Reduce Municipal Borrowing By Financial Slack

Background of the Company

Discuss About The Financial Slack Reduce Municipal Borrowing.

The present study is bifurcated into two parts. The first part of the study is about the evaluation of the monetary and non-monetary performance of the selected company for this study. Sainsbury has been selected for this assignment, and its financial statements are evaluated under this study to determine its overall performance. This study emphasizes on various concepts such as examining different kinds of resources, assessing the financial information from the financial statements, identifying tangible and intangible resource and focusing on the costing system used by an entity. Further second part of the study is based on an evaluation of investment appraisal techniques that can be used by the organisation while making an investment in the international market. Along with this different technique for risk recording, measuring and monitoring will be explained.

Sainsbury is a public limited company which is listed under FTSE 100 index which is a supermarket which provides all the grocery stuff along with all other stuff under a single roof. The foundation of this company started in the year 1869 in the centre of the United Kingdom is London. John James is a founder of this company as a single supermarket which now transformed into a long chain of supermarkets. It is ranked as a second largest owner of a supermarket in the UK after Tesco (Sainsbury, 2018). Tesco is the biggest competitor of this company that provides quality oriented services n satisfying all its customers. The increasing competition imposes by Tesco will increase the overall difficulty of Sainsbury in modifying its business practices to steal the attention of most of its buyers.

This company is listed on the London stock exchange to enjoy the benefits of the external market due to fluctuations takes places in the market volatility. Entities who maintain its position in the highly fluctuating market will able to beat all its market rivals easily (Asgharian, Christiansen and Hou, 2018). Increasing or decreasing changes takes places in the market will reflect the position of an entity to guide its investors before investing in Sainsbury when various competitive options available in the market that generates a higher return to the investor.

There are three kinds of resources required in an entity as these three resources act as a basic pillar in bearing the load of the overall business. A business is a mixture of various elements which includes the generation of the end products by processing all the raw materials feeds into the system. Sainsbury is a supermarket retailer which provides both raw as well as finished products under its single roof to satisfy all its customer’s visits in its supermarket which require all these three resources such as human resources, financial resources, and the information resources (Cooke, 2018). Human resources are one of the important types of resources required by an entity so as by Sainsbury in presenting all its products in front of its customers as meeting the needs of its customers is the basic motive of the Sainsbury as it exists in a service industry.

Evaluation of the Impact of Three Key Resource Decisions

Human resource management system is a separate concept which explains the selection of a candidate as per the existing requirement of the firm. A human resource manager appointed by every organization is to hire employees for an entity after judging the eligibility of a candidate as according to the organization culture and its requirements (Cascio, 2018). Human resource manager bridges the communication between employee and employer by conveying all the information announced by an employer which is essential in retaining all the personnel with the organization for a longer time (Ansong and et al., 2018). Just in the case of the Sainsbury, various kinds of employees required by an entity such as store supervisors for taking care about the products stored in warehouses, billing department for handling the daily selling of the products in a supermarket by all the customers, customer service cell deal with the queries and the suggestions of its existing or potential customers by announcing new offers to attract the attention of its users towards the newly launched products (Agnihotri and Agnihotri, 2018). All these kinds of employees are required by Sainsbury for its business operation as an entity is not run by a single person as this requires the support of all the users such as internal as well as the external users associated directly or indirectly with the company in inducing the performance of the firm (Han, Chen and Li, 2018).

Finance is considered as the heart of the business without which the existence of the same is not possible just like an individual can’t survive without its heart (Sull, Turconi, Sull and Yoder, 2018). The heart is considered as the main component behind the life of a person just like in the case of a business where an enterprise requires initial capital to start its own business as operating of an entity requires funds to meet the expenses incurred in the business lifecycle. Current business is run on credit which requires working capital to meet the routine daily expenses of a business concern which requires the fund to meet the uncertain difficulties takes places in an enterprise (Banerjee, Sing, Chowdhury and Anwar, 2018). There are three kinds of financial resources used by an individual in meeting its monetary requirements such as short term, medium term, and long-term financial resources. Sainsbury can use variety of financial resources according to its requirements as they can take bank loan in which they have to pay principal along with specific percentage of interest for the finance taken from the lenders Disadvantage of the bank loan is that an individual has to give collateral security before taking loan and also to pay higher amount of interest on the loan taken by an entity. For the new start-up entity, existing investors provide venture capital in the form of seed capital to start the business by an entrepreneur on its own by utilizing its skills and knowledge. Sainsbury can issue equity shares and can take the help of debentures for meeting the long-term requirement of an entity. Several benefits of equity shares and the debentures will guide Sainsbury to consider the most desirable approach which meets all its needs and the expectations (Aviso and et al., 2018). Debenture can use by an entity to raise the fund where an entity needs to pay the principal amount taken by a business from its lenders along with the coupon interest rate attached with the debentures issued by a business as this will reflect as a liability in the financial statements of the company. On another hand, equity shares raised by the company will show as equity in its financial statements as the equity shareholders will become the owners of the company and also possess a share in the firm by getting voting rights in accordance with the amount share held in an entity. 

