Please help with this question on ratios and explanation :)
Question 2 Company Parker Ltd wants to increase its efficiency and effectiveness but especially its profitability and performance. For this reason, the management of the company is evaluating to purchase company Bolton Ltd that is a supplier of raw materials to Parker Ltd. They, in fact, estimate that if Bolton Ltd will be part of the group the profitability would improve in the next few years. In year 2021 company Parker Ltd reported the following ratios: 6% Gross Margin 28% Operating margin ROCE 10% Inventory days 25 days Receivable days 35 days Payable days 40 days Below are the summarised financial statements for Bolton Ltd. Income Statements Bolton Ltd for years 2019, 2020 and 2021 2019 2020 2021 Sales 16,064 16,080 1,6200 Cost of sales 11,248 11,652 12,072 Gross Profit 4,816 4,428 4,128 Expenses 3,752 3,772 3,496 Operating profit (PBIT) 1,064 656 632 Interest 96 104 120 Profit before tax 968 552 512 Tax 184 132 104 Profit after tax 784 420 408 Dividends 0 0 O Preference 64 72 72 Ordinary 108 128 140 Retained profit for year 612 220 196 Statement of Financial Position Bolton Ltd for years 2019, 2020 and 2021 2019 2021 2020 Non-current assets Land 2,500 2,500 2,500 Property, plant & equipment 3.880 3.740 4,216 Total Non-current Assets 6,380 6,240 6,716 Current assets 216 360 544 Inventory Receivables 968 1,040 1,072 Cash at bank 240 168 72 Total Current Assets 1.424 1.568 1.688 Total assets 7,804 7,808 8,404 Capital Ordinary shares 1 2,400 2,400 2,400 Preference shares 1 800 800 800 Share premium 96 134 200 Retained profits 2,206 2.426 2.622 5,502 5,760 6,022 960 1040 1200 Total capital Non-current liabilities Long term loan 10% Total Non-current liabilities Current liabilities Accounts payable 960 1040 1200 414 538 596 Tax 184 132 104 Other current liabilities 744 338 482 Total Current liabilities 1,342 1.008 1.182 Total Capital and Liabilities 7,804 7,808 8,404 Required a. Calculate for Bolton Ltd the following ratios: Gross Margin; Net profit Margin; ROCE; Inventory days; Receivable days; Payable days. (9 marks) b. Comment on each ratio calculated above in (a) and its implications and if the purchase of Bolton can be evaluated as a good investment for Parker Ltd. (11 marks) Total 20 marks