Tesco
Analysis of Tesco balance sheet
Name
Course
Lecturer
Date city
institution
Balance sheet
A balance sheet is one of the financial statements that reveals the worth of a business at a given point. It could be half annually or annually. Also known as the “statement of financial position”, it shows the assets of a company, its liabilities and equity/net worth. It is essential for creditors and shareholders. Creditors can review what the company has used this document and decide the amount of money to lend to the company. Another importance of the balance sheet is that it informs the company of their financial position for them to adjust accordingly. As the name suggests, the assets and liabilities in a company need to balance. Nevertheless, a company can be said to be in a critical financial position if their liabilities exceed their assets.
The company’s assets are mainly from two sources. They include liabilities and equity.
Equity refers to the resources of the owner invested in the business.
Liabilities, on the other hand, refer to finances from borrowing.
Assets refer to what the company uses to run its business. Assets and liabilities support the assets.
Assets = Liabilities + owners equity
All in all a balance sheet many different depending on whether the business is a sole trader or a limited company. According to Rose (2017), a sole trader refers to a business where the owner and the business are considered to be one. There is legal disassociation between the two. Hence, any debts that a sole trader makes becomes their debt and creditors ma auction personal properties. The limited company is its legal entity separate from the owners and the shareholders.
The law requires that limited companies submit a balance sheet and other financial statements many times a year. The financial statements cover data collected either quarterly annually and annually. However, it is not compulsory for the sole traders to submit a balance sheet. But, they may prepare the balance sheet which may help them, especially when seeking for loan funds. The limited company’s balance sheet is more complex and has more items compared to the sole trader’s. The owner’s equity section is where the two differ most (Ingram, 2019). The section is labeled as “shareholder equity” for limited companies because shareholders hold shares jointly. Under this section includes items such as dividends paid out, retained earnings among others. Sole traders’ balance sheet does not contain these items on the owner’s equity section. Instead, their balance sheets contain the number of dollars that the owner contributed and other investors.
Main items in total assets are:
The total assets include the following items:
Deferred tax assets = £m117 as at 24 Feb 2018; 707 as at 25 Feb 2017
Derivative financial instruments = £m 1,144 as at 24 Feb 2018; £m 1,589 as at 25 Feb 2017
Loans and advances to customers = £m 11,522 as at 24 Feb 2018; £m 9,961 as at 25 Feb 2017
Trade and other receivables = £m 1668 as at 24 Feb 2018; £m 1655 as at 25 Feb 2017
Other investments = £m 928 as at 24 Feb 2018; £m 1107 as at 25 Feb 2017
Investments in joint ventures and associates =£m 689 as at 24 Feb 2018; £m 739 as at 25 Feb 2017
Investment ptoperty = £m 100 as at 24 Feb 2018; £m 64 as at 25 Feb 2017
Property, plant and equipment = £m 18,521 as at 24 Feb 2018; £m 18108 as at 25 Feb 2017
Goodwill, software and other intangible assets =£m 2,661 as at 24 Feb 2018; £m 2,717 as at 25 Feb 2017
Invetories = £m 2263 as at 24 Feb 2018; £m 2,301 as at 25 Feb 2017
Current tax assets = £m 12 as at 24 Feb 2018; £m 13 as at 25 Feb 2017
Short term investments = £m 1,029 as at 24 Feb 2018; £m 2,727 as at 25 Feb 2017
Cash and cash equivalents =£m 4,059 as at 24 Feb 2018; £m 3,821 as at 25 Feb 2017
Assets of the disposal group and non-current assets classified as he;d for sale = £m149 as at 24 Feb 2018; £m 344 as at 25 Feb 2017
Accoridng to Tesco’s balance sheet, the total aasets as at 24 Feb 2018 was £m 44,862 and £m 45,853 as at 25th Feb 2017.
Within the total assets, the current assets were £m 31, 136 as at 24th Feb 2018 and £m30,436 as at 25th Feb 2017 and the non-current assets were £m 13,726 as at 24th Feb 2018 and £m15,417 as at 25 Feb 2017.
