Bradbury Ltd is a family-owned clothes manufacturer. For a number of years, the chair and managing director was David Bradbury. During his period of office, sales revenue had grown steadily at a rate of 2 to 3 per cent each year. David Bradbury retired on 30 November 2017 and was succeeded by his son Simon. Soon after taking office, Simon decided to expand the business. Within weeks he had successfully negotiated a five-year contract with a large clothes retailer to make a range of sports and leisurewear items. The contract will result in an additional 2 million in sales revenue during each year of the contract. To fulfil the contract, Bradbury Ltd acquired new equipment and premises. Financial information concerning the business is given below.

a) Calculate, for each year (using year-end figures for a statement of financial position items), the following ratios: 1. operating profit margin 2. return on capital employed 3. current ratio 4. gearing ratio 5. trade receivables settlement period 6. sales revenue to capital employed. (b) Using the above ratios, and any other ratios or information you consider relevant, comment on the results of the expansion programme.

Income statements for the years ended 30 November Revenue Operating profit Interest charges Profit before taxation Taxation Profit for the year 2017 000 9,482 914 (22) 892 (358) 534 2018 000 11,365 1,042 (81) 961 (386) 575 Statements of financial position as at 30 November 2017 000 2018 000 ASSETS Non-current assets Property, plant and equipment Premises at cost Plant and equipment (net) 5,240 2,375 7,615 7,360 4,057 11,417 Current assets Inventories Trade receivables 2,386 2,540 4,926 12,541 3,420 4,280 7,700 19,117 Total assets EQUITY AND LIABILITIES Equity Share capital Reserves 2,000 7,813 9,813 2,000 8,268 10,268 1,220 3,675 Non-current liabilities Borrowing loans Current liabilities Trade payables Taxation Short-term borrowings (all bank overdraft) 1,157 179 172 1,508 12,541 2,245 193 2,736 5,174 19,117 Total equity and liabilities Dividends of 120,000 were paid on ordinary shares in respect of each of the two years