The Validity of "Turnover Is Vanity, Profit Is Sanity and Cashflow Is Reality" Insofar as It Applies to Tesco Stores Ltd.

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|Corporate Financial Services |

|Grade: 80% (Distinction) |

|Word Count 3,994 |

Question

Tesco Stores Limited is the principal trading subsidiary of Tesco plc, one of the

world’s leading international retailers trading predominately in food retail and clothing

in the UK and in thirteen other countries (April 2012). High levels of sales are produced each year by Tesco, although an old adage suggests:

“Turnover is vanity, profit is sanity and cashflow is reality”.

Required:

Discuss the validity of the adage insofar as it applies to Tesco Stores Limited. Within

your answer, you should evaluate Tesco Stores Limited’s performance in respect of

turnover, profit and cashflow, making comparisons to its peers, and linking to nonfinancial steps taken by Tesco / its peers to attempt to influence performance in

these areas.

Notes to students:

1. The company you are evaluating is Tesco Stores Limited, and not Tesco plc.

2. You should base your answer on the financial year ends and financial statements

provided in this assignment, not any more recent financial information which may

be available.

3. As with all citations, you must ensure that the source is fully detailed in your

reference list. In particular, the examiner will need to be able to access any

financial accounts referred to in your answer. You may wish to provide key

financial details in tabulated form in an appendix.

Overall assignment (Total – 50 marks)

(Maximum 4000 words)

Sales, profitability and sensible cash management are integral to the success of any business. It is often difficult to maintain a balance between the three and often success in one can mean that not enough attention has been paid to the others.

Turnover is the amount of...