ABSTRACT

This paper makes up two major parts; the initial part intends to analyze all the main
stakeholders for Tesco while pointing out the main three most relevant entities, later we will
examine how the Environmental and Social Assessment and the Corporate Governance Report
might influence how Tesco shows its action in terms of its corporate and social responsibilities
to two of the three primary stakeholders identified, this is through a complex dip into the
company’s 2016 financial report.
The later part will be to Determine and evaluate the fiscal stand of Benedict Co. using a variety
of financial ratios, to learn if the company can reach the company’s potential customers,
investors, lenders, and suppliers. Detailing the reason behind the preferred ratios while
emphasizing the prospects of the company’s performance. Finally, we will be critically assessing
the function of financial ratios in understanding and testing the company’s performance.

 
1- Introduction
Each company owns series of varied stakeholders that range from internal to external, these
stakeholders are described as individuals or organizations that are directly or indirectly
impacted or influenced by the company’s results. All of those need to be managed in a manner
that brings to an outstanding and profitable business. One approach to consider stakeholders is
by their power and interest. High power, high-interest stakeholders are key players, while low
power and low-interest stakeholders are least significant. Stakeholder analysis is an efficient
approach of identifying all stakeholders to prioritize, maintain and engage with them
productively and in an outstanding manner. Stakeholder identification and evaluation is the
initial step in the lengthy process of dealing with those stakeholders, engaging with them and
keeping a healthy and effective exchange with them.
I direct the later part of this paper on investigating and assessing the fiscal stand of Benedict Co.
We will use financial ratios;Such ratios serve as an economic overview for the company. The
primary categories of accounting ratios utilized in the analysis are: 
  Profitability ratios: employed to resolve the profitability and the company’s ability to
develop earnings relative to its revenue, working costs, and separate balance sheet
assets, still reviewing shareholders’ equity.
 The productivity of functional capital ratios: applied to measure how effectively the
company uses its short-term assets and liabilities. It can likewise determine the turnover
of receivables, the repayment of liabilities, the volume and management of equity, and
the general purpose of stockpile and equipment.
 Liquidity ratios: it is an essential class of financial metrics applied to figure out a
borrower’s capacity to meet off current debt obligations without causing foreign
investment.
 Gearing ratios (leverage): explains the scale to which the company’s enterprises are
financed by shareholders’ funds versus creditor’s finances.
 Investor ratios: measure the relationships between revenues, dividend, and share price.
Using these ratios, we will have a further view of the company’s conduct, financial status, and
cash flow.
2- Tesco
Tesco [Tesco PLC] is a British multinational grocery and other merchandise retailer having its
headquarters in Welwyn Garden City, Hertfordshire, England. By gross revenues, Tesco is the
third-largest retailer in the world and the ninth-largest retailer in the world measured by
revenues. It operates in seven countries across Asia and Europe, and its considered the market
leader of groceries in the UK.
Tesco was founded in 1919 by Jack Cohen, the business expanded rapidly, and by 1939 the
company had over 100 Tesco shops across the country. Tesco has expanded globally since the
early 1990s, with operations in 11 other countries in the world. Mid last century, Tesco has
diversified into other retailing avenues such as books, clothing, toys, furniture and electronics,
also petrol/gas, software, and financial services in some countries also into internet and
telecommunication services.
2.1 Stakeholder Analysis
Clarke and Clegg (1998) have classified stakeholders into four categories; Primary Social
Stakeholders, Secondary Social Stakeholders, Primary Non-Social Stakeholders, and Secondary
Non-Social Stakeholders. Another simpler classification will be to categorize stakeholders into
two main groups internal and external; where internal stakeholders are the entities within the
business, while the external ones will be not within the business but are affected or deadly care
about its performance. With these classifications in mind, the main internal stakeholders for
Tesco will be the Employees [called colleagues on the company’s website and in its external
reports] and Shareholders or investors, while the external ones will be Customers and
Suppliers, following Clarke and Clegg (1998) model, the following are the main stakeholders:
 Primary Social Stakeholders
o Customers
o Employees / Colleagues
o Suppliers and Partners
o Management
o Investors and shareholders
 
