Strategic Financial Analysis Report: MOD000983 Coursework

This report provides a strategic financial analysis of Wolsey and Tate & Lyle, focusing on ratio analysis to evaluate their financial performance. The analysis covers liquidity ratios (current and quick), profitability ratios (gross margin, net profit, and return on capital employed), and debt-equity ratios over a three-year period (2017-2019). The report compares the two companies' performance, highlighting their strengths and weaknesses in terms of their ability to manage current liabilities, generate profits, and utilize capital. The analysis reveals that Tate & Lyle generally demonstrates a stronger financial position, particularly in profitability, while Wolsey shows improvement in liquidity. The report also examines the debt-equity ratios of both companies, assessing their capital structure and financial leverage. The findings are supported by references to relevant academic sources.

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

the other hand, Tate & Lyle plc. is able to generate 19 percent in 2017, 19 percent in 2018
and 12 percent in 2019 (Rakićević et al., 2016).
Debt- equity ratio-
The capital proportion of the companies have not been maintained with the ideal ratio of
debt-equity ratio 2:1. Wolsey maintains more equity in total capital invested whereas debt
proportion is quite minimum such as .24 in 2017, .38 in 2018, and .53 in 2019. Tate & Lyle
plc. Has debt proportion of .44 in 2017, .40 in 2018, and .24 in 2019 (Guo, and Wang, 2019).

References
Chowdhury, M., 2018. Performance Measures through Financial Ratio Analysis of (Doctoral
dissertation, Daffodil International University).
Guo, L. and Wang, Z., 2019. Ratio Analysis of J Sainsbury plc Financial Performance
between 2015 and 2018 in Comparison with Tesco and Morrisons. American Journal of
Industrial and Business Management, 9, pp.325-341.
Rakićević, A., Milošević, P., Petrović, B. and Radojević, D.G., 2016. DuPont financial ratio
analysis using logical aggregation. In Soft computing applications (pp. 727-739). Springer,
Cham.
Rodrigues, L. and Rodrigues, L., 2018. Economic-financial performance of the Brazilian
sugarcane energy industry: An empirical evaluation using financial ratio, cluster, and
discriminant analysis. Biomass and bioenergy, 108, pp.289-296.