You are given summarised information about two firms in the same line of business, A and B, as follows.

Required:

(a) Produce a table of eight ratios calculated for both businesses.

(b) Write a report briefly outlining the strengths and weaknesses of the two businesses. Include comment on any major areas where the simple use of the figures could be misleading.

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Balance sheets at 30 June Land Buildings Less: Depreciation Plant Less: Depreciation Stocks Debtors Bank Creditors Bank Capital at start of year Add: Profit for year Less: Drawings Land revaluation Loan (10% p.a.) Sales Cost of sales £000 110 50 A £000 120 (40) 90 (70) 80 100 180 (160) £000 80 80 20 180 20 200 100 30 130 (30) 100 100 200 1,000 400 £000 120 B £000 200 150 (40) 100 90 10 200 (120) £000 260 200 110 570 80 650 300 100 400 (40) 360 160 130 650 3,000 2,000