Ratio Analysis 11 business activities In 2018 the average settlement for

Ratio analysis 11 business activities in 2018 the

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Ratio Analysis 11 business activities. In 2018, the average settlement for receivables was 9.5 days, which reduced to 9.4 days in 2019. A reduction in debtor days suggests that Tesco company may not have a major 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. An increase in sales revenue to capital employed is also a good sign of the company ( Dewi & Arifati 2016 ). Sales revenue per employee was 13.8 in 2019, while in 2018, it was at 12.8, which suggests that the company experiences more sales from employees. Liquidity Ratio. Current Ratio is one the liquidity ratios that helps in measuring short-term liabilities of Tesco Plc in comparison with current assets in an overall manner. This ratio reveals the ability of a 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 liquidity position of Tesco Plc for future purposes. As of 2018, the current ratio was 0.71, which reduced
Ratio Analysis 12 to 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 Plc in paying the current liabilities in timely manner. It is important to understand the fact that quick assets can be converted into current assets within time of 90 days. The acid test ratio reduced from 0.59 in 2018 to 0.48 in 2019. The acid test ratio depicts the actual value of Tesco's liquidity position. A decline will mean a decrease in the company's liquidity ( Guo, 2019 ). Cash generated from operations to maturing obligations ratio also reduced from 0.17 in 2018 to 0.13 in 2019. Gearing Ratio The gearing ratio was 47.7% in 2019 compared to 59.1% in 2018. Interest cover increased from 2.7 in 2018 to 4.1 in 2019. Gearing ratio provides the total indebtedness of Tesco PLC ( Adewuyi 2016 ). The gearing ratio reduced, which indicates that Tesco PLC is minimizing its debts. An increase in interest cover ratio suggests that the company has a higher risk of paying interest to lenders ( Zolfani & Yazdani 2018) . Investment Ratio This analysis evaluates the direct return that the shareholders have, from the company they have invested in. In 2017, Tesco did not declare dividends. Subsequently its market value and share price fell. Instead of issuing more capital during these years, Tesco redeemed its shares, in an effort to minimize its expenditure and dilution of ownership. These actions made all the investment ratios during these years to be zero. The dividend payout ratio, dividend yield ratio, and earnings per share at Tesco PLC increased from 0.25, 1.5%, and 11.9 per share in 2018
Ratio Analysis 13 to 0.37, 2.6%, and 15.4 per share in 2019, respectively. An increase in dividend payout ratio shows that there is high stakeholders’ return on investment. A higher dividend yield ratio affects the investors’ decision about investing in the company. The dividend cover ratio reduced from 4.0 in 2018 to 2.7 in 2019. Cash generated from operations per share also decreased from

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