The financial statements for Harridges Ltd are given below for the two years ended 31 December for each of the last two years. Harridges Limited operates a department store in the centre of a small town.

Dividends were paid on ordinary shares of £65,000 and £75,000 in respect of the year before last and last year, respectively.
Required:

(a) Choose and calculate eight ratios that would be helpful in assessing the performance of Harridges Ltd. Use end-of-year values and calculate ratios for both years.

(b) Using the ratios calculated ‘in (a) and any others you consider helpful, comment on the business’s performance from the viewpoint of a prospective purchaser of a majority of shares.

Transcribed Image Text:

Harridges Ltd Income statement for the years ended 31 December Last year Sales revenue Cost of sales Gross profit Wages and salaries Overheads Depreciation Year before last 000 000 2,600 3,500 (1,560) (2,350) 1,040 1,150 (320) (350) (260) (200) (150) (250) 310 Operating profit Interest payable Profit before taxation Taxation 260 (105) (50) 350 (50) 300 (125) Profit for the year 155 175