Overall, it can be shown that Tesco generates more profit than Morrison by their higher OPM rates. However, Morrison generates more of their profit through the efficient use of their capital (see figure 2 in appendices). Therefore, Morrison is still a profitable company to continue investing in, as their high sales revenue to capital employed rate compensates for their low operating profit margin. This can be shown by:
Return on Capital Employed = Operating Profit Margin * Sales Revenue to Capital …show more content…
and Lintner, J. (1962) Bird-In-Hand Theory. Cited in: Brigham, E.F. and Daves, P.R. (2007) Intermediate Financial Management. 9th edn. U.S: Thomson South-Western [online] Available at: http://books.google.co.uk/books?id=6Qnt2UqEFEAC&pg=PT618&dq=Gordon+and+lintner+dividend+preference+theory&hl=en&sa=X&ei=Xh06UeiYG-iL7Abm4oCwDQ&ved=0CDgQ6AEwAQ [Accessed: 27 February, 2013]
Morrison plc. (2012) Annual Reports and Financial Statements 2011/2012. [online] Available at: http://www.studynet2.herts.ac.uk/crs/12/7BSP1109-0206.nsf/Teaching+Documents/06DA864FEC7E3E1780257AFA00521E8B/$FILE/Final-annual-report_2011_12.pdf [Accessed: 23 February, 2013]
Morrison plc. (2011) Annual Reports and Financial Statements 2010/2011. [online] Available at: http://www.morrisons.co.uk/Documents/Morrisons-Annual-Report-2011.pdf [Accessed: 23 February, 2013]
Morrison plc. (2010) Annual Reports and Financial Statements 2009/2010. [online] Available at: http://www.morrisons.co.uk/Corporate/2010/AnnualReport/download-centre/PDFs/full.pdf [Accessed: 23 February, 2013]
Moyer, R.C., McGuigan, J.R. and Kretlow, W.J. (2006) Contemporary Financial Management. 10th edn. U.S: Thomson South-Western [online] Available at: http://books.google.co.uk/books?id=ykcK3dX8DjQC&printsec=frontcover#v=onepage&q&f=false [Accessed: 28 February,