Recycle plc is a listed company which recycles toxic chemical waste products. The waste products are sent to Recycle plc from all around the world. You are an accountant (not employed by Recycle plc) who is accustomed to providing advice concerning the performance of companies, based on the data which is available from their published financial statements. Extracts from the financial statements of Recycle plc for the two years ended 30 September 1997 are given below:

You ascertain that depreciation of tangible fixed assets for the year ended 30 September 1997 was \(£ 1200\) million. Disposals of fixed assets during the year ended 30 September 1997 were negligible.
You are approached by two individuals.
A is a private investor who is considering purchasing shares in Recycle plc. A considers that Recycle plc has performed well in 1997 compared with 1996 because turnover has risen and the dividend to shareholders has been maintained.
\(B\) is resident in the area immediately surrounding the premises of Recycle plc and is interested in the contribution, made by Recycle plc to the general well-being of the com-

munity. B is also concerned about the potential environmental effect of the recycling of chemical waste. B is uncertain how the published financial statements of Recycle plc might be of assistance in addressing social and environmental matters.
\section*{Requirements}

(a) Write a report to A which analyses the financial performance of Recycle plc over the two years ended 30 September 1997.
Assume inflation is negligible.
Your report should specifically refer to the observations made by A concerning the performance of Recycle plc.
( 25 marks)

(b) Briefly discuss whether published financial statements satisfy the information needs of B.
You should consider published financial statements in general, not just the extracts which are provided in this question.

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Profit and loss accounts - year ended 30 September 1997 m 1996 m Turnover 3.000 2800 Cost of sales (1600) (1300) Gross profit 1400 1500 Other operating expenses (800) (600) Operating profit 600 Interest payable (200) 900 (100) Profit before taxation 400 800 Taxation (150) (250) Profit after taxation 250 Proposed dividend (200) 550 (200) Retained profit 50 350 Retained profit b/fwd 900 550 Retained profit c/fwd 950 900