Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for each of the last two years are as follows:

Required:

(a) Calculate the following financial ratios for both years (using year-end figures for statement of financial position items):
(i) return on capital employed (ii) operating profit margin (iii) gross profit margin (iv) current ratio (v) acid test ratio (vi) settlement period for trade receivables (vii) settlement period for trade payables (viii) inventories turnover period.

(b) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.

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Revenue Cost of sales Income statements for the year ended 31 December Gross profit Operating expenses Depreciation Operating profit Interest Profit before taxation Taxation Year before last Last year 000 000 1,180 1,200 (680) (750) 500 450 (200) (208) (66) (75) 234 (-) 234 167 (8) 159 (80) (48) Profit for the year 154 111 Statements of financial position as at 31 December