1. Bounty plc (Bounty) is engaged in the production of clothing and essentials for retailers in the UK.

Bounty Plc

Income Statement for the Year Ended 30 September 2020 and the previous year ended 30 September 2019

	2020 £000	2019 £000
Revenue	98,000	108,000
Cost of Sales	(56,600)	(67,400)
Gross Profit	41,400	40,600
Administration Expenses	(20,100)	(20,150)
Trading Profit	21,300	20,450
Finance Costs	(6,600)	(7,200)
Profit on Ordinary Activities Before Taxation	14,700	13,250
Taxation on Profit on Ordinary Activities	(7,938)	(8,648)
Profit for the Year	6,762	4,602

Bounty Plc

Balance Sheet as at 30 September 2020 and 30 September 2019

	2020	2019
Non-Current Assets	£000	£000
Intangible Assets	22,450	22,450
Property, Plant and Equipment	87,200	91200
Other Investments	17,800	17,800
	127,450	131,450
Current Assets
Inventories	18,700	17,500
Trade and Other Receivables	27,530	25,500
Cash and Short-Term Deposits	13,400	14,650
	59,630	57,650
Total Assets	187,080	189,100
Current Liabilities
Bank Overdrafts	12,600	9,440
Unsecured Bank Loans	8,400	7,500
Trade and Other Payables	13,200	11,300
Current Tax Liability	9,320	8,360
	43,520	36,600
Non-Current Liabilities
Medium Term Bank Loans	22,000	28,000
Finance Leases	9,600	6,900
Provisions	10,200	21,500
	41,800	56,400
Total Liabilities	85,320	93,000
Net Assets	101,760	96,100
Equity
Called Up Share Capital	37,200	37,200
Share Premium	24,000	24,000
Other Reserves	12,400	12,400
Retained Earnings	28,160	22,500
	101,760	96,100

a) Evaluate the Profitability, liquidity position and debt to equity ratio of Bounty for the two years (2019 and 2020). Your answer should include calculation of these ratios, for each year.

Profitability:

Gross Profit %

Pre-tax profit %

Liquidity:

Current ratio

Quick ratio     

Gearing %  

b) Comment on the overall profitability and liquidity position of the company Bounty plc using the ratios.                                                    

c) State any two limitation of ratios in evaluating the performance of companies.