Money Management

Paper instructions:
Please read and check the below link is important before you writ this assignment:
An enlightening article on this matter is provided by Nobel Prize Prof. William Sharpe
please read this article before writing your final assignment !
P.S. websites used in this assignment:
My Assignment Pedagogical aim and expectations:
1. To critically evaluate the financial instruments available for investments
2. To analyse and evaluate the role and influence of the main actors in financial markets, both private and public.
3. To analyse the link between macro-economic forces and financial markets
4. To evaluate the risk and reward of investment possibilities and develop an investment strategy and portfolio that demonstrates informed investment decisions

Running Head: FINANCE

Money Management
Kindly read  the mid-term assignment just to review the
Kind of the assignment and also the Morningstar website I used it in my assignment
To help you to finish the final assessement
Money Management

Financial planning has been considered as the important aspect of daily life, due to which an individual person easily enjoy their life. In financial planning, insurance plan is component that is not

developed only for person who passes away but also for person who survive. This shows that insurance plan is extremely important for every person because it covers risk of common person’s

life. Furthermore, this study would cover share analysis of two international companies i.e. Wal-Mart and Tesco Plc.

Calculations of Yearly Pension Prepared By Life Insurance Company
According to Khurana (2013), an insurance plan is defined as plan, due to which risk of person’s life is reduced. This shows that insurance plan provides coverage against insurable risk. Beside this,

proper insurance planning can help an individual to look at the possibility of getting wider coverage for the same amount of premium. Hence, it is proved that there is a large need of insurance

planning in the daily life of an individual whether that person belong to middle class or upper class (p. 37). According to data, a person has only EUR 500,000 in hand at the time of retirement.

Therefore EUR 500,000 is used to develop life insurance plan. If the retirement age of person is 65 years and person will want EUR 50,000 yearly, then person can easily enjoy insurance money

since 10 years. In the below stated situation, inflation rate is high, therefore, an interest rate of insurance company will be 5% only.

Below is the calculation and computation of insurance plan that would be developed by an insurance company. According to data, person has only EUR 500,000 saving amount on hand

at the time of retirement age. If person need EUR 25,000 per year, then the remaining balance after the end of 1st year will be EUR 468500. In this way, the ending balance of saving amount will be

zero after end of 17 years i.e. till 82 years.

Management of Wealth by Yourself
According to Fornero & Monticone (2011), an individual person can either use retirement amount in insurance plan or can save money in saving account. In this way, individual can easily earns 5%

profit from saving amount. The retirement amount of individual is € 500,000 while retirement age of person is 65 years. If person will enjoys benefit of 5% of saving amount then can easily spend

14 years after retirement age i.e. 79 years. The above stated situation will occur if inflation rate will be low. In case of low inflation, bank and other institutions provides saving benefits of 5%.

Conversely, in case of high inflation, the saving rate will be reduced which in turn decrease the benefit of individual person (p. 550).

Below is the calculation and computation of retirement amount i.e. EUR 500,000. According to data, yearly expenditure of person is € 50,000. After deducting retirement amount of EUR 500,000

from yearly expenditure of € 50,000, the remaining yearly amount is EUR 450,000. If remaining amount of € 450,000 will be save in bank, then an individual will get saving amount of EUR 25,875. The

saving amount will be added in remaining amount than an individual will have EUR 475,875 amount in second year. After 14th years, an individual will have zero amounts in their account (Rooij el

at, 2012, p. 450).

Comparison of Two Plans
First plan has focused on insurance plan while second plan examined saving plan of an individual. According to insurance plan, an individual person will gain benefit of retirement money

till 17 years. In this way, insurance plan provides long term benefit as compare to saving plan. There are certain important variables that should be examined before developing an insurance plan

or saving. These variables are:
•    Inflation Rate – Inflation is the macroeconomic variable, due to which financial outcome of firm is changed. High inflation reduces benefits while low inflation increases economic activity

of firm. In case of high inflation, plan A should be chosen by individual while in case of low inflation, plan B should be chose.
•    Saving Rate of Bank – Saving rate put positive as well as negative impact on individual. Therefore, an individual develops different strategies in order to enhance retirement expenses.

Due to low inflation, bank will provide saving services at high rate. In this way, bank and customers enjoy long term advantages.
•    Retirement Age – Retirement age plays an important role in different plans developed by person. If person will die in the age of 75 years, then an individual can either choose plan B

while if an individual will survive till 85 years, then an individual have to choose plan A.
An individual should consider above three components before developing retirement plan for future life. Through effective use of retirement plan, an individual can expand successful life till 17

years (Card & Ransom, 2011, p. 230).

Share Analysis
2.1    Overview of Tesco Plc & Sainsbury Plc
Tesco is one of the leading retailers in United Kingdom with 2715 stores all around the globe. The firm was founded by Jack Cohen and by two key peoples i.e. Sir Terry and David. The firm exist in

almost four business units i.e. groceries, telecoms, financial services and consumer good. These business units increased revenue margin to £70.89 billion in 2013. The high revenue margin increase

net income of Tesco Plc to £124 million (Tesco Annual Report, 2013, p. 2).
Wal-Mart is operating their retail stores in different countries, in different formats which are according to the standards of that particular country.  In the United States of America, the retail

stores of Wal-Mart are in various formats, and those are supercenters, discount stores, neighborhood markets, and Sam’s Clubs.  Similarly in global arena, the company also operates in El

Salvador, Argentina, Canada, Chile, Brazil, China, Guatemala, Costa Rica, Honduras, Japan, Puerto Rico, Mexico, India, Nicaragua, and the United Kingdom. The company’s headquarter is located in

Bentonville, Arkansas. Nearly, the company employs 2.1 million people. However, the company is operating on a very lucrative scale in the international market, but still the company is facing

several risks, those includes market risk, commodity risk, foreign exchange risk and interest rate risk (Wal-Mart Annual Report, 2013, p. 5).

