Business Performance: Evaluation of T plc's Financial Ratios and Recommendations

Business Performance

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Evaluation of performance of T plc............................................................................................3
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
For the success of the company, it is essential to evaluate the performance of business
continuously. The reason underlying this fact is that business runs for earning profit and in case
performance will not be good then it will affect the overall business. the present report is based
on company T plc which is a retailer. The current report will outline a discussion relating to
various ratios and some recommendation for improvement.
MAIN BODY
Evaluation of performance of T plc
Profitability
With help of the profitability ratio it is clear that company is performing very well as
compared to past performance and industry average as well. With respect to gross profit margin
the industry was having 37 % as average but company is having more than this in every year that
is from 2018 – 2020. Moreover, with help of the net profit margin as well it is clear that
company is performing good in comparison to the industry standard. The average of retail
industry outlines the net profit margin of 4 but company is having more than 4 in every year.
Besides this, the ROCE also outlines better performance of the company. The major reason
underlying this fact is that when the company is providing good return to the shareholders then
they will invest more (Perszyk and et.al., 2021). Hence, as a result of this performance of
company will improve in better and effective manner. Thus, with the analysis of the profitability
it is clear that company is outperforming then the industry standards as well. This simply implies
that profitability of the company is very good and T plc need to maintain and sustain this
profitability level.
Liquidity
The liquidity outlines the ability of company to convert its liquid asset into cash as and
when there is a requirement. With the analysis of the liquidity ratios of T plc it was evident that
liquidity positon of the company has reduced a little as compared to past years. The industry
average in current ratio highlights 1.05: 1 whereas 2020 figures highlight the current ratio of
0.8:1. This simply means that as per industry for paying every single current asset there is 1.05
times current asset (Choi and et.al., 2018). On the other side, in the latest year the company is
having only 0.85 times current asset for every current liability payment which is not good. In