Paramount Services provides a range of business consultancy services. Its financial statements for the last year are given in Table 7.17. Note that the format of the Balance Sheet is different to that shown in this chapter. This is because the format used in this chapter is the latest; the format used for Paramount Services is that which applied at the time the financial reports were produced.

An analyst has produced the following ratio analysis (Table 7.18) and has asked you to comment on any aspects that you think are important.

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Table 7.17 Paramount Services plc. Income Statement in '000 2007 2006 Income 34,000 29,000 Less expenses 16,500 13,000 Operating profit before interest 17,500 16,000 Less interest expense 4,000 2,700 Profit before tax 13,500 13,300 Income tax expense 5,400 5,320 Net profit after tax 8,100 7,980 Less dividends paid 4,000 3,750 Retained profits 4,100 4,230 Number of shares issued 10,000,000 10,000,000 Earnings per share 0.81 0.80 Dividend per share 0.40 0.38 Market price of shares 8.55 10.20 Balance Sheet in '000 2007 2006 Fixed assets 21,933 17,990 Current assets Debtors 7,080 4,750 Bank 377 1,250 7,457 6,000 Less creditors due within one year Creditors 4,300 3,750 Net current assets 3,157 2,250 Total assets less current liabilities 25,090 20,240 Less creditors due after more than one year Long-term loans 2,750 2,000 Total net assets 22,340 18,240 Capital and reserves Shareholders' funds Retained profits 10,000 10,000 12,340 8,240 22,340 18,240