9.18 The directors of the Cuttlefish Biscuit Corporation Limited have calculated a set of key accounting ratios for their biscuit manufacturing business. These are set out in the following table, together with industry averages provided by the National Biscuit Manufacturers’ Federation.

Cuttlefish Industry average Gross profit margin 32.3% 31.6%

Operating profit margin 16.2% 17.1%

Trade receivables turnover (days) 36.0 38.4 Inventory turnover (days) 48.7 47.4 Trade payables 31.4 39.6 Gearing (debt/equity) 18.7% 29.4%

Write a brief report to the directors of Cuttlefish comparing the ratios for their company with the industry averages. Identify any areas in which you think they could make improvements.