2.2    History of Tesco Plc & Wal-Mart
Wal-Mart is the largest retail store of United States of America; basically Wal-Mart runs its business with the single-business strategy in its mind. Since, the last three decades this strategy works

in the betterment of the company, and have able to maintain the growth and the comparable advantages of the company. These days’ customers are looking for convenience shopping, and they

suggest a broad alternative for their shopping experiences.  Thus it is very important for the company, which the management should think upon revising the strategies on the timely basis, and

characterizes their target market and should be able to cope up with the market troubles. However, Wal-Mart’s future will depend on how well the business manages its expansion plans (Wal-Mart

Annual Report, 2013, p. 5).

2.3    Analysis of External Data

Price Earnings Ratio is used to compare firm’s current share price with its per share earnings. The Price Earnings Ratio of Tesco Plc was 9.8 times and 26 times in 2012 and 2013. This means that

investor of Tesco Plc expect higher earnings growth form management in future. Conversely, Price Earnings Ratio of Wal-Mart was 14 times and 15.1 times in 2012 and 2013. Beside this, Price to

Book Ratio is used to compare stock market value to its book value. Price to Book Ratio of Tesco Plc was 1.6 and 1.8 times as comparing to Wal-Mart. Price to Book Ratio of Wal-Mart was 3.1

times and 3.5 times. According to Price Book Ratio, the stock value of Tesco Plc was undervalued as compare to Wal-Mart.
Similarly, dividend yield of Tesco Plc was 4.5 times and 4.8 times while dividend yield of Wal-Mart was 2.3 times and 2.5 times in 2012 and 2013. Price/Earnings Ratio, Price/Book Ratio, Price/Sales

Ratio, Price/Cash flow Ratio indicates that Tesco Plc is the best firm for investment and finance purposes (Calculation Shows in Excel Sheet).

2.4 Analysis of Internal Data
Profitability ratio is used to find management effectiveness with respect to sales volume, cost of sales, short term investment, and operating expenses and so on.  Gross profit margin of Tesco

Plc was 8.15% and 6.31% in 2012 and 2013. While operating profit margin of firm was 6.17% and 3.38% in 2012 and 2013. Firm earned 6.31% inform their core activities. Conversely, management of

Wal-Mart earned 24.87% from their core activities in 2013. However, the operating profit margin of Wal-Mart was low because of large amount of operating expenses.
Liquidity ratio is used to determine firm effectiveness with respect to meet their short term obligations. Wal-Mart has 0.83 current assets on hand while Tesco Plc has 0.63 current assets on hand.

Conversely, quick ratio of Tesco Plc was higher than Wal-Mart. In the last this study covers, debt to equity ratio, which was 60% and 54% for Tesco Plc and Wal-Mart. Management of Tesco Plc

took 60% debt as compare to equity. Comparably, management of Wal-Mart took 54% debt as compare to equity. Hence, it is proves that Tesco Plc is the best investment firm for investors

(Calculations Shows in Excel Sheet).
2.4 Analysis of Internal Data
Ratios    Tesco Plc    Wal-Mart
2012    2013    2012    2013
Gross Profit Margin    8.15    6.31    25.02    24.87
Operating Profit Margin    6.17    3.38    5.94    5.93
Current Ratio    0.67    0.69    0.88    0.83
Quick Ratio    0.37    0.41    0.2    0.2
Debt/Equity    0.56    0.6    0.66    0.54

According to data, an individual have to choose insurance plan as compare to Saving plan because of interest rate and inflation rate. Beside there are certain other variables that

should be considered before developing retirement plan. However, in share analysis, Tesco Plc is the best firm for investment purpose rather than Wal-Mart. This statement is proves from internal

and external analysis of Tesco Plc.


Annual report of Tesco Plc. (2013). Tesco PLC Annual Report and Financial Statements 2013. p. 2. Data Retrieved From: https://files.the-
Annual report of Wal-Mart. (2013). Wal-Mart Annual Report and Financial Statements 2013. p. 5. Data Retrieved From: http://c46b2bcc0db5865f5a76-
Card, D., & Ransom, M. (2011). Pension plan characteristics and framing effects in employee savings behavior. The Review of Economics and Statistics, 93(1), pp. 228-243. Data Retrieved From:
Draft of Share Analysis of Tesco Plc. Data Retrieved From:
Draft of Share Analysis of Wal-Mart. Data Retrieved From:
Fornero, E., & Monticone, C. (2011). Financial literacy and pension plan participation in Italy. Journal of Pension Economics and Finance, 10(04), pp. 547-564. Data Retrieved From:
Khurana, S. (2013). Relationship between Service Quality and Customer Satisfaction: An empirical study of Indian Life Insurance Industry. Journal of Research in Marketing, 1(2), pp. 35-42. Data

Retrieved From:
Khurana, S. (2013). Relationship between Service Quality and Customer Satisfaction: An empirical study of Indian Life Insurance Industry. Journal of Research in Marketing, 1(2), pp. 35-42. Data

Retrieved From:
Rooij, M., Lusardi, A., & Alessie, R. J. (2012). Financial Literacy, Retirement Planning and Household Wealth*. The Economic Journal, 122(560), pp. 449-478. Data Retrieved From: