G ple isang holding company with subsidiaries that have diversified interests. G plc’s board of directors is interested in the group acquiring a subsidiary in the machine tool manufacturing sector. Two companies have been identified as potential acquisitio and B Ltd. Summaries of both these companies’ accounts are shown below:

You are required to prepare a report for the board of G plc assessing the financial performance and position of A Ltd and B Ltd. Your report should be prepared in the context of G plc’s interests in these two companies and should be illustrated with financial ratios where appropriate. You should state any assumptions you make as well as any limitations of your analysis.

Transcribed Image Text:

Profit and Loss Accounts for the year ended 30 April 19X8 A Ltd B Ltd 000 000 Turnover Cost of goods sold Opening stock 985 560 150 145 Materials Labour Factory overheads Depreciation Closing stock 255 136 160 125 205 111 35 20 (155) (140) 650 397 Gross profit 335 163 Selling and administration expenses Interest (124) (75) (35) (10) Profit before taxation 176 78 Taxation 65 25 Profit after taxation 111 53 Balance Sheets at 30 April 19X8