For the assignment this week, you are provided with two sets of financial statements and then asked to undertake financial analysis on the data. You are also required to calculate earnings per share, both basic and diluted. Finally, you should interpret the measures that you have calculated and provide comments regarding the financial performance of the organisation.

You will find an income statement, statement of financial position, and notes to the financial statements for a fictional company attached below. Each statement shows figures for the past 3 years. After reviewing the financial statements, complete the questions below. Required:

1. Complete a ratio analysis on the attached financial statementsfor each year provided. Compute the following ratios: operating return on equity, financial leverage multiplier, return on capital employed, asset turnover, net profit margin, current ratio, and gearing ratio.
2. Compute both the basic and diluted earnings per sharefor each year provided.
3. Include the above calculations in a business report, providing a detailed analysis of profitability, liquidity, solvency, and asset utilisation of the organisation from the information that you have calculated. What details can you glean from this analysis? What trends do you see? What additional information may be needed to provide a clearer picture?

International Financial Reporting and Analysis Week 5: Hand-In AssignmentAttachment Income Statement for the year to 31 January Total revenue Cost of sales 2010 2009 2008 '00 '00 '00 0 0 0 405,607 378,799 348,650 306,158 286,515 264,152 Gross profit 99,449 92,284 84,498 Selling general and administrative expenses 76,651 70,500 65,001 Earnings before interest and taxes 22,798 21,784 19,497 2,199 2,103 1,849 Income before tax 20,599 19,681 17,648 Income tax expense 7,199 6,950 6,364 Net income 13,400 12,731 11,284 Basic weighted ordinary shares 10,500 11,000 12,000 Diluted weighted ordinary shares 11,000 11,675 12,300 Interest expense 111111111161 Statement of financial position as of 31 January 2010 '00 0 2009 '0 00 2008 '00 0 37,769 3,905 38,362 3,654 36,375 2,840 7,275 48,949 5,569 47,585 7,373 46,588 Assets Current assets Inventories Receivables Cash and cash equivalents Total current assets Non-current assets Land 25,600 25,400 115,929 104,605 Total assets163,429163,514 151,193LiabilitiesCurre nt liabilitiesAccounts payable47,72146,5004 3,471Tax payable7,669119548,2 83Total current liabilities55,39058,454 51,754Long term debt36,74035,335328 95Provisions6,0145,11 74,971Total long-term liabilities42,75440,452 37,866222222222222 222222222222222222 222222222222222222 2222222222222222222 2222222222222222222222 2222222222222222222222 2222222222222222222222 2222222222222222222222 2222222222222222222222 2222222222222222222222 2222222222222222222222 222222222262 19,000 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 3333333333333333333333 14,480 Total liabilities98,14498,90689,620Stockholders' equity Ordinary shares47,94548,03048,070Retained earnings17,34016,57813,503Total stockholder equity65,28564,60861,573 Summary of Significant Accounting Policies General The company operates three retail stores throughout the United Kingdom and is committed to providing individuals with highquality products and value to customers. We have fostered a culture that retains devoted and well-trained employees who provide optimal service. Our accounting year ends on 31 January. Cash and Cash Equivalents The company considers investments with a maturity of 3 months or less when purchased to be cash equivalents. The company receives a majority of its payments due from banks for third-party credit card, debit card, and electronic benefit transactions (EBT) processed. These transactions normally complete within 24-48 333333333363 hours and are thus considered cash equivalents. Receivables Accounts receivable consist primarily of receivables from suppliers for marketing or incentive programs. Additionally, amounts due from banks for customer credit card, debit card, and EBT transactions that take in excess of 7 days to process are classified as accounts receivable. Inventories Inventories are valued at the lower of cost or net realisable value using the retail method. This is computed on the basis of selling price less the appropriate trading margin. All inventories are finished goods. Non-current Assets Non-current assets are stated at cost, and management reviews these assets for signs of impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying amount is determined to not be recoverable, potential impairment is based on fair market value. Cost of Sales Cost of sales includes all actual product costs and costs of transportation. 444444444464 Operating, Selling, General, and Administrative Expenses Operating, selling, general, and administrative expenses include all operating costs of the company except those costs related to the transportation of products from the supplier to the retail stores. Depreciation Depreciation for financial statement purposes are provided on the straight-line method over the estimated useful lives of the various assets. Legal Proceedings The company is not involved with any current litigation. Provisions The company has designated an estimated amount for possible future shop closures and redundancy costs. Dividends The company declared and paid the following dividend amounts in each year to 31 January: 2010 2009 2008 '000 '000 Divid 555555555565 '000 666666666666