Ratio analysis Liquidity ratio

Ratio analysis
Liquidity ratio-
The ideal ratio for current ratio is 2:1. Wolsey maintains a ratio of 1.45 in 2017, 1.64 in 2018,
and 1.72 in 2019. Undoubtedly, the company has been increasing its efficiency to increase
the ability to pay off the current liability obligations (debts) with current assets. Therefore,
the company does not hold appropriate. On the other hand, Tate & Lyle plc. maintains a ratio
of 2.1 in 2017, 2.31 in 2018 and 1.61 in 2019. Tate & Lyle plc. has already been maintaining
appropriate level of current ratio in 2017 and 2018. However, it has dropped in 2019 because
of increase in current liabilities. Between both the companies, Tate & Lyle plc. has
appropriate liquidity position whereas; Wolsey does not have appropriate liquidity position
(Rodrigues, and Rodrigues, 2018).
The ideal ratio for Quick ratio is 1.5:1. Wolsey maintains a ratio of 1.08 in 2017, 1.02 in
2018, and 1.05 in 2019. On the other hand, Tate & Lyle plc. maintains a ratio of 1.2 in 2017,
1.27 in 2018 and 0.97 in 2019.Wolsey is more efficient while maintaining its absolute liquid
ratio.
Profitability ratios-
The ideal gross margin ratio is estimated as 15-20 percent. Wolsey maintains a ratio of 29
percent for all three years 2017, 2018 and 2019. On the other hand, Tate & Lyle plc.
generates a ratio of 38 percent, 40 percent, and 41 percent in 2017, 2018, and 2019. Tate &
Lyle plc performs appropriately well as compared to Wolsey (Chowdhury, 2018). Net profit
is quite low for both the organisations. This signifies indirect expenses have to be controlled
by companies so that distributable income can be increased. Return on capital employed is
nearly 23 percent in 2017, 31 percent in 2018, and 25 percent in 2019 in case of Wolsey. On