Financial Reporting for Sainsbury Essay Example | Topics and Well Written Essays - 1500 words

Financial Reporting for Sainsbury - Essay Example Income 640 585 Revenue 21,102 19,964 Net Profit Margin (Net Income / Revenue) 3.03% 2.93% (Sainsbury’s Annual Report 2011) The net profit margin indicates that over the past two year period, the company has increased its earning per dollar of revenue earned as it net profit margin percentage has increased from 2.93% in 2010 to 3.03% in 2011.additionally, for the current year, we can see that the company has earned 3 cents in net profit or net income against each dollar of revenue that it has earned in 2011. These net profit margin figures are also indicative of the fact that the company has been able to grow and improve its pricing strategy, reduce its operational costs and reduce its liability costs (interest to be paid) over the year which had led to an increase of 0.1% over the year (Ratio – Profit Margin, 2012, 3 Financial Ratios, 2012) Stockholders Equity Ratio: Details 2011 2010 Total Liabilities 5,475 5,679 Stockholders Equity 4,221 4,157 Stockholders Equity Rati o (Total Liabilities / Stockholders Equity) 1.30 1.37 (Sainsbury’s Annual Report 2011) The stockholders equity ratio indicates that the company has leveraged its equity and taken loans and established liabilities against it. The ratio is indicative of the number of times the company has leveraged itself over its equity. This implies that in 2011, the company has leveraged about 1.3 times its equity which has actually reduced from the previous year when it was 1.37 in 2010. A high ratio of stockholders equity indicates that the company has an aggressive financing mode and would like to grow through financial leverage instead of organic growth through buildup of retained earnings. For an organization that is in the retail sector, leverage ratios are generally ranging from 1.5 to 1.68 which means that... Center of discussion in this paper is Sainsbury Supermarket Ltd. Is a child company of Sainsbury’s PLC which is also commonly known as Sainsbury’s and is also the third largest retail outlet in the United Kingdom with a market share ranging to about 17%. Sainsbury’s has a long and hard history with several brand and organizational re-launches and which dates back to the 19th century in the Victorian Era. It became the largest retail store in London in the early 1920’s and is considered as a pioneer for self service in a retail store. In the early 1990’s, Tesco and Asda became larger than Sainsbury’s and took over its market share letting it slide down to the third position in the retail industry. In 2010-11, Sainsbury launched several sponsorship programs, the most popular of which is the sponsorship for 2012 Paralympics. In 2011, Sainsbury’s also opened its 1000th store which is based in Scotland and marks a major milestone for the co mpany and for the entire Sainsbury’s group. The financial analysis for Sainsbury’s includes two major ratios which are Net Profit Margin and Stockholder’s Equity Ratio. The case in point was the annual report for 2010-11 for Sainsbury’s Supermarket Ltd. which is one of the largest retail stores in the United Kingdom. The analysis of its ratios indicates that the company has shown great promise and its net profit margin has shown an improvement over the two year time period while its leverage is also significantly lower than an average of the retail companies.