A Report on Core Analysis.edited.docx - Accounting and...

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Accounting and Finance: A Case Study of Sainsbury plc Name Institution
Contents Part 1: Financial Analysis ......................................................................................................................... 3 1.0 Introduction ......................................................................................................................................... 3 2.0 CORE analysis ................................................................................................................................... 4 2.1 Context ............................................................................................................................................ 4 2.1.1 External profile ......................................................................................................................... 4 2.1.2 Internal profile .......................................................................................................................... 6 2.2 Overview .......................................................................................................................................... 8 2.2.1 Income statement .................................................................................................................... 8 2.2.2 Balance sheet .......................................................................................................................... 9 2.3 Ratios ............................................................................................................................................. 10 2.4 Evaluation ...................................................................................................................................... 11 2.4.1 Profitability .............................................................................................................................. 11 2.4.2 Efficiency ratios ..................................................................................................................... 12 2.4.3 Liquidity ratios ........................................................................................................................ 13 2.3.4 Gearing ratios ........................................................................................................................ 14 3.0 Conclusion ......................................................................................................................................... 14 2.1 Part 2: Management Accounting and Financial Management Techniques ............................... 15 2.1 Capital investment techniques .................................................................................................... 15 2.2 Budgeting technique .................................................................................................................... 17 References .............................................................................................................................................. 19 Appendixes .............................................................................................................................................. 22 Appendix 1: Ratios calculation and formula .................................................................................... 22
1.0 Part 1: Financial Analysis 1.1 Introduction Almost every sector and industry has been affected by the COVID-19 pandemic and the UK retail industry is not an exception. Sainsbury’s CEO Simon Roberts noted that “this is a time unlike any other in retail” as the retail industry has been forced to take a lead in ensuring they get food and other essential products to their customers (Sainsbury, 2020). However, this has been met with a lot of challenges in the supply chain and in response to this, Sainsbury promised to introduce immediate payment terms to nearly 1,500 small suppliers with revenues of less than GBP100,000 to caution them from the impact of COVID-19 (Barker, 2020). In particular, Sainsbury claims that it will reduce the payments terms to 14-day from the invoice date (Parrett, 2020). Following this, FreshFields Foods, a small UK company that involved in the production of vegetables is contemplating on entering into a business arrangement with Sainsbury as a supplier of the SO Organic range but not sure whether this is the right thing to do or not. In line with this, this report aims to present insights of the financial performance and position of Sainsbury’s plc over the last four years using data from the company financial statement in 2020 and 2018 financial years to establish whether FreshFields Foods should enter into a business arrangement with the company as a supplier of the SO Organic range. In doing so, the CORE (Context, Overview, Ratios, and Evaluation) analysis model is used due to its ability to dissect much better the performance of the company subject to the environment it operates. For the financial year ended 30 th Match 2020, J Sainsbury reported sales worth GBP28.99 billion and had about 171.4k full-time and part-time employees (J Sainsbury Plc, 2020).
1.2 CORE analysis 1.2.1 Context 1.2.1.1 External profile J Sainsbury is one of the oldest and prominent companies in the UK. Initially started as a single grocery which has gradually expanded to a multi-brand and a multi-channel business from the introduction of self-servicing shopping into its stores. The company has a long history, going back in 1869 when John James Sainsbury and his wife Mary Ann launched their first store in London’s Drury Lane (Sainsburyarchive.org.uk, 2020). Since then, its focus has been an expansion to date making it one of the largest general merchandise and clothing retailers. It is the second-largest food retailer after Tesco. The company is a bit more diversified as it operates

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