Human Resources

The last type of resource which also plays a significant role in an entity is the information resources which an entity required before crafting any strategy for generating fruitful results for an entity. An entity requires information about it existing performance by assessing its overall financial performance with the help of the preparation of the financial statements and all the financial ratios (Su and Hildreth, 2018). Important information used by the firm about the existing or the potential market competition which helps in forming a novel and unique strategies to curb the current competition and also to attract the customers towards its products (Ghobakhloo and Azar, 2018). Sainsbury tries to search the information about its competitors such as Tesco and Adi about its existing product’s prices and then create its product catalogue to bring the attention of loss of its buyers. A marketing manager of Sainsbury will seek information about the population of the area in which the firm has located its supermarket to know the interest about the customers to offer quality oriented services to all the users.

As a retailer, Sainsbury will use budgeting method for the planning and the resource allocation of all these resources mentioned above. Identifying and selecting of the resource in an entity is not enough as allocation on the same play a significant role as this helps on accomplishing all the goals and the objectives of an entity within a short span of time. An entity prepares the budget to keep track of all its resources used in a business. The expenses and the income earned by Sainsbury can track by preparing budgets to know the ability of an enterprise in producing the overall results (Thanuskodi and Kalyani, 2018). Different kinds of budgets prepared by an entity such as sales, purchases, expenses, master budget, cash budget in fulfilling various needs and the expectations of its business. The results of the budgets are compared with the standard criteria’s develops by the firm to make the corrective action when the actual result is less than the standard returns and also to know about the deficiency incurred in a business.

It is essential to know the consequences of meeting the strategic objectives of business due to inadequate resources available with an enterprise. When Sainsbury requires human resources for the vacant post in the firm will affect the firm badly as the strategic aims, and the objectives of the firm will not get achieved with on a stipulated deadline as the firm did not find the suitable candidate according to the current requirement (Kuroki, Hirose and Motokawa, 2018). Due to inadequate resources identified by the firm will show its inability in searching for different candidates as their motive is to select the best suitable candidate for the current enterprise (Gupta and et al., 2018). This action will bring down the image of Sainsbury in the external market as investors will not invest in an enterprise that is not able to meet its goals as compared to all its rivals existing in a similar line of business. 

Financial Resources

Assessing of the financial information will help in determining the actual picture of Sainsbury by presenting the financial position of an entity as against to its competitors in the retail industry. It is essential to know the position of an entity in the UK retail industry before adopting any opportunity by testing the calibre of the firm to know its overall importance. A researcher will find different sources of collecting monetary information reflecting the efficiency or deficiency of the firm (Miller, 2018). The standard set of financial statements prepared by every entity an also by Sainsbury includes an income statement, statement of financial position, cash flow statement and changes in equity statement. All these statements play an integral role in showcasing the increasing or declining performance of Sainsbury due to both internal as well as the external stakeholders affecting the performance of the firm (Sani, Amboningtyas and Yulianeu, 2018).

Income statement depicts the overall profitability earned by an entity within a particular time period includes three criteria’s such as gross profit, operating profit and finally the net profit earned by a firm. Gross profit shows the raw profit earned by Sainsbury by just excluding the amount of cost of goods sold to know the burden of cost on the earning capacity of the business or not (Al-Malkawi and Pillai, 2018). Operating profit emphasizes on all the operating costs such as wages, salary, and rent of the premises payable by an entity whose effect is shown on the entire earnings. Net profit is a profit determined after deducting all the expenses and most important deducting the taxation to analyze its burden on it (Laitinen, 2018).

Balance sheet specifies the assets and the liabilities which need to be balanced at the end of the year to maintain the financial stability in business as fluctuating balance will result into the excessive burden of costs on an entity.

