Bill was interested to see the results of the analysis of the competitor's accounts and he called in at the office just as John and Azina were discussing their findings. He listened for a while and then commented that there were other features of the competitors accounts that they needed to be aware of. He listed the following points: (i) The depreciation rates for the competitor were different to those of Bale and Cowley. According to the notes Rowe and Davies used the straight line method but with the following rates: Buildings 0% Fixtures and fittings 12.5% Office equipment 12.5% Computer equipment Vehicles 25% 12.5%

(ii) The fixed assets were all at cost not valuation, but they should remember that most of the property had been purchased when the company was formed. This was in the late 1970s and it was therefore likely that the book value was much lower than it would be at current prices even with the fall in the property market. A figure of 1 million was a more likely comparison. (iii) The bad debt provision is only 1% of debtors. (iv) Directors' salaries were very high. The dividends in contrast did not exist. The directors had apparently decided to take their earnings in the form of salary rather than dividends on their shareholdings. (v) The debtors include an amount of 123000 relating to an advertisement campaign which had been run six months earlier but which the directors believed would still be benefiting the company and should not be written off against profit in one year. Required Consider the effect of the points raised by Bill on the report you prepared in the chapter. Rework any ratios you consider would have changed to support your comments.