The financial statements for Harridges Limited are given below for the two years ended 30 June 2006 and 2007. Harridges Limited operates a department store in the centre of a small town.

Required:

(a) Choose and calculate eight ratios that would be helpful in assessing the performance of Harridges Limited. Use end-of-year values and calculate ratios for both 2006 and 2007.

(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.

Transcribed Image Text:

Harridges Limited Income statement for the years ended 30 June 2006 2007 000 000 Sales revenue Cost of sales 2,600 3,500 (1,560) (2,350) Gross profit Wages and salaries Overheads Depreciation Operating profit 1,040 1,150 (320) (350) (260) (200) (150) (250) 310 350 Interest payable (50) (50) Profit before taxation 260 300 Taxation (105) (125) Profit for the year 155 175 Balance sheet as at 30 June 2006 2007 000 000 Inventories Cash at bank Total assets Non-current assets Property, plant and equipment Current assets Trade receivables 1,265 1,525 250 400 105 145 380 115 735 660 2,000 2,185