 Secondary Social Stakeholders
 Media and Commentators
 Competitors
 Charities and Foodbanks
 
 Primary Non-Social Stakeholders
 The Environment
 Future Generations
2.1.1 Customers
Customers are at the core of the company’s stakeholders’ analysis and fixate, as they are the
beneficiaries of the company’s goods, services, and products. The company is regarded to have
a customer-focused culture that has permeated the company’s success; also customers have
been given plainly in the company’s 2015 updated mission statement “Serving Shoppers a slight
stronger every day” likewise there is one of the core values detailing on how to handle people,
“We treat people how they need to be treated”. With all of this in mind, it is obvious that Tesco
considers its customers as one of the principal stakeholders, hence the company grows to give
one of the finest customer experiences whenever feasible, such as 24/7 hours services to
sustain the customers’ hectic schedules and their sudden emergency needs. Also, the company
provides one of the finest customer loyalty schemes in the industry, and it is regarded a pioneer
in this sector by cultivating such a strategy that commenced in the 1960s
2.1.2 Colleagues [Employees]
Tesco has declared in its 2016 annual address that it currently employing 476 thousand
employees globally, the company has an exceptional atmosphere for recruitment, as it affords
highly competitive benefits such as Employee Share Schemes, other discounts on
merchandises, staff housing benefits as effectively as a number more benefits, that make Tesco
as an employer of choice attracting employees and talents in the countries of its operations,
and manage a highly satisfactory employee retention quota.
2.1.3 Suppliers
Suppliers are a crucial stakeholder to Tesco, absolute attention was applied to this specific
stakeholder as part of the annual reports, occasionally, they were referred to as partners,
conferring to the company’s website, Tesco works solely with leading manufacturers, who have
superior characters and afford the highest quality wares. Suppliers were discussed in Porter’s
model of five forces in which “supplier power” relates to the pressure suppliers can wield on
businesses by hiking prices, reducing quality, or cutting down the availability of their products.
Hence partnering with the appropriate supplier is of immense relevance to ensure business
stability and progress. According to Porter’s 5 forces industry analysis framework, supplier
power, or the bargaining power of suppliers, is one cause that modify the ambitious system of
the industry.
2.1.4 Environment
As part of the Corporate and Social Responsibility, Tesco has been running a sustainability
program that has been described on the corporate website, as one of their missions is to have a
split obligation to cut down waste from “farm to fork”. Mainly to curtail food waste while
working in cooperation with their suppliers and partners. Key action items from this program:
 Broadening specifications: This program gives the company to have considerable more
of their suppliers’ crop, to boost the volume of produce they sell in-store, and provide
customers great products at nominal prices.
 Managing bumper crops: To reduce waste, the company sold extra-large boxes of
produces at a cheaper price than usual. Customers enjoyed the bumper crop and the
company took more from the growers.
 Improving food processing: By connecting growers with suppliers of fresh and frozen
foods, this can provide a stable demand and supply of produces, which increases the
amount of crop used and saves edible produce being plowed back into the field.
Fesco has also partnered with a charity called FareShare, which has a program aimed at
relieving food poverty and reducing food waste, the company has helped its suppliers to
redistribute to charity using FareShare application which helps in redistributing food to people
in need.
2.2 Corporate Social Responsibility
As part of the 2016 Corporate Governance report which is part of the annual report, the
company has identified in section 4 the relations with its social and environmental stakeholders
through the Corporate Responsibility Committee report. Within this report, it stressed the
importance of corporate responsibility to rebuilding trust and transparency with a wide
spectrum of stakeholders mainly the customers.
In the report, the committee recognizes that the company has made a big difference on
national and international fronts and how simple actions can have a significant impact on
customers and to the environment. There were several projects that the committee has been
driving and following. During the reporting year, the company has shown progress on some
vital projects impacting key stakeholders as follows:

