Both Alison plc and Barbara plc operate wholesale electrical stores throughout the UK. The financial statements of each business for the year ended 30 June 2016 are as follows

Statement of Financial Position as at 30 June 2016

Statement of Profit and Loss for the year ended 30 June 2016

Note: All purchases and sales were on credit.

aFor each business, calculate two ratios that are concerned with each of the following aspects (eight ratios in a total of each business):

i.profitability

ii.Efficiency

lii.Liquidity

IV. Gearing

b) Compare the profitability, efficiency, liquidity and gearing ratios of the two companies. Explain what a comparison of each ratio indicates about the relative performance and position of the two companies.

c) Explain the effect of a companys gearing on its profitability

Alison plc Barbara plc m m Non-current assets Property, plant and equipment (cost less depreciation) Land and buildings 360.0 510.0 Fixtures and fittings 87.0 91.2 447.0 601.2 Current assets Inventories 592.0 403.0 Trade receivables 176.4 321.9 91.6 84.6 Cash at bank 853.0 1300.0 816.5 Total assets 1417.7 Equity and liability Equity 320.0 367.6 250.0 624.6 874.6 Share capital Retained earnings 687.6 Noncurrent liabilities 190.0 Loans 250.0 Current liabilities Trade pavables 275.7 17.4 406.4 16.0 Tax payable 422.4 1300.0 293.1 Total equitv and liabilities 1417.7 Barbara plc Alison plc m m 1790.4 1478.1 1018.3) Revenue 1214.9 Cost of sales 575.5 459.8 Gross profit 408.6) 308.5) Operating expenses 166.9 151.3 Operating profit 27.5 19.4) Interest payable 139.4 131.9 Profit before taxation 34.8 104.6 32.0) Taxatiorn 99.9 Profit for the year