Analyse the key profitability ratios and identify the reason for the change in them by answering the following questions Note the following assumptions for solving this question: The key profitability ratios are Variable Margin (as a % of sales), Operating Margin. Return on Equity and Return on Average Capital Employed. Assume that there is no change in the capital employed during the year 2002 so that the capital employed at the beginning of the year is the same as that during the ending of the year. The gross profit is also known as the variable margin. Question 4A: Calculate the key profitability ratios for the years 2002 to 2006(E). (8 marks, a for each key ratio) 2006E 1 Exhibit 2 - Balance Sheet in $ thousand, some numbers are rounded) 2 At December 31 2002 2003 2004 2005 3 Assets 4 Cash 705 1,542 1,818 2,158 5 Accounts Receivable 3,485 4,405 6,821 10,286 6 Inventories 3,089 2,795 3,201 3,291 7 Current Assets 7,279 8,742 11,839 15,735 8 Plant, Property, & Equipment (net) 2,257 2,680 2,958 3,617 9 Other Assets 645 645 645 645 10 Land 450 1,750 2,853 2,853 11 Non-Current Assets 3,352 5,075 6,456 7,115 12 Total Assets 10,631 13,817 18,295 22,850 13 Liabilities & Shareholders Equity 14 Accounts Payable 2,034 2,973 4,899 6,660 15 Current Portion of long-term Debt 315 352 525 730 16 Current Liabilities 2,349 3,325 5,423 7,390 17 Long-Term Debt 3,258 4,400 5,726 7,123 18 Shareholders Equity 5,024 6,091 7,146 8,336 1,955 14,471 3,847 20,273 4,347 645 2,853 7,844 28,117 9,424 649 10,074 8,480 9,563 19 Total Liabilities & Shareholders Equity 20 10,631 13,817 18,295 22,850 28,117 24