The following are the summarized trading and profit and loss accounts for the year 1984, and the balance sheets as at 31 December 1984, of A Ltd and Β Ltd:

Trading and Profit and Loss A/cs

A Ltd Ltd A Ltd Ltd Stock at 1.1.84 £'000 £'000 £Ό00 £'000 Stock at 1.1.84 96 16 Sales 720 720 Purchases 638 648 Stock at 720 31.12.84 104 24 Gross profit 90 80 824 744 824 744 General expenses 32 35 Gross profit 90 80 Net profit 58 45 Gross profit 90 80 90 80 Issued share capital 200 200 Fixed assets 256 215 Reserves 160 32 Stock 104 24 Profit and loss A/c 120 48 Debtors 80 48 Creditors 128 81 Bank 168 74 608 361 608 361 Required:

(a) Set out and complete the following table:

A Ltd Β Ltd (i) Rate of stock turnover (ii) Average credit period allowed to debtors (in months)
(iii) Average credit period allowed by creditors (in months)
(iv) Current ratio (v) Return on tangible assets (vi) Acid test ratio (vii) Gross profit as a percentage of sales (viii) Net profit to sales percentage (ix) Return on net capital employed You may assume that the stock of each company has been built up from the amount at 1 January to the amount at 31 December at an even rate during the year. As regards the calculation of the liquid ratio, debtors are to be treated as liquid assets.

(b) State concisely the conclusions which may be drawn from the comparison of the above data relating to A Ltd with that concerning Ltd. Assume that both companies sell the same kind of products to the same type of customers.

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A Ltd B Ltd '000 '000 A Ltd B Ltd '000 '000 Stock at 1.1.84 96 Purchases 638 16 Sales 648 Stock at 720 720 31.12.84 104 24 Gross profit 90 80 824 744 General expenses Net profit 288 32 35 Gross profit 90 824 744 90 80 60 58 45 90 80 90 80 Issued share capital 200 200 Fixed assets 256 Reserves 160 32 Stock 104 Profit and loss A/c 120 48 Debtors 80 Creditors 128 81 Bank 168 215 24 48 74 608 361 608 361