Cash flow statement includes the cash inflow in the business and outflow from the business to know the performance of Sainsbury to meet its financial difficulties within a short span of time or not.

Particulars	Formula	2016	2017
Sales		23506	26224
GP		1634	1855
GP ratio	GP/Net sales*100	6.95%	7.07%
Operating Profit	707	642
Operating profit ratio	Operating Profit/Net sales*100	3.01%	2.45%
Net Profit	471	377
NP ratio	Net profit/Net sales*100	2.00%	1.44%
Liquidity Ratios
Current assets	4444	6312
Current liabilities	6724	8573
Current ratio	Current assets/Current liabilities	0.66	0.74
Total assets	16973	19737
Asset Turnover	Sales/Total assets	1.38	1.33
Debt		2053	625
Equity		6375	6872
Debt to equity ratio	Debt/equity	0.32	0.09

(Data Source: Sainsbury PLC, 2017)

Gross profit shows the imposition of the cost of goods sold in an entity when the sale amount is not sufficient to meet the overall cost incurred by an entity. In the above column chart, the performance of Sainsbury is increasing from 2016 to 2017 as in comparison with the costs of goods sold; the sales and the revenue earned by an entity are higher to meet all the existing costs incurred.

Information Resources

It is recommended to Sainsbury firm to maintain this position by creating a tracking system of inventories to keep a record all the inventories purchases by an entity as per the requirement by using just in time inventory system to purchase inventory only when it’s required.

Declining position is reflected in the above chart depicts the deficiency lies in Sainsbury as its operating costs are higher than its earnings. This position occurs when the operating costs exceed the operating profits.

It is suggested to an entity to adopt expenses regulation system to pass transaction above the limit of some amount need to enclose the initials of the higher authority.

Decreasing amount of net profit shows the overall burden of taxation imposed on Sainsbury will get decreased by taking tax deductions.

Sainsbury is suggested to take taxation advice from the tax consultants to reduce its tax amount.

Current ratio tests the liquidity of the business and also to test the short-term solvency of Sainsbury from one period to another. The firm’s liquidity has increased from 2016 to 2017 due to higher current assets held by an entity as compared to the overall amount of current liability.

It is recommended to Sainsbury to invest the increasing amount of cash in various investment schemes to generate returns on it rather than savings the same in the business entity.

Asset turnover shows the utilization of all the assets in generating sales and the revenue in an entity. Above figure shown in the chart is worst as the performance of an entity is decreasing.

It is suggested to Sainsbury to keep track of all the assets of an entity to utilize the same in an entity in generating higher results for the business.

This chart shows the burden of debt on an entity as compared to the equity component held in a business whose result is clearly visible in the growth of an entity from one period to another.

It is suggested to an entity to decrease the amount of debt held by a firm by increasing the income sources to generate cash to eliminate the excessive debt in the capital structure of a business.

Sainsbury has both tangible as well as intangible assets held in its business and also this information is shown in the balance sheet of an entity which reflects the overall financial position of an entity within a specific period of time (Wang, Hong,  Kafouros and Wright, 2018). Tangible resources are the resources which can be seen and touched, and on another hand, intangible resources cannot be seen and touch as its presence can be felt by an individual.

Sainsbury’s tangible resources include land ad plant, equipment, and property which held for the long-term period in an entity on which an entity charges depreciation according to the diminution of the value of the plant, property, and machines from one period to another.

Intangible resources of the firm include goodwill which shows the image of the business in the external market as various rational actors play an integral role in inducing or suppressing the overall performance of an entity (Liu and Liu, 2018). Another kind of intangible assets included in the business of Sainsbury includes intellectual property resources which are important in safeguarding it from all other competitor’s of the business in the current market. It includes copyright and trademark rights taken by Sainsbury for its business and logo and all other products launched by the firm to protect it from imitating by its users.

 For monitoring of these resources used in the Sainsbury, it is essential to use an appropriate measure to tests the capability of an entity. Benchmarking technique will use by Sainsbury to improve its overall performance from one period to another. By using this technique, Sainsbury can judge its actual performance by comparing it with the best practices of the overall industry say for example comparing the performance of Tesco as they capture the overall market by getting the first position on the market.

