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Ratio Analysis 11business activities. In 2018, the average settlement for receivables was 9.5 days, which reducedto 9.4 days in 2019. A reduction in debtor days suggests that Tesco company may not have amajor problem collecting debts, and they are managing the financial position of their customers.Sales revenue to capital employed slightly increased from 2.24 in 2018 to 2.25 in 2019. Anincrease in sales revenue to capital employed is also a good sign of the company (Dewi & Arifati2016). Sales revenue per employee was 13.8 in 2019, while in 2018, it was at 12.8, whichsuggests that the company experiences more sales from employees.Liquidity Ratio.Current Ratio is one the liquidity ratios that helps in measuring short-term liabilities ofTesco Plc in comparison with current assets in an overall manner. This ratio reveals the ability ofa particular firm to meet the short-term obligations for future business activities (Zadek et al.2013). This particular ratio will help investors as well as creditors for viewing at the liquidityposition of Tesco Plc for future purposes. As of 2018, the current ratio was 0.71, which reduced
Ratio Analysis 12to 0.61 in 2019. A decline in the current ratio indicates a decrease in the liquidity of the company(Bragg, 2018). Acid-test ratio is one of the liquidity ratios that help in measuring the ability of Tesco Plcin paying the current liabilities in timely manner. It is important to understand the fact that quickassets can be converted into current assets within time of 90 days. The acid test ratio reducedfrom 0.59 in 2018 to 0.48 in 2019. The acid test ratio depicts the actual value of Tesco's liquidityposition. A decline will mean a decrease in the company's liquidity (Guo, 2019). Cash generatedfrom operations to maturing obligations ratio also reduced from 0.17 in 2018 to 0.13 in 2019.Gearing RatioThe gearing ratio was 47.7% in 2019 compared to 59.1% in 2018. Interest coverincreased from 2.7 in 2018 to 4.1 in 2019. Gearing ratio provides the total indebtedness of TescoPLC (Adewuyi 2016). The gearing ratio reduced, which indicates that Tesco PLC is minimizingits debts. An increase in interest cover ratio suggests that the company has a higher risk of payinginterest to lenders (Zolfani & Yazdani 2018).Investment RatioThis analysis evaluates the direct return that the shareholders have, from the companythey have invested in. In 2017, Tesco did not declare dividends. Subsequently its market valueand share price fell. Instead of issuing more capital during these years, Tesco redeemed itsshares, in an effort to minimize its expenditure and dilution of ownership. These actions made allthe investment ratios during these years to be zero. The dividend payout ratio, dividend yieldratio, and earnings per share at Tesco PLC increased from 0.25, 1.5%, and 11.9 per share in 2018
Ratio Analysis 13to 0.37, 2.6%, and 15.4 per share in 2019, respectively. An increase in dividend payout ratioshows that there is high stakeholders’ return on investment. A higher dividend yield ratio affectsthe investors’ decision about investing in the company. The dividend cover ratio reduced from4.0 in 2018 to 2.7 in 2019. Cash generated from operations per share also decreased from