a. Abstracts from the Profit & Loss Accounts and Balance Sheets of WayToGo are presented in the following 2 pages. Using ratio analysis, you are required to prepare a report for the board of directors assessing the performance of the company, highlighting strengths, any areas of weakness and any recommendations for improving the company's situation that you might have. As far as possible, you are encouraged to try and gain insights into the actual operations/processes of the company and not remain solely at the purely financial level. Justifications supporting the case you make must include appropriate ratios. b. Write a short note for the directors explaining the appropriate way to use ratio analysis and any limitations of the method. WayToGo Limited has traded profitably for many years and, since moving to a new factory in 2000, its turnover has risen annually. From the information given below, you are required to prepare a report for the board of directors of WayToGo Limited, assessing the performance of WayToGo Limited from 2009 to 2013, including an analysis of its profitability and financial position. Abstracts from the financial statements of WayToGo Limited for the five years ended 31 December 2013 are set out below: Profit and loss accounts 2009 $ 2010 $ 2011 $ 2012 $ 2013 $ Turnover 4,500,000 4.980,000 5,994,000 6,720,000 8,100,000 3,781,200 4,188,000 5,152,800 5,734,200 7,101,000 Purchases Increase in stocks Gross profit Staff costs Depreciation Other operating charges 33,000 64,200 204,000 168,600 305,400 3,748,200 4,123,800 4,948,800 5,565,600 6,795,600 751,800 856,200 1,045,200 1,154,400 1,304,400 411,400 461,200 551,000 599,800 668,600 43,200 45,600 45,000 46,200 45,600 104,000 117,800 146,200 155,000 176,200 558,600 624,600 742,200 801,000 890,400 193,200 231,600 303,000 353,400 414,000 7,200 14,400 34,800 51,600 193,200 224,400 288,600 318,600 362,400 110,400 114,600 121,800 142,500 157,200 82,800 109,800 166,800 176,100 205,200 Operating profit Bank interest Profit before taxation Taxation Profit after taxation Retained profits brought forward 188,400 271,200 70,500 200,700 310,500 70,500 240,000 406,800 72,000 334,800 510,900 72,000 438,900 644,100 72,000 Dividend Retained profits carried forward 200,700 240,000 334,800 438,900 572,100 Balance Sheets as at 31 December 2009 $ 2010 $ 2011 $ 2012 $ 2013 $ Fixed assets Land and buildings at cost Machinery at cost, less depreciation 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 354,000 367,800 1,434,000 1,447,800 360,000 369,000 1,440,000 1,449,000 366,000 1,446,000 Current assets Stocks Debtors Cash 612,000 676,200 379,200 433,500 6,600 5,400 997,800 1,115,100 880,200 1,048,800 514,800 619,500 3,600 3,900 1,398,600 1,672,200 1,354,200 739,500 2,700 2,096,400 Creditors: amounts falling due within one year Trade creditors Taxation and dividend payable Bank overdraft 310,200 180,900 330,600 185,100 67,200 582,900 406,200 193,800 163,800 763,800 411,000 214,500 316,800 942,300 468,900 229,200 532,200 1,230,300 491,100 506,700 532,200 634,800 729,900 866,100 Net current assets Total assets less current liabilities 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 Capital and reserves Ordinary share capital Capital reserve Retained profits 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 240,000 240,000 240,000 240,000 240,000 200,700 240,000 334,800 438,900 572,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 Note: The Selling Price Index of the goods sold by WayToGo Limited is as follows: 2009 100 2010 120 2011 150 2012 180 2013 200 a. Abstracts from the Profit & Loss Accounts and Balance Sheets of WayToGo are presented in the following 2 pages. Using ratio analysis, you are required to prepare a report for the board of directors assessing the performance of the company, highlighting strengths, any areas of weakness and any recommendations for improving the company's situation that you might have. As far as possible, you are encouraged to try and gain insights into the actual operations/processes of the company and not remain solely at the purely financial level. Justifications supporting the case you make must include appropriate ratios. b. Write a short note for the directors explaining the appropriate way to use ratio analysis and any limitations of the method. WayToGo Limited has traded profitably for many years and, since moving to a new factory in 2000, its turnover has risen annually. From the information given below, you are required to prepare a report for the board of directors of WayToGo Limited, assessing the performance of WayToGo Limited from 2009 to 2013, including an analysis of its profitability and financial position. Abstracts from the financial statements of WayToGo Limited for the five years ended 31 December 2013 are set out below: Profit and loss accounts 2009 $ 2010 $ 2011 $ 2012 $ 2013 $ Turnover 4,500,000 4.980,000 5,994,000 6,720,000 8,100,000 3,781,200 4,188,000 5,152,800 5,734,200 7,101,000 Purchases Increase in stocks Gross profit Staff costs Depreciation Other operating charges 33,000 64,200 204,000 168,600 305,400 3,748,200 4,123,800 4,948,800 5,565,600 6,795,600 751,800 856,200 1,045,200 1,154,400 1,304,400 411,400 461,200 551,000 599,800 668,600 43,200 45,600 45,000 46,200 45,600 104,000 117,800 146,200 155,000 176,200 558,600 624,600 742,200 801,000 890,400 193,200 231,600 303,000 353,400 414,000 7,200 14,400 34,800 51,600 193,200 224,400 288,600 318,600 362,400 110,400 114,600 121,800 142,500 157,200 82,800 109,800 166,800 176,100 205,200 Operating profit Bank interest Profit before taxation Taxation Profit after taxation Retained profits brought forward 188,400 271,200 70,500 200,700 310,500 70,500 240,000 406,800 72,000 334,800 510,900 72,000 438,900 644,100 72,000 Dividend Retained profits carried forward 200,700 240,000 334,800 438,900 572,100 Balance Sheets as at 31 December 2009 $ 2010 $ 2011 $ 2012 $ 2013 $ Fixed assets Land and buildings at cost Machinery at cost, less depreciation 1,080,000 1,080,000 1,080,000 1,080,000 1,080,000 354,000 367,800 1,434,000 1,447,800 360,000 369,000 1,440,000 1,449,000 366,000 1,446,000 Current assets Stocks Debtors Cash 612,000 676,200 379,200 433,500 6,600 5,400 997,800 1,115,100 880,200 1,048,800 514,800 619,500 3,600 3,900 1,398,600 1,672,200 1,354,200 739,500 2,700 2,096,400 Creditors: amounts falling due within one year Trade creditors Taxation and dividend payable Bank overdraft 310,200 180,900 330,600 185,100 67,200 582,900 406,200 193,800 163,800 763,800 411,000 214,500 316,800 942,300 468,900 229,200 532,200 1,230,300 491,100 506,700 532,200 634,800 729,900 866,100 Net current assets Total assets less current liabilities 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 Capital and reserves Ordinary share capital Capital reserve Retained profits 1,500,000 1,500,000 1,500,000 1,500,000 1,500,000 240,000 240,000 240,000 240,000 240,000 200,700 240,000 334,800 438,900 572,100 1,940,700 1,980,000 2,074,800 2,178,900 2,312,100 Note: The Selling Price Index of the goods sold by WayToGo Limited is as follows: 2009 100 2010 120 2011 150 2012 180 2013 200