2.2.1 Customers and Communities

The company has been working on 2 main fronts as part of the sustainability and corporate
responsibility towards the customers and the communities, the first project is the ‘Eat
Happy/Farm to Fork’ project which has reached a key milestone in November 2015 with 1
million children have participated in education trail initiative aimed at raising awareness about
the process of food production and making healthy eating choices which increased the overall
awareness of the average customer, allowing the consumers to make healthier and more
responsible choices. The company has highlighted one of its targets which is to make it easier
for customers, colleagues and the communities to have a healthier life. One way is by creating
partnerships with health experts like Diabetes UK and the British Heart Foundation that support
prevention and cure for the biggest health challenges in modern days. In 2015 the company has
raised 7.89 million pounds that are placed towards prevention projects and important health
researches. 
2.2.2 Environment
Tesco has a great social responsibility towards the environment, and this has been detailed in
the company’s 2016 annual report, examples of such responsibilities are detailed below.
As part of the UK government program to reduce the production and use of plastic bags, the
company has raised through the ‘Bags of Help’ program 11.5 million pounds, where proceeds
from sales of carrier bags are reinvested into local projects to develop some poorly used
outdoor areas.
On the other hand, the company has continued to make progress on trying to prevent food
waste from farm to fork, first through their suppliers, by making as much use of the edible
crops as possible. Second, through the company’s own operations, The Community Food
Connection (CFC), run in partnership with FareShare FoodCloud, working to deliver one main
aim, which is to never throw away food that could be eaten. The program allows stores to
notify local charities of how much extra food available at the end of each day, through the
FareShare FoodCloud app. Charities simply respond by text message to confirm that they will
collect the surplus food. This has been expanded to more than 100 stores; nearly 9 million
meals have been donated with a value reaching over 4.6 million in one year. Tesco is the only
UK retailer to publish independently assured food waste data for its own operations. The
company didn’t send any food waste to landfills since 2009 which is a great measure in
preserving the environment and securing a better future for the next generations.
Another important topic is carbon and greenhouse gas emissions, with the recent global
warming concerns that have been sounded by scientists across the world, greenhouse gas
emissions are monitored carefully at Tesco through an independent party, KPMG LLP using the
assurance standards ISAE 300 which is also reported in details in the annual reports. The aim is
to reduce those gas emissions year of year, in 2016 report, it confirmed that the company has
reduced the net carbon intensity per sq. ft. of retail and distribution floor space by 1.8%
compared to the previous year, and 41.7% since 2006/07.

