INFORMATION: Extracts of the Statement of Comprehensive Income and Statement of Financial

Position for the year ended $31$ December $2024$ are given for the two companies viz. ABC Limited and

$xYZ$ Limited.

Extract of statement of Comprehensive Income for the year ended $31$ December $2024$:

Note: All the income and expenses of both companies are included in the figures above.

Extracts of Statement of Financial Position as at $31$ December $2024$:

Extracts of Statement Changes in Equity for the Year ended $31$ December $2024$:

REQUIRED: Use the information provided above to answer the following questions:

$3\mathrm{.}1$ Compare and comment on the profitability of both companies using the following ratios:

$3\mathrm{.}1\mathrm{.}1$ Return on capital employed

$3\mathrm{.}1\mathrm{.}2$ Profit margin

$3\mathrm{.}2$ Calculate the earnings retention ratio of both companies and explain how shareholders can benefit

from a higher retention ratio.

$3\mathrm{.}3$ Compare the two companies with regard to the amount of debt that each company uses to finance

its assets $($as a percentage$).$

$3\mathrm{.}4$ Suggest two ways in which ABC Limited can improve its gross profit margin without increasing its

selling prices.