$3.$ Using trend analysis and appropriate ratios, analyse the financial statements that have been prepared by the business in the case study. In particular, comment on the following aspects of the company:

$$ areas of concern in financial performance, focussing mainly on the performance statement

$$ areas of concern in financial health, focussing mainly on both the performance and position statements

$[$Guidance to students:

You should use your knowledge gained from Readings $18$ and $19,$ together with the relevant ratios and percentage changes discussed in Reading $20$Analysing $$nancial performance and financial health$,$ to construct your answer. This should include a comparison of one year to the other to identify trends. You will need to undertake some simple comparative analysis and then calculate a range of ratios and percentage changes. You should select those ratios and percentage changes that you feel are helpful in answering this question including those shown in the table below:

Main financial ratio calculations:

$20232022$

Calculations relating to Financial Performance

Revenue $($Sales$)$ Growth$/$Decrease $(\%)[2023$ only$]$ N$/$A

Gross Margin $(\%)$

Operating Profit Margin $(\%)$

Return on Equity $(\%)[2023$ only$]$ N$/$A

Calculations relating to Financial Health

Quick Ratio

Receivables Collection Period $($days$)$

Inventory Turnover Period $($days$)$

Gearing $(\%)$

Show your calculation workings and present your answers to one decimal place. State what each calculation might mean if you identify it as an area of concern, i$.$e$.$ explain why your figures may be of concern to The Reading Nook Ltd$.$ It may be that your findings indicate that, in some areas, The Reading Nook Ltd is performing well and concern is not warranted. Make sure that you note the most obvious matters of concern.