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1. STRATEGIC FINANCIAL MANAGEMENT

2. Page 1 of 13
Table of Contents
Introduction:.................................................................................................................................... 2
1. Stakeholder Analysis of Tesco: .................................................................................................. 2
Stakeholders:............................................................................................................................... 2
Tesco Approach........................................................................................................................... 3
Environmental and Social Review of Tesco ............................................................................... 3
2.0 Financial Analysis..................................................................................................................... 5
Purpose and relevance of chosen ratios: ..................................................................................... 5
Results and analysis of movements of ratios: ............................................................................. 7
Another concern of Benedict Co. possessing future issue:......................................................... 9
Application of financial ratios is measuring performance of company: ................................... 10
Conclusion .................................................................................................................................... 10
References:.................................................................................................................................... 11

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Introduction:
Current assignment is all about strategic financial management where the entire assignment is
segregated in two parts aiming to integrate the financial and non-financial strategies of
organizations to develop the understanding regarding the relation between corporate strategies
with the financial performance and thus, policies on the same area of concern. The initial part of
this Assignment has focused on the corporate governance practices and stakeholder management
followed by the financial ratio analysis for Benedict Co based on the given case of financial
statements.
1. StakeholderAnalysis of Tesco:
Stakeholders:
A stakeholder can be defined as a person, an organisation or a group of people who holds and
interest about a specific organisation. The stakeholders may get affected and may affect the
organisational operations, its aims, objectives and governance. In order to provide example of
stakeholders one may mention the employees, directors, owners, government and suppliers as the
stakeholders of an organisation (Epstein et al. 2017).
In the context of Tesco, three stakeholders can be identified as the employees, customers and the
suppliers of the organisation. in this context it is necessary to mention the fact that employees are
the internal stakeholders while the suppliers and customers are the external stakeholders of the
company.
b)
Tesco Plc is a retail giant based on United Kingdom that employs more than 440,000 employees
throughout the world. The company operates through its more that 6,800 outlets spread all over
the world and it also caters the needs of the customer through online operations. The principle of
the company is to serve the customers in a more effective way and that too without
compromising with the environmental and social challenges that may affect the communities.
This report will solely focus on analysing the environmental and social review of the
organisation and determine how Tesco has effectively demonstrated its corporate and social
responsibilities to its customers and employees.

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Tesco Approach
The key purpose of Tesco is to serve its customers a little better with the passage of time and in
order to serve this purpose the company ensures that it is not compromising with the social and
environmental components of the business (Jones et al. 2017). The company has reviewed its
third value to ensure that it can leave a larger impact over those issues through the cumulative
impact of smaller and thoughtful actions. It is quite commendable that Tesco has an excellent
organisational work culture. Through this it ensures that all the employees feel they are
amalgamated within each and every organisational process. After the identification of the
challenged the management of the organisation discussed the matter with employees and reached
on the conclusion that every small contribution helps in bringing about a bigger change.
The employees of Tesco carry a sense of value which implies that they can play an important
role in simplifying the decision-making process for both their colleagues and customers and
thereby helping them in making a healthier choice. Reducing the wastage of food products,
tackling food poverty as efficiently as possible and also designing sustainable supply chains are
the key objectives of the employees. Furthermore, it is also an interesting fact that the
governance of the organisation is robust so as to ensure effective corporate responsibility. It is
generally performed in a two-way process internally and externally. Internally the board
committee and externally the advice and feedbacks of the stakeholders are taken into
consideration which helps the organisation.
Environmental and Social Review of Tesco
Tesco has always valued its employees and it has always kept the customers at its primary
priorities while rendering the services. During the transformation phase of the organisation it has
made sure that the employees be the first to know any sort of changes that are being
implemented and which can affect them. Tesco has also ensured that the organisation’s
commitment towards remaining transparent and open will always remain the same even after the
transformation as well. The workforce diversity is always considered by Tesco as a crucial
business element and the ratio of male to female employees if observed from the perspective of
all employees was not significantly different. The percentage of male employees is 43% while
that of the women employees is 57%, this gives rise to the idea that in Tesco the employees have
never experienced any phenomena that can be explained as an incident of gender discrimination.

