the strategy of changing its packaging system which is affecting the different varieties of fruits (Araya, et al. 2019). The company discards the process of 17 million of food items and hence resulting in the reduction of waste.
Innovative operation
Developing the existing business process and founding new ways to improve the business operation can be called an innovation operation. “Sainsbury’s tripled the new product lines sold and launched over 1900 across all the grocery brands”. The company tends to launch new products like 200 products in the business process to enhance the performance after the reduction of the varieties. This may help the business to set up new growth and earning level in the business market system.
2. Competitor Analysis
Dividend Per Share
As per the business records and the analysis of the financial aspects of the company, it can be seen that the compensation level of Sainsbury is higher as compared to TESCO as per the valuation of the ratio. The dividend growth of TESCO tends to be solid and steady as per the shares paid to the shareholders of the company. Therefore, this shows that they are creating enough value for mitigating the level of risk.
Net Profit Margin
The net profit margin of Tesco is 2.42% which seems to be higher as compared to Sainsbury. This shows the investment process in the process of TESCO tends to be higher than Sainsbury. This may be profitable for the long-term investment process.
Returns on Equity
The return on the equity of TESCO is recorded as 10.71% which is higher than Sainsbury's. The performance decreased as compared to the previous for level of 47%. Therefore, the management of Tesco seems to be more efficient.
Earnings Per Share
As per the analysis, the Earning per share in the year 2022, tends to be 42.64 as compared to Sainsbury to the level of 29.80. Therefore, the profit is high in taste and also distributed among the shareholders as the demand for TESCO is high.
Dividend Paid Ratio
The dividend paid ratio of TESCO tends to be fluctuating from 2018 to 2022. The ratio in the year 2022 tends to be 17.3 which is comparatively lower than Sainsbury's Dividend paid ratio. This shows the business is capable of paying high dividends to the shareholders.
Conclusion
The overall comparison helps to conclude that Sainsbury is showing a high-efficiency level in terms of financial analysis compared to Tesco. Only the return over the equity level of the business shows a low performance.
Recommendation
As per the overall analysis, it can be recommended to Mr. and Mrs Wonga invests capital in the business process of TESCO ltd as the company tends to have higher ratio records in its business process as compared to Sainsbury's performance as they are short-term inventors. If the investors are long-term investors, it would have suggested investing in Sainsbury. As per the time period between 2021 and 2022, the company tends to show a high level of improvements in the business process. this shows the business is efficient as a long-run process.
Araoye, F. E., Aruwaji, A. M., & Ajya, E. O. (2019). Effect of dividend policy on stock price volatility in Nigeria Stock Exchange. International Journal of Accounting and Financial Reporting, 9(2), 219-231.https://www.academia.edu/download/77073582/pdf.pdf
Caputo, F., Leopizzi, R., Pizzi, S., & Milone, V. (2019). The non-financial reporting harmonization in Europe: Evolutionary pathways related to the transposition of the Directive 95/2014/EU within the Italian context. Sustainability, 12(1), 92.https://www.mdpi.com/2071-1050/12/1/92/pdf
Estiasih, S. P., Prihatiningsih, E., & Fatmawati, Y. (2020). Dividend Payout Ratio, Earning Per Share, Debt To Equity Ratio Terhadap Harga Saham Pada Perusahaan LQ45. Jurnal Akuntansi dan Pajak, 21(1), 205-212.https://pdfs.semanticscholar.org/871a/e3ff5190eb237c82e11565a692a728e9c437.pdf
Liahmad, K. R., Utami, Y. P., & Sitompul, S. (2021). Financial Factors and Non-Financial to Financial Distress Insurance Companies That Listed in Indonesia Stock Exchange. Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 4(1), 1305-1312.https://pdfs.semanticscholar.org/2dd0/5d12475472e178e8fef8234081083c29d766.pdf
Purba, M. A. (2019). Pengaruh Earning Per Share, Dividend Per Share Dan Financial Leverage Terhadap Harga Saham Pada Perusahaan Food and Beverage Yang Terdaftar Di Bursa Efek Indonesia. Jurnal Akuntansi Barelang, 4(1), 86-95.http://ejournal.upbatam.ac.id/index.php/jab/article/download/1480/971
SakinaI chsani, A. R. (2018). The Effect of Return on Equity (R.O.E.) and Return on Investment (R.O.I.) on Trading Volume. Procedia - Social and Behavioral Science, 896-902.https://doi.org/10.1016/j.ememar.2015.04.004
Supriantikasari, N., & Utami, E. S. (2019). Pengaruh return on assets, debt to equity ratio, current ratio, earning per share dan nilai tukar terhadap return saham (studi kasus pada perusahaan go public sektor barang konsumsi yang listing di Bursa Efek Indonesia Periode 2015-2017). Jurnal Riset Akuntansi Mercu Buana, 5(1), 49-66.https://ejurnal.mercubuana-yogya.ac.id/index.php/akuntansi/article/download/814/541
Talitha Nathaniela Nariswari, N. M. (2020). Profit Growth: Impact of Net Profit Margin, Gross Profit Margin, and Total Assets Turnover. International Journal of Finance & Banking Studies (2147-4486), 2147-4486.https://doi.org/10.1080/10454446.2017.1244792
