Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2004 and 2005 are as follows:

Required:

(a) Calculate the following financial ratios for both 2004 and 2005 (using year-end figures for balance sheet items):
(i) return on capital employed;
(ii) net profit margin;
(iii) gross profit margin;
(iv) current ratio;
(v) acid test ratio;
(vi) settlement period for debtors;
(vii) settlement period for creditors; and (viii) stock 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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Revenue Cost of sales Gross profit Operating expenses Depreciation Interest Profit before tax Tax Profit after tax Profit and loss account for the year ended 30 June 2004 2005 000 000 000 000 1,180 1,200 (680) (750) 500 450 (200) (66) ' (208) (75) (8) (266) (291) 159 (48) 111 (72) 39 Dividend - paid Retained profit for year Balance sheet as at 30 June