Analysis of the financial statements of three leading supermarkets in Research Paper

Analysis of the financial statements of three leading supermarkets in UK - Research Paper ExampleReporting financial results in a vapourish and straightforward fashion is a means to an end (Fridson & Alvarez, 2002). The financial performance of a company can be discerned by the different financial ratios in accounting that tries to evaluate the overall financial condition of a company.The different financial ratios can be categorised into liquidity ratios, activity ratios, debt ratios and profitability ratios. liquidness ratios measure the companys availability of cash to pay its obligations and debts. Activity ratios measure the ability of the company to convert non-cash assets into cash. Debt ratios measure the companys capability to repay long term obligations. advantageousness ratios measures how the company controls its expenses and uses its assets in order to generate an acceptable rate of return.Based on the financial statements and financial ratios calculated, Tesco is mor e liquid than Sainsbury and Morrison. The liquidity of the company is thrifty by the current assets ratio as well as the acid test ratio. An asset is liquid if can be readily converted to cash, firearm a liability is liquid if it essential be repaid in the near future. The current assets ratio compares the assets that will turn into cash within the year to the liabilities that must be paid within the year. The acid test ratio is a more conservative liquidity measure where the numerator of the current ratio is reduced by the value of its inventory. (Higgins, 1995)The trends of Tescos liquidity ratios are increasing from 2007 to 2009. This means that the company has