8.8 The financial statements for Harridges Ltd are given below for the two years ended 30 June 2014 and 2015. Harridges Limited operates a store in the centre of a small town.

Income statements for the years ended 30 June 2014 2015

£000 £000 Sales revenue 2,600 3,500 Cost of sales (1,560) (2,350)

Gross profit 1,040 1,150 Wages and salaries (320) (350)

Overheads (260) (200)

Depreciation (150) (250)

Operating profit 310 350 Interest payable (50) (50)

Profit before taxation 260 300 Taxation (105) (125)

Profit for the year 155 175 Statement of financial position as at 30 June 2014 2015 £000 £000 ASSETS Non-current assets Property, plant and equipment 1,265 1,525 Current assets Inventories 250 400 Trade receivables 105 145 Cash at bank 380 115 735 660 Total assets 2,000 2,185 EQUITY AND LIABILITIES Equity Share capital: £1 shares fully paid 490 490 Share premium 260 260 Retained earnings 350 450 1,100 1,200 Non-current liabilities Borrowings – 10% loan notes 500 500 Current liabilities Trade payables 300 375 Other payables 100 110 400 485 Total equity and liabilities 2,000 2,185 Dividends were paid on ordinary shares of £65,000 and £75,000 in respect of 2014 and 2015, respectively.
Required:

(a) Choose and calculate eight ratios that would be helpful in assessing the performance of Harridges Ltd. Use end-of-year values and calculate ratios for both 2014 and 2015.

(b) Using the ratios calculated in

(a) and any others you consider helpful, comment on the business’s performance from the viewpoint of a prospective purchaser of a majority of shares.