a. Assess the performance of the businesses based on PROFITABILITY and EFFICIENCY ratios ONLY. b. Calculate the profitability and efficiency ratios for both the companies in the following layout: Appendix Ratio calculation Ratios Formula Company A Company B Operating profit ratio Operating profit X100 Revenue -8.5 X100 =-2.19% 52 x100 = -1,16% 386.4 446.3 Gross profit gross profit x100 ratio Revenue 210,4 x100 =54.45% 250.3 x100 = 56.08% 386.4 446.3 You should clearly show all the formulae and calculations in the appendices. The figures should be rounded to 2 decimal places. c. An overall conclusion summarizing your observations in relation to which company is better for investment based on profitability and efficiency of the companies. Company X Company Y INCOME STATEMENTS '000 '000 '000 '000 Turnover 80.000 110,000 Opening inventory 26,000 20,500 Purchases 51,000 90,500 77,000 111.000 Closing inventory (14,000) |(18,000 Cost of Sales |(63,000) (93.000) 17,000 17,000 Gross profit Expenses Depreciation Other expenses (4,000 (4,500) Operating profit Interest paid Profit before tax Taxation Net Profit (1,200) (9,300) (10,500) 6,500 (500) 6.000 (1,400) 4,600 (8,500) 8,500 (1,000) 7.500 (1.700) 5,800 22,500 (6,500) Statement of Financial Position ASSETS Non-current Assets Equipment at cost 12,000 Depreciation (8,000) Net Book Value Current Assets Inventory 14,000 Receivables 22.000 Bank 6.0001 4,000 16,000 18.000 19,000 3,500 42,000 40,500 (7,000) (12,000) LIABILITIES Current Liabilities Trade payables Non-current Liabilities Bank loan Net Assets (5,000) 34,000 (10,000) 34,500 CAPITAL Ordinary share capital Retained profit 15,000 19,000 34,000 22,000 12,500 34,500 '000 '000 2,250 Dividend Paid 3,300