Of these two, the best indicators of liquidity, when trying to show trends, are the Current Ratio. A current ratio of 2 is considered "adequate liquidity". Tesco has Current Ratio numbers for 2006 and 2005 were 0.52 and 0.7 and Morrison has the current ratio of 0.4 and 0.6 for the FY year 2006 and 2005. Each sets of these ratio figures indicate that Tesco would possibility have some difficulties in meeting its financial obligations, so these numbers will be important to watch closely in the future. On the other hand Morrison has also a bad current ratio it means in the company could have problems in paying their debts.
Working Capital is more a measure of cash flow than a ratio. The result of this calculation must be a positive number. Tesco has working capital of m 165 for the year 2006 and for the year 2005 is m 24 which is a good sign for the company. The liquidity of the company is not so good and they have to focus on it. (M C Shukla, 1999)
The return on assets of the company shows how well the company is in generating revenues from their assets. ...Show more