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The organisation effectively maintains a diverse workplace where the employees can
comfortably discharge their duties. As important stakeholder of the company, the employees are
always valued by the organisation and that can be observed clearly from the organisational
practices (Jones et al. 2017).
Tesco’s Responsibility towards Employees
The organisation claims that it always respects the human rights of its employees as well as the
people who work in the supply chain of the organisation. The company is firmly standing over
the cornerstone of upholding the basic human rights and supporting the UN Universal
Declaration of Human Rights. The business ethics of Tesco is solely reliant over the principle of
upholding the basic human rights. It is a matter of fact that projecting the responsibility of an
organisation towards its employees is a quintessential factor for the success of the business
entity. In the context of Tesco, it can be stated that the employees are the building blocks of any
organisation and these employees largely determines the success and failure of an organisation.
In this context it is also necessary to introduce the concept of corporate social responsibility. The
corporate social responsibility is a well-known concept and it is management approach that
assists the organisations in amalgamating the environmental and societal concerns within their
business operations and interaction with the stakeholders as well (Park et al. 2014). In such a
scenario it can be observed that in relation to the food waste and other environmental impacts it
has successfully integrated a sense of value within its employees who are significantly looking
after these facts. Furthermore, in relation to mitigating the food poverty, the organisation has
made an initiative of distributing the surplus food products and thereby reducing the food
poverty (Panwar et al. 2015). This is another initiative which has been taken by the organisation
with the assistance of the employees. Therefore, it can easily be claimed that the employees are
the pillar of the organisation which helps in establishing and depicting the robust and crisp
corporate and social responsibility of Tesco.
Tesco’s Responsibility towards Customers
Customers are another key stakeholder of the organisation. Though the company cannot directly
impact or control the customer’s behaviours but it can implement certain policies which will
affect the customers indirectly. For instance, it also takes into account the basic human rights of

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the customers as well. As per the corporate governance report of the organisation, it suggests that
the company holds a strict principle of maintaining clarity and transparency. After reviewing the
document, it becomes further clear that the report reflects each and every aspects of the corporate
governance structure of the organisation. This is important because if the customers are
inquisitive, they can certainly have a look at the report and will be able to get an idea of the
overall scenario. The company values its customers and put them at the front line of any business
operations (Heald, 2018). In this context it can be stated that customer satisfaction is the key to
success for every business. The customers generally perceive a value about a product or service
provided by an organisation. After consuming the products or the services if the actual value
generated supersede the perceived value the customer satisfaction increases. This is ensured by
Tesco Plc, the company has ensured customer satisfaction and has also developed a widespread
loyal customer base throughout the world. The social responsibility of any organisation is to
provide high quality products at the affordable prices. Tesco Plc has successfully established this
framework and has been continuing its business since the past few years profitably and
efficiently. Therefore, it can be stated that the principle of doing ethical business may sometime
give rise to an idea that profit accrual will be low, but in the long run, ethical businesses actually
give rise to the highest amount of revenues. Tesco has believed in the fact that has now become a
worldly acclaimed business. It has taken a good care of its customers and provided them with
their desired product without fetching the extra consumer’s surplus for increasing its profit level
and thereby increasing the overall economic welfare.
2.0 FinancialAnalysis
Purpose and relevance of chosen ratios:
In the given case study of Benedict Co. the ratios that have been chosen as the key performance
indicator are liquidity ratios, efficiency ratios and profitability ratios. These ratios have their own
significance in measuring performance level of a company. Each type of ratio is important
equally to judge different aspects of a company. In the opinion of Kanapickienė and Grundienė
(2015), liquidity of a company refers to the availability of short term fund in account of the
company to meet daily obligations of the organization. Therefore, liquidity is directly related to
the working capital of the company where the measurement of the liquidity includes the