3. Benedict Co. Financial Position Analysis

3.1 Introduction
Benedict Company provides salvage solutions, they specialize it in buying and selling damaged
or abandoned freight and other related items, from transport needs or warehouse losses they
acquire virtually anything worldwide that can be moved. The company has been in operations
since 1983. During this segment of the report, we will work a comprehensive analysis of the
company’s financial position utilizing a variety of financial ratios, indicating the comprehensive
financial position of the company while emphasizing the views of performance that raise
concerns. 
3.2 Financial Ratios
Financial or Accounting ratios are regarded a group of critical metrics applied to measure the
capability and profitability of a company based on its financial reports while expressing the
relationship between various financial data points.
3.2.1 Profitability
Profitability is calculated through a class of metrics that are employed to gauge a business’s
strength to generate earnings relative to its revenue, working costs, balance sheet assets, and
shareholders’ equity over time, utilizing statistics from a definite point in time. Having a greater
profitability ratio relative to a competitor’s ratio or relative to the preceding period’s ratio
shows that the company is financially well-performing.
In Benedict Co’s case, the Return on Capital Employed [ROCE] which is the underlying
profitability ratio, declares the percentage of return the company made and the capital
employed. Here, the ROCE dropped from 21.9% in year 20X0 to 18% in 20X1 despite the
upsurge of sales, this suggests that the revenue per invested capital has decreased, which is a
negative signal. This might be for different investments into the company that might be
required to increase yields on a multi-year term for example. Another importance matrix is the
Gross Profit percentage; in this case, the Gross Margin has risen and jumped 41.7% to 48%
which is a considerable rise in sales revenue, but the Net margin fell from 36.9% to 31% which
shows that the cost of sales has risen which altered the revenue, at this point the company
owns to review its working costs and to give efficiencies. Another angle to study at is the Net
Asset turnover ratio which reveals how thorough the company’s capital is applied to generate
turnover, in 20X0 the turnover ratio was 0.24, and it increased to 0.28 in 20X1, although this
doesn’t entail that there is a problem, emphasis on the fact that efficiencies need to be set up
in operations to enhance the situation.
3.2.2 Efficiency and Use of Resources
Using efficiency ratios which are occasionally called activity ratios is run by investors to measure
the performance of the company’s short-term, assessing how effectively the company utilizes
its short-term assets and liabilities. A significant measure is the number of debtor days or the
trade receivable day, as this is absolutely significant in cash collection flow influencing the
overall company’s cash flow, this number was 55.7 days in 20X0 and reduced to 90 days in 20X1
which is showing a delay in collecting revenue, which negatively impacts the cash flow;Keeping
in mind that the average number of days for companies in the same field is 55 days. A quick
remedy is to ensure faster cash collection will be by issuing invoices on time and tackling the
debtors more often to reduce the debtor days.
Trade Payable days is another measure that impacts the company’s cash flow, it was 108 in
20X0 and jumped to 155 in 20X1; it isn’t particularly bad, but the industry standard is 90 days
which might reflect negatively on the company’s business structure and might prevent partners
from dealing with the company in future contracts. Inventory days show the number of days
the company holds its inventory before selling it, this number also increased from 65 to 118
days which shows that the selling process is hindered for some reason and needs to speed it up,
as the average among competitors is 60 days. The cash conversion cycle gives an idea of the
length of time it takes the company to generate cash from operations, this value was 13 in 20X0
and increased to 53.6 in 20X1, this needs to be looked at and corrective actions need to be
implemented.
3.2.3 Liquidity Ratios
This is an important metric used to determine if the company can pay off current debt
obligations without raising external capital. Two ratios are involved, Current ratio, which is a
liquidity ratio that measures the ability to pay short-term obligations due within one year. It has
dropped from 1.25 in 20X0 to 1.19 in 20X1, while the industry average is 1.6. This is alarming as
if the ratio keeps dropping at one point the company might not have the capital to meet its
short-term obligations which might lead to significant problems or even bankruptcy.
The other matrix is the Quick ratio, which is like the current ratio but as a shorter-term measure
of liquidity. The industry average is 1.0, while the company’s ratio reduced from 0.745 in 20X0
to 0.7 in 20X1, again this is considered alarming, it might drive away investors and partners and
need to be addressed from different angles.
3.2.4 Gearing Ratios
Gearing ratios comprise a group of financial ratios that compare some form of equity or raised
capital to debt. It is a measurement of the entity’s financial leverage, which demonstrates the
degree to which the company’s activities are funded by shareholders’ funds versus creditor’s
funds. The capital gearing ratio increased from 23.6% in 20X0 to 30% in 20X1 and the
debt/equity ratio increased from 30.9% to 42.8% in the respective year. This indicates that the
company has more financial leverage and is more susceptible to economic downturns as the
company has higher amounts of debt as compared to shareholders’ equity.
3.2.5 Investors.
Investors are an important stakeholder for the company and managing the relationship is a vital
managerial aspect; in 20X1, the return on equity has dropped from 27% in 20X0 to 23.50%,
which is in line with the drop in ROCE. On the other hand dividend per share slightly increased
from $0.20 to $0.25, this is due the total increase of dividend paid by the company which has
been increased from 3.6M to $4.5 M. Dividend Yield is the ratio of the annual dividend
compared to the share price, this ratio decreased from 0.55% to 0.46% (down by 0.9%) which is
in line with the stock price increase, from $3.6 per share to $5.6.