Cost plays an integral role in an entity as it is important to know the number of overall costs incurred by an entity to include the same in the pricing strategies created by a firm. There are two kinds of costs such as fixed as well as a variable cost which will include in the product’s prices (Gonçalves, Gaio and Silva, 2018). Fixed costs remain the same without getting affected by the production of the business. On another hand, variable costs are directly proportionate to the volume of production as with zero level of production there is no variable cost.

Sainsbury follows cost-plus pricing and competitive pricing strategies for all of its products to earn a profit and at the same time attract a crowd of customers towards its quality oriented services as compared to their rivals (Jorgensen, Lee and Oh, 2018). It is suggested to Sainsbury to reduce their margin in the peak season to capture the market of their rivals.

Two kinds of costing available out of which an entity will consider the best suitable mode such as absorption costing as well as the marginal costing.  Absorption costing is also known as full costing in which both the fixed as well as variable costing is consider while crafting the pricing strategies to cover the overall  cost complexities of an entity. Marginal costing only considers the variable costing by ignoring the fixed costs which are an incomplete method of costing (Gonçalves, Gaio and Silva, 2018). It is recommended to Sainsbury to select Absorption costing method which will include all the costs incurred by an entity to craft the pricing strategies.

Investment appraisals aim to assess the project viability, portfolio or procedure decisions and the generated value. In terms of business, the main aim of investment appraisals is to have value upon benefits for justifying the costs. It is significant to assess the investment benefits in financial context (Gotze, Northcott and Schuster, 2016). The major investment appraisals techniques that can be used by ABC Company are accounting rate of return, net present value and payback period.

Accounting rate of return: This type of investment appraisals makes comparisons of profits that the company is expecting to earn from an investment to the invested among. It is generally gauged as the net annual profit companies expects on the working life of the investment project, made comparison of the same with the net invested capital amount. Further, this capital investment technique makes a comparison of the profits which can be gained by a proposed project to the initial investment capital amount that would be needed for the cited project (Götze, Northcott and Schuster, 2015). Projects having the capacity to earn higher return rate are given more priority over the lower return rate. ARR is said to be a non-discounted type of investment appraisals, and it does not consider the engaged time value of money.

Net Present Value: NPV capital investment appraisal evaluates the cash inflows, if or if not extra or less, after the satisfaction of general financial commitments (Baum and Crosby, 2014). All the capital investment appraisals are having the same goal of driving towards an affirmative NPV, it is a calculation based on mathematics engaged with net cash flow at a specified period of time at discounted rate simultaneously that is initial capital outflows (Žižlavský, 2014). Therefore, there is an opposite relative relationship among discounted rate and net present value. Moreover, a higher discounted rate can make a reduction in NPV of capital, while a higher interest rate can make increment in the discounted rates over time and most of the capital investment appraisals are aware of the same increment.

Payback period: This technique of capital investment appraisals is an easy technique to assess an investment by the time period in terms of length which will be required to repay the same. It is generally a non-payment technique for small-scale business and gives more consideration of cash flow rather than profits.  This technique is based on the time that would be considered to obtain the initial investment by the company. Payback period is considered as the easiest means, projects having short-term payback are generally favoured for investment while compared to those with long-term payback period.

Equity finance is the renowned financial source for a company to meet its long-term needs, as the capital is raised by business on an internal basis. By this, the company is able to save the cost of interests, with the careful planning for equity finance; the company can ensure business growth and expansion. This source of finance can be obtained easily, leading to higher potential growth while a continuous flow of interest of equity financers (Barton and Wiseman, 2014). The major sources for equity financing are initial public offering, venture capital, institutional investors, corporate investors and retained earnings.

Another option for long-term financing is debt financing, in this financial source business lends money from lenders at an interest which is fixed for a fixed period of time. Major sources of debt financing are trade credit, loans, instalment purchase, bonds, insurance companies and lenders based on assets (Huang, Ritter and Zhang, 2016). In this financial source, ownership is free of dilution, while the business is offered a leverage benefit. The borrowed funds costs are also low, as it is a deductible expenditure.

ABC Company can make use of bank overdraft and credit from suppliers as Short-term source of finance, and the same are enumerated as below:

Bank overdraft:  A bank overdraft is a credit extension from a borrowing institution occurred when the account is reached at nil position. Overdraft refers to that bank facility which allows business to lend a fixed amount of money (McGuinness and Hogan, 2016). An overdraft financing is offered when firms do transactions from their current account of business surpassing the accessible cash balance. This facility of over drafting allows businesses to acquire short-term financing. Bank overdraft is a common means to finance small as well as medium scale entities, and are sound financial sources for business having financial requirements on the fluctuated basis (Lee, Sameen and Cowling, 2015).

