2: Joey is thinking of investing in one of the two limited liability companies, Ada Ltd and Mandy Ltd. She has asked for your help to calculate some of the ratios she needs to decide which company to invest. She has given you the summarized financial statements for the year ended 31 December 2021 which are shown below: Statements of financial position as at 31 December 2021 Assets Ada Ltd Mandy Ltd $1000 $000 5'000 $000 Non-current assets At cost 20,800 45,280 Accumulated depreciation (6,496) 14,304 (7,008) 38,272 Current assets Inventory 8,896 9,344 Receivables 5,088 5,536 Cash and cash equivalents 5,952 19,936 2,688 17,568 Total assets 34,240 55,840 Equity and liabilities Share capital and reserves Share capital Retained earnings Non-current liabilities Bank loan 13,280 29,760 9,920 6,208 23,200 35,968 4,960 Current liabilities Trade payable 7,840 9,280 Interest payable 2,272 Income tax 3,200 11,040 3,360 14,912 Total equity and liabilities 34,240 55,840 Page 4 of 10 Statement of profit or loss and other comprehensive income for the year ended 31 December 2021 Ada Lid Mandy Ltd 5000 $1000 $'000 $000 Sales revenue 50,112 52,256 Cost of sales (15,168) (18,912) Gross profit 34,944 33,344 Expenses: Administrative 5,632 5,120 Selling distribution 2,976 2,272 Depreciation 3,328 2,688 Bank loan interest (11.936) 2,496 (12.576) Net profit 23,008 20,768 Required: a. Calculate the following six ratios for both companies, clearly showing the ratio formulae and figures used. i. Current ratio; ii. Quick ratio (acid test ratio); Receivables collection period; iv. Return on capital employed; V. Gross profit margin; vi. Net profit margin. (12 Marks) b. Using the additional information given and the ratios you calculated in part (a), write a brief report on the financial performance of Ada Ltd and Mandy Ltd. Moreover, please suggest what additional information might be helpful to interpret the ratios in your report. (13 Marks) (Total: 25 Marks) Page 5 of 10