Prestige Ltd wishes to choose a long term supplier for wooden components. They have identified two potential suppliers Alpha Ltd and Beta Ltd and their financial statements for the year ended 31 December 2018 are given below. Alpha 000 Beta Ltd 000 Sales Cost of Sales Gross profit Operating Expenses Profit before interest and taxation Interest payable Profit before taxation Taxation Profit after taxation 5,800 3,750 2,050 750 1,300 60 1,240 410 830 6,400 4,300 2,100 1,150 950 280 670 220 450 Alpha Ltd Beta Ltd 000 000 000 000 Assets 4,600 6,700 Non-current assets Current Assets Inventories Trade receivables Bank balance 900 550 675 350 1,120 2,020 1,575 6,175 Total Assets 8,720 Equity Share capital Retained Earnings 2,200 2,525 4,725 2,100 1,050 3,150 600 3,750 Liabilities Non-current liabilities Long term loans Current liabilities Trade payable Dividends payables Bank Overdraft 475 375 1,140 220 460 850 6,175 1,820 8,720 For both companies, all purchases and sales are made on credit terms Page 5 of 8 Required Using the above Statement of Financial Position and Income Statements, evaluate both companies using ratio analysis. The following ratios are to be calculated (i) Calculate all the following ratios for the years 2018. (14 marks) 1. Profitability-three ratios (3 marks) 2. Liquidity-two ratios (5 marks) 3. Efficiency-three ratios (3 marks) 4. Gearing - one ratio (3 marks) (ii) Use the information provided by these ratios to explain to the management of Prestige Ltd which will be the better Company to supply the components (7 marks) (iii) What further information should be requested form both companies (4 marks)