Ratunga Inc. manufactures and sells office furniture to business customers. It is listed on a stock exchange. A ratio analysis of its statement of comprehensive income and statement of financial position over the last four years has identified the following trends:

a. Explain how ratio analysis can be used to interpret business performance, with an emphasis on the different types of ratios that can be used.

b. Use the above ratios to explain the strengths and weaknesses of the financial performance of Ratunga Inc. over the last four years.

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2012 2011 2010 2009 Sales growth 10.0% 8.5% 8.0% 7.0% Return on investment (ROI) 5.0% 4.8% 4.5% 4.1% Return on capital employed (ROCE) 4.0% 4.5% 5.0% 5.3% Operating profit/sales 6.0% 6.3% 6.5% 6.7%