Non-current assets Property (NBV) Equipment (NBV) Vehicles (NBV) Statements of Financial Position at 31 March 2011 000 000 000 1.800 270 180 2.250 2012 000 1,710 405 144 2.259 Current assets Inventory (cost) Trade receivables Cash in hand and at bank 374 324 110 808 500 492 43 1,035 Current liabilities Trade payables Taxation payable 347 198 545 218 223 441 Net current assets 263 594 Non-current liabilities 10% Debentures 2014 270 2.513 2.583 Net assets Equity Ordinary share capital Retained earnings 2,160 353 2.513 2160 423 2.583 The managing director, who was previously a sales manager with a well-known public limited company, has asked for your advice concerning the points that follow: (a) She was led to understand that the debenture issue which took place in April 2011 would improve the cash balances of the company. She realises that some of the proceeds went towards buying new equipment but cannot understand where the rest of the proceeds have gone and is worried about the company's liquidity. (b) The investment in new equipment in April 2011 was part of a plan to increase the scale of operations by 25% in 2011/12. She had hoped that this would bring about a proportionate improvement in profit, but can see that this has not happened. There were no disposals of non-current assets during the year to 31 March 2012. Required: Prepare a brief report for the managing director to help explain what has happened to GURI Ltd during the year to 31 March 2012, and comment on the significance of your findings. Your report should be based around the discussion of profitability, efficiency, and liquidity You can start by conducting a vertical common-size analysis, as well as using ratios when analysing profitability, efficiency, and the liquidity of the company. GURI Ltd. is in business as a frozen foods wholesaler. The accounts of the company for the past two years, as prepared for internal management, are set out below: Sales Cost of sales Gross profit Income statement for vear ended 31 March 2011 '000 2,981 1.789 1,192 2012 '000 3,427 2.124 1,303 Wages and salaries Distribution expenses Advertising Office expenses Depreciation 430 119 45 49 153 477 126 9 47 171 796 830 396 Operating profit Interest 473 27 -- Profit before taxation Taxation Profit for the financial year 396 198 198 446 223 223 Dividends of 99,000 were paid during the year ended 31 March 2011 and 153,000 during the year ended 31 March 2012