Harlequin plc is an engineering company that has been operating for twenty years. Summaries of its profit and loss accounts and balance sheets for the past two years are given below:

Summarised profit and loss accounts for the year ended $31$ December

$20232022$

$$

Turnover $200,000200,000$

Cost of sales $120,000100,000$

Gross profit $80,000100,000$

Selling, distribution & admin expenses $60,00060,000$

Profit before interest $20,00040,000$

Interest $15,00010,000$

Profit after interest $5,00030,000$

Dividends $20,00020,000$

Retained profit$/($loss$)$ for year $(15,000)10,000$

Summarised balance sheets at $31$ December

$20232022$

$$

Fixed assets

Land $63,00043,000$

Plant $6,0006,000$

Building $54,000123,00030,00079,000$

Current assets

Stock $65,00055,000$

Debtors $50,00040,000$

Investments $($at cost$)80,00050,000$

Bank $-\_\_\_3,000$

$195,000148,000$

Creditors: amounts due within one year

Trade creditors $60,00040,000$

Bank $4,000-$

Proposed dividend $20,00020,000$

$(84,000)(60,000)$

$234,000167,000$

Financed by:

Ordinary share capital $50,00040,000$

Share premium reserve $14,00012,000$

Revaluation reserve $20,000-$

Retained profits $-15,000$

$10\%$ Debentures $150,000\_\_\_\_\_\_100,000\_\_\_\_\_\_$

$234,000167,000$

Requirement:

$($a$)$ Calculate the following ratios for each year:

$($i$)$ Return on capital employed.

$($ii$)$ Return on owners$$ equity.

$($iii$)$ Debtors turnover.

$($iv$)$ Creditors turnover.

$($v$)$ Current ratio.

$($vi$)$ Quick ratio.

$($vii$)$ Gross profit percentage.

$($viii$)$ Net profit percentage.

$($ix$)$ Dividend cover.

$($x$)$ Gearing ratio.

$10$ Marks

$($b$)$ Using the summarised accounts given, and the ratios you have just prepared, compile a report on the position, progress and direction of Harlequin Plc$.$

$10$ Marks

$($c$)$ Discuss the statistical difficulties which are inherent in using ratios to make inferences about large samples of companies.

$5$ Marks

$25$ Marks