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Unit 2 P7 - Illustrate the financial state of a given business
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Illustrate the financial state of a given business
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Unit 2 Business ResourcesPass Criteria 7
P7 – Illustrate the financial state of a given business
Solvency
Using figure 1 (below) I can figure out solvency for Tesco in 2014, the current ratio is 1.42:1.
A ratio between 1.5:1 and 2:1 is desirable, but 1.42:1 is close and it means that if Tesco
needed to pay off all its liabilities they could do so by selling their assets and still have the
0.42 of assets left over.
Profitability
Profitability can be figured out using a formula, there are three main ones – gross profit
percentage, net profit percentage and return of capital employed using figure 1 I can figure
out the gross profit percentage and net profit percentage which is 6.31% and 1.53%
respectively, these are both low and probably due to the intense competition that Tesco has
as they are always having to lower their prices.
Performance
Performance can be measured by calculating stock turnover, using figure 1 and 2 the stock
turnover is 27.19 number of times which means it takes 27.19 days for the stock to be sold
and replaced.
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