Credit from suppliers: Trade credit is a significant external financial source to raise working capital. It is said to be the short-term credit expanded by good and services suppliers in a regular business source, to the business for improving their sales metrics and targets (Detzer and et al., 2017). Trade credit takes place when the supplier of products and services enables the business to make payment of purchased products and services at the later basis. Trade credit is one of the simplest and significant financial sources to fund short-term financial objective of business. It is a short-term financial source that is comparatively easy to arrange and set-up (Foley and Manova, 2015).

Statement showing Cash Flows of the concern if the investment is made in the US
							(In GBP)
Particulars	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Avg Spot Rate	2.1	2.1	2.2	2.3	2.1	2.25	2.5
Expected Revenue (In USD)	0	700000.00	700000.00	700000.00	700000.00	700000.00	700000.00
Expected Revenue (In GBP)	0	333333.33	318181.82	304347.83	333333.33	311111.11	280000.00
Estimated running Expenses (In GBP)	0	210000.00	210000.00	210000.00	210000.00	210000.00	210000.00
Cash Flow before deducting Approval Fee	0	123333.33	108181.82	94347.83	123333.33	101111.11	70000.00
Discounting Factor @ 10%	1	0.909	0.826	0.751	0.683	0.621	0.564
Present Value of Cash Flows	0	112110.00	89358.18	70855.22	84236.67	62790.00	39480.00
Advance Approval Fee (In GBP)	22000.00	22000.00	22000.00	22000.00	22000.00	22000.00	0.00
Discounting Factor @ 10%	1	0.909	0.826	0.751	0.683	0.621	0
Present Value of Approval Fees	22000	19998.00	18172.00	16522.00	15026.00	13662.00	0.00
Net Present Value if Investment is done in US	-22000	92112.00	71186.18	54333.22	69210.67	49128.00	39480.00
Total Net Present Value	353450.07

Particulars	Year 0	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Avg Spot Rate	1.80	1.8	1.9	2	2.1	1.95	1.9
Expected Revenue (In Euro)	0.00	450000.00	450000.00	450000.00	450000.00	450000.00	450000.00
Expected Revenue (In GBP)	0.00	250000.00	236842.11	225000.00	214285.71	230769.23	236842.11
Estimated running Expenses (In GBP)	0.00	190000.00	190000.00	190000.00	190000.00	190000.00	190000.00
Cash Flow before deducting Approval Fee	0.00	60000.00	46842.11	35000.00	24285.71	40769.23	46842.11
Discounting Factor @ 10%	1.00	0.909	0.826	0.751	0.683	0.621	0.564
Present Value of Cash Flows	0.00	54540.00	38691.58	26285.00	16587.14	25317.69	26418.95
Advance Approval Fee (In GBP)	25000.00	25000.00	25000.00	25000.00	25000.00	25000.00	0.00
Discounting Factor @ 10%	1.00	0.909	0.826	0.751	0.683	0.621	0
Present Value of Approval Fees	25000.00	22725	20650	18775	17075	15525	0
Present Value if Investment is done in France	-25000.00	31815.00	18041.58	7510.00	-487.86	9792.69	26418.95
Total Net Present Value	68090.36
Royalty Fee Payment	25000.00
Net Present Value if Investment is done in France	43090.36

Statement showing Cash Flows of the concern if the investment is made in Switzerland
						(In GBP)
Particulars	Year 1	Year 2	Year 3	Year 4	Year 5	Year 6
Avg Spot Rate	10	12	14	12	13	14
Expected Revenue (In CHF)	380000.00	380000.00	380000.00	380000.00	380000.00	380000.00
Expected Revenue (In GBP)	38000.00	31666.67	27142.86	31666.67	29230.77	27142.86
Estimated running Expenses (In GBP)	200000.00	200000.00	200000.00	200000.00	200000.00	200000.00
Licensing Fee	30000.00	30000.00	30000.00	30000.00	30000.00	30000.00
Inspection Cost	0.00	0.00	70000.00	0.00	0.00	70000.00
Net Cash Flows	-192000.00	-198333.33	-272857.14	-198333.33	-200769.23	-272857.14
Discounting Factor @ 10%	0.909	0.826	0.751	0.683	0.621	0.564
Present Value of Cash Flows	-174528.00	-163823.33	-204915.71	-135461.67	-124677.69	-153891.43
Total Net Present Value	-957297.84

Statement showing NPV’s in Different Countries
Sr. No.	Particulars	Amount in GBP
1	US	353450.07
2	France	43090.36
3	Switzerland	-957297.84

International expansion should be done in the USA as this project is expected to provide highest net present value to be a company.

