Aber and Cromby are two retail businesses in the leisurewear market. Your manager has asked you to review the performance of both businesses from the financial statements which are provided below:

Required:

(a) Calculate the following ratios for each:

(i) Gross profit percentage

(ii) Return on capital employed

(iii) Earnings per share.

(b) Comment on the performance of each as indicated by each of the ratios.

(c) Explain the limitations of using ratios as the basis for analysing performance.

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Statements of income year to 31 October 2011 Revenue Cost of sales Gross profit Expenses Profit from operations Finance cost Profit before tax Tax Net profit Aber £'000 5,500 (4,400) 1,100 (610) 490 (15) 475 (200) 275 Cromby £'000 7,200 (5,040) 2,160 (1,685) 475 (15) 460 (180) 280