# Ahold Vs. Tesco – Analyzing Performance Harvard Case Solution & Analysis

## Ahold Vs. Tesco – Analyzing Performance Case Study Solution

Who is the decision maker in the case, and what business decision is he/she faced with that good FSA/Valuation will help improve the quality of? (2 pts)

The decision maker in this case is Mary King, the European equity analyst and the potential investment opportunity within the two different retail companies, Tesco and Ahold. Both these companies had presented Mary with a number of different challenges. Mary Kind had easily collected the financial and business strategy data of both the companies and she evaluated the performance of both the companies on the basis of the financials and computing the return on equity of both the companies.

The performance based on the return on equity has been similar for both the companies and then she moved ahead to measure the performance by calculating the basic return on equity decomposed metric. The performance of the Ahold stock had been much better as compared to the Tesco stock and Tesco also had large amount of cash on its balance sheet and thus had low levels of the net debt.

Therefore, the key decision to make now is to determine that whether the operating performance of both the companies is a result of financial leverage or operating profitability. To do this, the modified DuPont Decomposition would be used. This would be a good FSA for Mary who is the key decision maker in the case for recommending one of the two companies for investment.

Question 2

In a neatly constructed Table, briefly compare and contrast Ahold’s and Tesco’s key firm characteristics and business models as of the time of the case. (2 pts)

Question 3

Using the Basic DuPont ROE decompositions provided in Exhibit 6, what do you conclude about the profitability of each company in 2009-2011? (4 pts)

Using the Basic DuPont ROE decompositions in exhibit 6 for the year 2009 and 2011 and based on the excel financials we can see that the average return on equity of Ahold and Tesco are both same. They both have an average return on equity of 15.9% as shown in the table below......................

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