In a situation where a firm makes decisions to get involved in global financing activities, it bears further risks as well as opportunities. These major risks are related with the business involved in international finance inclusive of political risks and foreign exchange risk. Sometimes, these risks might form complexity to manage ongoing and relevant revenue. Further, the organization involved in international finance operations can have a higher tendency of uncertainty within their revenues. With unstable and unforeseeable revenue stream, it will be difficult to conduct business operations smoothly (Titman, Keown and Martin, 2017).  Apart from the negative factors, international business can capture opportunities for low costs for resources and higher lucrative market.

A business plan for risk management is engaged in identification, assessment and development of business strategies to effectively manage risks. It is considered as an integral element for any type of business plan; this will help the business in preparing and addressing certain risk exposures related to economic recession (Burtonshaw-Gunn, 2017). Methods and ways are present by which a firm can cope with these risks exposures, the distinct techniques for monitoring and recording risks are presented as below:  

Risk management based on capital: For maintaining an offset among risk exposures and returns while ensuring the effectiveness of business from an entire perspective, ABC is required to use the risk management method based on capital. In this technique, risk capital is measured by the company on the value at risk basis, as an ideal measure of operational risk, market risk and credit risk, while considering the related characteristics as well as the business operations of ABC Company (Com and II, 2016). Further, the company is required to assign capital in an appropriate manner to every unit to take the entire exposure to several risks present in the range of resources that is capital. In terms of market risk and credit risk, the company must establish maximal limits of risks capital, which can make an indication on the maximal risks that might be considered at that time period, along with the stress level set in the business plan. Moreover, for operational risk, the company must assign risk capital as a whole, while setting entire assignments of risk capital in the capital structure (Chan and Wong, 2015). Further, the limits of risk capital are categorized into plans or guidelines for every business inclusive of loss limits. Hence, by observing carefully the loss limits and other related factors, ABC must manage the operations of the business as a large.

Stress testing: By considering the volatility in a business environment, the use of stress testing is a very important technique to analyze and gauge the adverse impacts of situations like economic downturn and market instability on the financial conditions and business operations of financial institutions in immensely important (McNeil, Frey and Embrechts, 2015).  While creating a management plan as per the requirement, ABC is required to form certain scenarios like global economic slowdown and perform a stress testing  in order to assess the expected financial influence on the business, so that action and plans can be prepared to address stressful situations. Furthermore, ABC must put a system that allows flexible and dynamic control over operation during a sudden change in the business environment.

ABC must also conduct frequent meetings with the business, reliable departments and risk management units for the aim to reach the common goals and understanding of changing the environment, with proper discussions on stress situation creating a direct impact on business activities. Along with this, the company must perform a regular review and get responses during the emergence of stress situations. The implementation process of stress testing is categorized into two procedures; scenario establishment and assessment and analyses of financial effects (Bromiley and et al., 2015).  By considering the economic environment and international trends at the present time, largely potential scenarios on the indicators of macro economy inclusive of the foreign exchange rate, GDP, interest rate and price are established. Based on the macroeconomic effect of every scenario been established on several distinct financial aspects, ABC must analyse and assess the effect of financial aspects on common equity.

Conclusion

The present study shows that it is essential for corporate entities to conduct financial planning for ensuring availability of funds at the time of requirements while considering effective strategies to employ funds in a viable manner.  It will help in ensuring that the arrangements of funds are made in an appropriate capital framework.  It is summarized from the above assignment that Sainsbury chooses absorption costing method costing in crafting its pricing strategies as this is the most suitable technique as compared to all other technique. The financial performance of Sainsbury is clearly visible in this report as its profitability is declining from one period to another which depicts its lack of efforts in improving its performance. Except for current ratio of the Sainsbury, its asset turnover is also declining which is fruitful for an entity which requires improvement. Further, companies are required to apply appropriate investment appraisal techniques to make viable financial decisions. For international expansion company is required to consider risk mitigation strategies to be proactive for future contingencies. 

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