Beige Ltd and Magenta Ltd are both furniture retailers in New Zealand.

Beige Ltd imports furniture and then sells the furniture online via its website and other websites such as TradeMe. It has distribution centres in Auckland and Christchurch. It has been operating for eight years with revenue growing much faster than the industry average.

Magenta Ltd was established over forty years ago. It also imports furniture, but it sells the furniture in its retail stores throughout New Zealand. Its retail stores account for over ninety percent of its sales. While online sales are growing rapidly, Magneta Ltds revenue has declined by 10% over last four years.

Selected financial data for the financial year ended 30 June 2021 from the two companies is presented below:

Selected financial data	Beige Ltd	Magenta Ltd
	(in thousands)	(in thousands)
Income statement
Sales revenue	$39,176	$217,799
Cost of sales	27,246	171,799
Other income	712	2,013
Selling and administrative expenses	9,962	36,173
Interest expense	464	1,326
Income tax expense	842	3,897
Net profit after interest and taxation	$1,374	$ 6,854
Statement of financial position as at 30 June 2021 (end of the period)
Current assets	$ 9,648	$ 28,246
Non-current assets	14,506	55,205
Total assets	$24,154	$ 83,451
Current liabilities	7,054	27,282
Non-current liabilities (long-term debt)	9,240	21,067
Total equity (shareholder capital, retained earnings and reserves)	7,860	35,102
Total liabilities and equity	$24,154	$ 83,451
Selected balances as at 1 July 2020 (start of the period)
Total assets	$19,490	$ 78,130
Total equity	6,519	31,343
Current liabilities	6,301	29,949
Total liabilities	12,971	46,787
Other data for 2021
Average debtors (net)	$ 1,916	$ 1,884
Average creditors (net)	6,627	28,115
Average inventory	4,349	22,028
Credit purchases	$27,899	$167,132
Net cash from operating activities	1,992	10,260
Number of employees	63	512
Financial ratios for 2021
Gross profit margin	30.45%	(i)
Operating profit margin	6.84%	5.55%
Return on equity	19.11%	(ii)
Return on capital employed	17.70%	22.69%
Average inventory turnover (days)	58.26 days	(iii)
Average debtors settlement (days)	51.00 days	31.57 days
Average creditors settlement (days)	86.70 days	(iv)
Sales revenue to capital employed	2.29x	3.88x
Sales revenue per employee	$621,841.27	(v)
Current ratio	1.37 to 1	(vi)
Acid test (or quick) ratio	0.82 to 1	0.26 to 1
Gearing ratio	54.04%	(vii)
Interest cover (or times interest earned) ratio	5.76x	(viii)

Required:

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(b) Compare and contrast the financial performance of the two companies: Beige Ltd and Magenta Ltd. Be sure to comment on profitability, efficiency, liquidity and gearing. Hint: Write no more than two (2) paragraphs.

(8 marks)

(c) Imagine you are the Chief Executive of Magenta Ltd and you wish to improve the companys performance. Identify two (2) pieces of additional information that can be easily collected and, you believe, would be very useful in undertaking a complete analysis of the two companies. For each piece of additional information, briefly explain why it is useful for decision-making. Hint: A brief explanation means one or two sentences