Now imagine that you work for the bank that provides short-term finance to Ted Baker PLC. Your manager asks you to conduct a financial analysis to help the bank monitor the lending risks and returns.

Required Calculate the following ratios for 2007/08 and 2006/07 showing all your workings.

In each case, explain the purpose of the ratio and interpret your results. Include brief comments on any change in the lending risk over the period.

(a) Current ratio

(b) Acid test

(c) Inventory holding period

(d) Trade receivables collection period

(e) Trade payables payment period

(f) Debt/equity

(g) Interest cover In addition, describe the limitations of the analysis you have conducted.