(LO 4.3) You are required to interpret financial statements using appropriate ratios and comparisons both internal and external.

Required - Prepare a table of the following 9 ratios, calculated for both years, clearly showing the figures used in the calculations. Include interpretation of the ratios

1. Current ratio

2. Quick assets ratio

3. Inventory turnover in days

4. Receivables turnover in days

5. Payables turnover in days

6. Gross profit %

7. Net profit % (before taxation)

8. ROCE

9. Gearing

You are given summarised results of an electrical engineering business, as follows INCOME STATEMENT Year ended 31.12.X7 31.12.X6 $000 50,000 34,000 16,000 13,000 3,000 1,300 1,700 600 (50) 1,100 600 $000 60,000 42,000 18,000 15,500 2,500 2,200 300 350 Turnover Cost of sales Gross profit Operating expenses Interest payable Profit before taxation Taxation (Loss) profit after taxation Dividends paid 600 STATEMENT OF FINANCIAL POSITION $000 $000 Non-current assets Intangible Tangible 850 12,000 12,850 11,000 11,000 Current assets Inventories Receivables Bank and cash 14,000 16,000 500 43.350 13,000 15,000 500 39,500 Capital and reserves Share capital Share premium Revaluation reserve Retained earnings 1,300 3.300 2,000 6.750 13.350 1,300 3,300 2,000 7,400 14,000 Current liabilities Non-current liabilities 24,000 6,000 43.350 20,000 5,500 39,500