1. Stephen, the principal shareholder of Wing Sdn Bhd is very concerned that although the company's net profit has increased in the past year the bank is reluctant to continue the company's overdraft facility. The summarised results of Wing Sdn Bhd for the last three years are as follows: Profit and Loss Statements for the year ended 31 December Sales Less: Cost of goods sold Gross profit Less: Administration expenses Distribution expenses 20x2 RM'000 20x3 RM'000 20x4 RM'000 100 130 150 3/8 80 110 125 20 20 25 6479 5 11 7477 12 13 10 Net profit 10 Statements of Financial Position as at 31 December 20x2 RM'000 20x3 RM'000 20x4 RM'000 ASSETS Non-Current Assets Property, plant and equipment Current Assets 60 60 60 60 60 Inventory Debtors Cash at bank 18. TOTAL ASSETS 78 06288 10 24 40 7 49 91 109 EQUITY AND LIABILITIES Ordinary share Reserves 522 50 20 70 5220 50 29 42 79 92 Current Liabilities Creditors Bank overdraft TOTAL EQUITY AND LIABILITIES 1002 78 91 1321 109 Required: Calculate the following financial ratios for each year based on the financial statements above. Gross Profit Margin Net Profit Margin a. i. ii. iii. iv. Current ratio V. Quick Ratio vi. Debt Ratio Return on Capital Employed [9 marks] b. Outline and briefly explain six limitations of financial ratios. [6 marks] [Total: 15 marks] 2. The following information is available for Company A and B engaged in selling the same sort of product in similar market. Capital employed Net profit Gross profit ratio Net profit ratio Return on capital employed Required: Company A Company B RM'000 RM'000 10,000 100,000 10,000 10,000 25% 28% 10% 14% 100% 10% Comment on the profitability of the company A and B