Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2006 and 2007 are as follows:

Required:

(a) Calculate the following financial ratios for both 2006 and 2007 (using year-end figures for balance sheet items):

(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 2006 2007 000 000 Revenue Cost of sales Gross profit 1,180 1,200 (680) (750) 500 450 Operating expenses Depreciation Operating profit Interest (200) (208) (66) (75) 234 167 (-) (8) Profit before taxation 234 159 Taxation (80) (48) Profit for the year 154 111 Balance sheets as at 30 June 2006 2007 000 000 Non-current assets Property, plant and equipment Current assets Inventories Trade receivables Cash Total assets 702 687 148 236 102 156 3 4 253 396 955 1,083