Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2017 and 2018 are as follows:

Dividends were paid on ordinary shares of £70,000 and £72,000 for 2017 and 2018, respectively.

Required:

(a) Calculate the following financial ratios for both 2017 and 2018 (using year-end figures for statement of financial position items):

1. Return on capital employed

2. Operating profit margin

3. Gross profit margin

4. Current ratio

5. Acid test ratio

6. Settlement period for trade receivables

7. Settlement period for trade payables

8. Inventories turnover period.

(b) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.

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Income statements for the year ended 30 June 2017 £000 1,180 (680) 500 Revenue Cost of sales Gross profit Operating expenses Depreciation Operating profit Interest Profit before taxation Taxation Profit for the year (200) (66) 234 234 (80) 154 2018 £000 1,200 (750) 450 (208) (75) 167 (8) 159 (48) 111