Current assets refer to all the assets that a company has and which may be converted to cash within a year while the non-current assets are those that a company expects to keep for more than a year and they are not easily converted to cash (Tamski, 2018).
According to the balance sheet, the current assets increased by £m700 in 2018 due to the increase in short term investments. Contrary, the non-current assets decreased by £m1,691 because of the depreciation of property, plant, and machinery.
The inventories of the company have as well reduced by £m38 since the company’s goods sold at a quick rate. Hence, the increased revenue.
Main items in total liabilities are:
Trade and other payables = £m 9360 as at 24 Feb 2018; £m 9,199 as at 25 Feb 2017
Borrowings =£m 8,621 as at 24 Feb 2018; £m 11,993 as at 25 Feb 2017
Derivative financial instruments = £m 663 as at 24 Feb 2018; £m 668 as at 25 Feb 2017
Customer deposits and deposits from banks =£m 10784 as at 24 Feb 2018; £m 8,963 as at 25 Feb 2017
Current tax liabilities = £m 335 as at 24 Feb 2018; £m 613 as at 25 Feb 2017
Provisions = £m 1,268 as at 24 Feb 2018, £m 1,123 as at 25 Feb 2017
Post-employment benefit obligations =£m 3,282 as at 24 Feb 2018; £m 6621 as at 25 Feb 2017
Deferred tax liabilities = £m 91 as at 24 Feb 2018; £m 88 as at 25 Feb 2017
Liabilities of the disposal group classified as held for sale = £m 17 as at 25 Feb 2017
From the balance sheet, the total liabilities were £m34,404 as at 24th Feb 2018 and £m39,268 as at 25th Feb 2017.
Current liabilities are those debts that a company expects to settle within a year from the date of the balance sheet. Within the total liabilities, the current liabilities were £m19, 238 as at 24th Feb 2018 and £m19, 234.
Non-current liabilities are those debts that a company does not expect to settle any time soon. In other words, it may take them more than a year to settle. The non-current liabilities were 15,166 as at 24th Feb 2018 and 20, 034 as at 25th Feb 2017.
There was not much change in the current liabilities. There was just an increase of £m4 basically due to a rise in customer deposits and deposits from banks. The non-current liabilities, on the other hand, reported a decrease of £m4868 because of the enormous reduction in borrowings and post-employment benefit obligations.
Main items in total shareholders equity are:
Share capital =£m 410 as at 24 Feb 2018; £m 409 as at 25 Feb 2017
Share premium =£m 5107 as at 24 Feb 2018; £m 5096 as at 25 Feb 2017
All other reserves =£m 735 as at 24 Feb 2018; £m 601 as at 25 Feb 2017
Retained earnings = £m 4,228 as at 24 Feb 2018; £m 332 as at 25 Feb 2017
Non-controlling interests = £m 22 as at 24 Feb 2018; £m 24 as at 25 Feb 2017
The balance sheet shows that the total equity is £m 10,458 as at 24th Feb 2018 and £m 6,414 as at 25th Feb 2017. There is an increase of £m6,414. The increase in equity is due to profits the company made during that period.
In conclusion, the total cash and cash equivalent of the company were £m4,059 as at 24th Feb 2018 and £m3,821 as of 25 Feb 2017. This was an increase of £m238.
References
Ingram, D. (2019). The Difference in a Balance Sheet for a Corporate Vs. A Single-owner Business. [Online] Available at: https://smallbusiness.chron.com/difference-balance-sheet-corporate-vs-singleowner-business-15830.html
Rose, D. (2017). Differences between a sole trader and a limited company. [Online] Available at: https://www.morethanaccountants.co.uk/differences-sole-trader-limited-company/
Tamski, M. (2018). Fixed Assets vs. Current Assets: What’s the Difference? [Online] Available at: https://www.patriotsoftware.com/accounting/training/blog/fixed-assets-vs-current-assets/