5010ACC Question Three The comparative financial statements of 2Sisters Cosmetic Ltd for 2020 and 2019 include the following select data 2020 2019 In 000s In 000s Current assets Inventories (stocks) 360 340 Trade receivables (debtors) 280 250 Bank 70 60 Cash 145 155 Total current assets 910 825 570 610 Total current liabilities (All current liabilities are trade payables Income Statement 5,860 5.110 Credit Purchases Required In 900 words answer the following a) Compute these ratios for 2019 and 2020 1 Current ratio 2. Acid-test ratio b) 3. Settlement period for trade payables (Trade Payables (Creditors) Days) (3 marks) Which of the first two ratios improved from 2019 to 2020 and which ratios deteriorated? How does this trend affect the company? (5 marks) c) For last year, two businesses in the same industry had the following financial results 6 of 8 Continued... 5010ACC ABC plc XYZ plc m m 36 Operating profit Average long-term capital employed Sales revenue 60 80 300 The operating profit margin of ABC plc is twice that of XYZ pic. If both businesses have the same return on capital employed ratio, what is the 1 Sales revenue for XYZ pic, and 2. Operating profit for XYZ plc? (4 marks) d) Critically discuss Six limitations of ratio analysis (18 marks) End of Question Three [Total 30 Marks]