Lotty is looking to expand through acquisitiors and has selected two unlisted firms, Balgro

and Calgro, that are similar in size, operate in a similar industry, and are based in the same

courtry as suitable acquisition possibilies. Lotty's chairman has confirmed that both

organisations are oper to credible bids.

A board meeting has beer scheduled to discuss the patertial acquisition targets. Latty's

chairman has requested that a report be prepared for the meeting which will indude analysis

of the following five key financial ratios that board members use when considering

acquisitions.

Grass profit percentage

Prafit before tax as a percentage of revenue

Return on copital employed

Gearing $($debt$/$equity$)$

Liquidity $($current assets$/$current liabilies$)$

In addition to the analysis of the five ratios above, the chaiman has requested that other

relevant ratios be calculated and anslysed if they faciltate comparison of the business

ervironments that Balgro and Calgro operate in or provide insights into the structure or

efficiencies of the two businesses.

The mast recently published income statements for both Balgro and Calgro are presented

below, together with extracts from their statements of financial position.

Required:

Write a report, as requested by the chairman of Lotty in which you compare and contrast

the financial performance and financial position of Belgro and Calgro.

Note:

Calculate and analyse the key financial ratios and any other relevant financial ratios.

Show your calculations seporately in the form of an appendix.

Your analysis should have a condusion on wity these comperies have different

results.

Corsider year end balances to approximate averages for the year.