TESCO company Essay Example | Topics and Well Written Essays - 2000 words

TESCO company - Essay Example Not surprisingly, these results are reflected in the profits reported by each company. TESCO’s continuously growing turnover led to progressively increasing profits, reaching an almost 100 per cent gain during the period. At the same time, Sainsbury continuously reported losing profits, actually entering the negative range in the period between 1996 and 2004. These profit losses actually reached as low as  £12 million British in 2001. While it can be seen that Sainsbury had a higher sales cost than TESCO, these differences were too great to be explained solely by this difference. Another possible factor for Sainsbury’s unfavorable results could be attributed to other factors such as solvency.Solvency refers to whether or not a company is able to pay out its debt. In determining this, it’s equally important to determine how the company manages debt, short-term liabilities, and long-term obligations. There are three main considerations in looking at solvency. The se include immediate solvency which is also often referred to as liquidity), short-term solvency and medium- or long-term solvency. The ability of a company to meet obligations on time is what is meant by liquidity or immediate solvency. Related to this issue is the concept of short-term solvency, which generally refers to a slightly longer period, generally not longer than a year, in which the company would have the time necessary to sell stock as a means of meeting any obligations it might have that cannot be covered immediately.