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components of working capital. On the other hand, liquidity has been described by Combs et al.
(2017) as the asset class that the company is possessing in order to immediately convert the same
into liquid cash for daily expenses. Here, the long-term organizational goals or business
objectives would be met only at fulfilling the short term requirements. As a reason, the liquidity
is the strength of a company to run its operation to generate profit from its short term functions.
Profitability ratios are the indicators of the capability of a business in generating profit from its
operation. In that case, profitability is a different concept from the direct profit margin. Profit
refers to the outcomes of business operation in terms of excess revenue over the expenditures
employed in the business. Thus, profitability is a necessary measure of a business to ensure the
long term financial sustainability and continuation of profit generation in longer future of the
company. In continuation Elhaj et al. (2015) stated that investors of the company are also
concerned about the profitability of the business to ensure return on investment in time. Apart
from that, profitability also indicates competency of the firm along with the retained amount to
be reinvested in future for further generation of the income from operation. Gross profit, net
margin and ROCE are the examples of profitability ratios.
In case of efficiency ratios, the same delivers information regarding operational competency of
the company to handle its operating components including debtors, inventory, creditors and other
asset classes that company is holding. Inventory turnover, debtor’s turnover and creditor’s
turnover are three examples of these ratios which indicate the cash cycle of the company and
liquidity cycle of the same. According to Caro et al. (2018), efficiency ratios are also used in
determining liquidity position of the company through the concept of operating cycle, modified
version of working capital, required in running the business to achieve the financial goals in
terms of profitability, wealth maximization and market share in the market it is operating in.
In case of Benedict Co, the selected ratios have been chosen to examine the credibility of the
company from all aspects to continue its operation while evaluating its competency in running
the operation in longer future. Moreover, the changes in the financial ratios would indicate the
position of the company over the two years mentioned in order to estimate the probable future
and upcoming benefits and obstacles to be concerned about.

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Results and analysis of movements of ratios:
Results of the chosen financial ratios for Benedict Co are analysed below:
Liquidity ratios:
20x0 20X1
Current Asset 6400 12800
Current Liability 5100 10800
Current Ratio 1.254902 1.185185
Current Asset 6400 12800
Inventory 2600 5200
Current Liability 5100 10800
Quick Ratio 0.745098 0.703704
According to the above result it could be inferred that there has been problem in the financial
position of the company as the liquidity ratios are not in close to the standard. In case of current
ratio it could be inferred that the company would be financially strong in case the current asset is
double the current liability. As a reason, such financial condition would only make the business
capable in paying off the liabilities. In case of the quick ratio the standard is 1:1. Therefore,
below the standard indicates inadequate amount of money, present in the account of the
company. Therefore, the company possesses inadequate amount of money to meet the daily
obligations of the business operation. Such condition would create the obstacles in the form of
excess liability on the asset which would enforce incorporating the retained profit in the liability
payoff. This would in turn generate significant losses and thus, financial turmoil to continue
operational flow in future.
Profitability ratios:
20x0 20X1
Revenue 24900 30800
Gross Profit 10400 14800

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Gross Margin 41.77% 48.05%
Revenue 24900 30800
Net profit 7000 6600
Net Margin 28.11% 21.43%
Total Asset 39000 50800
Current Liability 5100 10800
Operating income 8700 8300
ROCE 25.66% 20.75%
Profitability ratios refer to the sound measure of the organizational strengths as it indicates the
monetary back up of the company to be employed in the organizational operation further.
Moreover, as mentioned in the previous section that profitability is the key area that the investors
are concerned with. Therefore, higher profitability is always accepted to the external stakes of
the company in expectation of the upcoming benefits. In this context, Laitinen (2018) stated that
higher profit margin also indicates the percentage of retained profit to be kept for future use of in
the organization. The trend of gross margin and net margin are contradictory in nature as the
gross margin shows increasing result where the net margin is on decreasing movements.
Therefore it could be inferred from this opposite result that operating cost has been moved
upward that has reduced the profitability in comparison of both the previous year and gross
margin.
Unlike the same, ROCE has also been decreased where the reason behind the same would be
predicted as the increasing operating cost. As the net profit has been reduced, the company has
reduced the rate of return to the shareholders.
Efficiency ratios:
20x0 20X1
Inventory 2600 5200
Sales 24900 30800

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Inventory Turnover 38 62
Debtors 3800 7600
Sales 24900 30800
Debtors Turnover 56 90
Creditors 800 4000
Sales 24900 30800
Creditors Turnover 12 47
According to the above outcomes of the efficiency ratios, it has been observed that the company
is inefficient in managing its cash cycle as the debtor’s turnover is greater than the creditors turn
over. As a reason, Benedict Co needs to pay off its liabilities from its retained profit as the
collection days of credit sales is longer than creditors payment period. It would be problematic
for the company in near future in case of making profits as the company needs to reduce its
retained profit for the liabilities.
Another concern of Benedict Co. possessing future issue:
The key issue that has been found from the financial ratio analysis of Benedict Co is the cash
management issue. In case of the working capital management, the company would face
obstacles in case of managing assets and liabilities as the company has already achieved greater
collection period where suppliers are paid before the period where retained profit is the only way
of paying off the same. In case of the opinion of Giordani et al. (2014), creditors’ period needs to
be longer than debtors’ period in order to pay off creditors after the collection of credit sales. On
the other hand, in case of inventory turnover, lesser the result indicates frequent stock out of the
products from inventory and thus, sale of the product. Moreover, cost management is another
concern of the company where Benedict Co has faced increasing operating cost that has reduced
the profitability of the firm. Benedict Co needs to analyse its cost structure to restructure its cost
components with an optimal utilization of the same for the business. Moreover, corporate
governance and social responsibility would be another concern that the company would work on
to gain social acceptance and market share.

