Tesco Plc. and SainsburyPlc Ratio Analysis and an Investment Decision


The report analysed Tesco Plc. and SainsburyPlc., which are competing in the grocery stores industry. The purpose of which is to determine the better long-term investment for a potential investor using ratio analysis on the more recent three year performance. Sainsbury and Tesco operates supermarkets, convenience stores and online distribution channels primarily in the United Kingdom. Tesco is the third largest global retailer and is the market leader in the United Kingdom while Sainsbury is currently ranked at third.

Tesco and Sainsbury are having problems in asset management since inventory levels have increased due to price competitions and stricter receivable terms. The reason for the lower liquidity is that creditors may have requested for a faster payment period, which resulted to the increase in the long-term borrowings. Tesco and Sainsbury regularly paid dividends in the past three years to mitigate the company perception of an increased investment risk. Both companies do not have a potential to become bankrupt in the near future as concurred by the better z-scores.

Tesco is still the better investment for potential investors despite its recent operating problems, which included the horsemeat scandal and the lower profitability.


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