A-4.2 The financial statements for Harridges Limited are given below for the two years ended June 30, 2010 and 2009. Harridges operates a retail and wholesale store in the centre of a small town. Harridges Limited Income Statements for the year ended June 30 2010 2009 (in $ thousands) Sales 3,500 2,600 Less: Cost of goods sold 2,350 1,560 Gross profit 1,150 1,040 Wages and salaries 350 320 Depreciation 250 150 Overhead expenses 200 800 260 730 Earnings before interest and taxes (EBIT) 350 310 Interest expense 50 50 Earnings before taxes 300 260 Income tax expense 125 105 Net income 175 155 8. Case (4.2) Harridges Ltd Required: a) Choose and calculate eight ratios that would be helpful in assessing the performance of the company. Use end-of-year values and calculate ratios for both 2009 and 2010. b) Using the ratios calculated in part (a) and any others you consider helpful, comment on the business' s performance from the viewpoint of a prospective purchaser of a majority of shares. Harridges Limited Balance Sheets as at June 30, 2010 2009 (in $ thousands) Current assets Cash 115 380 Accounts receivable 145 105 Inventory $400 250 Total current assets 660 735 Net property, plant, and equipment 1,525 1,265 Total assets 2,185 2,000 Current liabilities Accounts payable 300 235 Dividends payable 75 65 Other 110 100 Total current liabilities 485 400 Long-term liabilities Bank loan (10%) 500 500 Total liabilities 985 900 Shareholders' equity Common shares 490 490 Contributed capital 260 260 Retained earnings 450 350 Total shareholders' equity 1,200 1,100 Total liabilities and shareholders' equity 2,185 2,000 & Harridges Limited Statements of Retained Earnings for the year ended June 30, 2010 2009 (in $ thousands) Opening retained earnings, July 1 350 260 Add: Net income 175 155 Less: Dividends declared (75) (65) Closing retained earnings, June 30 450 350