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Application of financial ratios is measuring performance of company:
Financial ratios are the potential tools of measuring financial performance through indicating the
ratio of a financial component on another one. The ratios also indicate the misbalance of
financial observations while tracing the reason of such financial imbalance to be addressed. In
the words of Czajor and Michalak (2017), financial statement and its components possess a
certain ratio with each other that ensures the strengths and weakness of a company that the
company needs to be aware of. Different types of ratios indicate several financial and accounting
parts in the statement where such segregation has eased maintaining the company’s financial
performance in smaller parts.
Conclusion
On a concluding note, it can be stated that corporate social responsibility has now become a
crucial component of any business model, irrespective of the size and revenue of the business. In
the era of globalisation and advancement people are becoming more aware about the social and
environmental impact of the business entities and hence it is critical for the businesses to
incorporate the corporate social responsibility within its business model otherwise consumers
will abandon their products and services. In the context of Tesco it has been observed that the
company has effectively reflected its corporate and social responsibilities towards the employees
and the customers. It has held a significant principle of maintaining basic human rights, reducing
the food poverty, providing the best quality products in the market and many more. This report
has successfully outlined how the corporate social responsibilities have been reflected by the
company with the help of the environmental and social review coupled with the corporate
governance report.

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References:
Caro, N.P., Guardiola, M. and Ortiz, P., 2018. Classification trees as a tool to predict financial
difficulties in Latin American companies through their accounting ratios. Contaduría y
Administración, 63(1), pp.25-26.
Combs, A., Samy, M. and Cengiz, H., 2017. An Analysis of how Financial Ratios of Companies
in Turkey Are Affected by National Standards, and IFRS. International Business Research.
Czajor, P. and Michalak, M., 2017. Operating Lease Capitalization-Reasons and its Impact on
Financial Ratios of WIG30 and sWIG80 Companies. Przedsiębiorczość i Zarządzanie, 18(1, cz.
1 Practical and Theoretical Issues in Contemporary Financial Management), pp.23-36.
Elhaj, M.A.A., Muhamed, N.A. and Ramli, N.M., 2015. The influence of corporate governance,
financial ratios, and Sukuk structure on Sukuk rating. Procedia Economics and Finance, 31,
pp.62-74.
Epstein, E., Freeman, R.E., Jensen, M.C., Laplume, A.O., Sonpar, K., Litz, R.A., Margolis, J.D.,
Walsh, J.P., Verbeke, A. and Tung, V., 2017. The future of stakeholder management theory: A
temporal Perspective. In Stakeholder Management(Vol. 10, No. 1, pp. i-xiii). Boston, MA:
Pitman.
Giordani, P., Jacobson, T., Von Schedvin, E. and Villani, M., 2014. Taking the twists into
account: Predicting firm bankruptcy risk with splines of financial ratios. Journal of Financial
and Quantitative Analysis, 49(4), pp.1071-1099.
Heald, M., 2018. The social responsibilities of business: Company and community, 1900-1960.
Routledge.
Jones, T.M., Wicks, A.C. and Freeman, R.E., 2017. Stakeholder theory: The state of the art. The
Blackwell guide to business ethics, pp.17-37.
Kanapickienė, R. and Grundienė, Ž., 2015. The model of fraud detection in financial statements
by means of financial ratios. Procedia-Social and Behavioral Sciences, 213, pp.321-327.
Laitinen, E.K., 2018. Financial Reporting: Long-Term Change of Financial Ratios. American
Journal of Industrial and Business Management, 8(09), p.1893.

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Panwar, R., Nybakk, E., Pinkse, J. and Hansen, E., 2015, July. Competitive Strategies and Small
Firms’ Social Responsibilities. In Proceedings of the International Association for Business and
Society (Vol. 26, pp. 99-111).
Park, J., Lee, H. and Kim, C., 2014. Corporate social responsibilities, consumer trust and
corporate reputation: South Korean consumers' perspectives. Journal of Business
Research, 67(3), pp.295-302.