The following are extracts from the profit and loss accounts and balance sheets of Digby plc:

Task:
Comment on Digby€™s liquidity, capital structure, profitability and working capital management during the three-year period. (State any assumptions you make.)

Transcribed Image Text:

Profit and loss account (£m) 2012 2011 2010 Sales 1,000 600 3,000 1,950 1,050 2,000 Cost of goods sold Gross profit Operating expenses 1,240 760 400 760 590 330 Debenture interest 16 13 8 Net profit before tax 274 157 62 Taxation 96 55 22 Profit after tax 178 102 40 Preference dividend 10 10 10 Equity dividend Retained profit 60 30 10 108 62 20 Balance sheet at 31 December (£m) 2012 2011 2010 Fixed assets 330 302 250 Stock 250 170 1 20 Debtors 190 140 80 Cash 20 10 20 Liabilities < 12 months 140 110 70 Net capital employed Less: Debentures 10% Net assets employed Financed by: Equity capital Retained profits Preference shares 650 512 400 160 130 80 490 382 320 200 200 200 190 82 20 100 100 100 490 382 320