A Ltd and B Ltd, two separate companies, manufacture IT equipment. Their financial statements at 31.12.X9 are as follows:

Comment on the profitability, liquidity and risk of the above companies. Calculation of relevant ratios for the above two companies is essential in answering this question.

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INCOME STATEMENTS FOR THE YEAR ENDED 31.12.X9 A Ltd B Ltd 000 000 Sales 2,150 1,512 Cost of sales 1,430 1,148 Gross profit 720 364 Other expenses 250 190 Operating profit 470 174 Interest on debentures 20 60 Net profit before tax 450 114 Taxation 100 30 Net profit after tax 350 84 Dividends 200 80 Retained profit 150 4