4. Conclusion
From the financial analysis of Benedict Co., it appears that the company is not heading in the
right direction, as their profit margins have been declining and the revenue per invested capital
has dropped, this might repel investors a way which might have some devastating results,
mostly being unable to raise more capital to run their operations or to acquire additional
inventories. Cash collection is slower and inventory day on hand has been prolonged, which
leads to a poor current ratio, which indicates that the company is barely able to manage its
short-term obligations due within the fiscal year. While the company’s gross and profit margins
declined, it is not clear why the decision to increase the dividend, but there is a possibility that
the company is trying to attract further equity by attracting more investors.
Important actions to be considered such as cutting internal operational cost, as the company’s
sales revenue has increased in 20X1 compared to 20X0 but the profit margin dropped which
indicates an increase in the cost of sales, this needs to be strategically addressed.  General
operational efficiencies are required to be applied by the company, mainly to better utilize its
capital and cash collection process. We recommend further analysis to take place; such as
applying financial ratios over various periods and to compare more “year of year” data, to get a
better understanding of the company’s financial status and trends over years.
 Appendix
ROCE =

Operating Profit [not including Interest and Tax] X 100 / Total Assets [Including non-current Liabilities]- Current liabilities

20X1= (8300+1300)X100 / 50800+12000-10800 =18.4%

20X0= (8700+500)X100 / 39000+8000-5100 = 21.9%

Net Profit= Operating Profit [not including Interest and Tax] X 100 / Total Sales

20X1= 9600X100/30800= 31%

20X0= 9200X100/24900= 36.9%

Gross Profit= Gross Profit X100/ Total Sales=

20X1= 14800X100/30800= 48%

20X0= 10400X100/24900= 41.7%

Net Asset Turn Over = Sales [Turnover] / Capital employed

20X1= 14800/52000= 0.28

20X0= 10400/41900= 0.24

Debtor day= [Trade Receivables / Credit sales] X 365

20X1= [7600/30800] X 365= 90 days

20X0= [3800/24900] X 365= 55.7 days

Trade [Stock] day= [Inventory / Cost of sales] X 365

20X1= [5200/16000] X 365= 118.6 days

20X0= [2600/14500] X 365= 65.4 days

Creditor day= [Trade Payable / Cost of sales] X 365

20X1= [6800/16000] X 365= 155 days

20X0= [4300/14500] X 365= 108 days

Cash conversion cycle = Inventory (Stock) days + Receivable (Debtors) days – Payables (Creditors) days

20X1=118.6 + 90 -155= 53.6 days

20X0= 65.4 + 55.70 - 108= 13 days

Current Ratio = Current assets / current liabilities

20X1= [12800/10800] = 1.19

20X0= [6400/5100] = 1.25

Quick Ratio = [Current assets – Stock] / current liabilities

20X1= [12800-5200]/10800 = 0.7

20X0= [6400-2600]/5100 = 0.745

Capital Gearing Ratio= [long term debt / (Capital Employed] X 100

20X1= [12000/(50800-10800)]X100 = 30%

20X0= [8000/(39000-5100)] X 100= 23.6%

Debt to Equity Ratio= [long term debt / (Share Capital + Reserve)] X 100

20X1= [12000/28000]X100 = 42.8%

20X0= [8000/25900] X 100= 30.9%

Return on Equity Ratio=

[Earnings after tax and preference dividends / (Ordinary share capital plus reserves + Reserve] X 100

20X1= [6600/28000]X100 = 23.5%

20X0= [7000/25900] X 100= 27%

dividend per share = Dividend paid to ordinary shareholders / Number of issued ordinary shares

20X1= 4500000/18000000 = 0.25

20X0= 3600000/18000000 = 0.20

Dividend yield = [Dividend per Share / Market Price per share] X 100

20X1= [0.25/5.6]X100 = 4.46%

20X0= [0.2/3.6] X 100= 5.55%

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