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^st December 2018 are given below.

	Alpha	Beta Ltd
	000	000
Sales	5,800	6,400
Cost of Sales	3,750	4,300
Gross profit	2,050	2,100
Operating Expenses	750	1,150
Profit before interest and taxation	1,300	950
Interest payable	60	280
Profit before taxation	1,240	670
Taxation	410	220
Profit after taxation	830	450

	Alpha Ltd		Beta Ltd
	000	000	000	000
Assets
Non-current assets		4,600		6,700
Current Assets
Inventories	550		900
Trade receivables	675		1,120
Bank balance	350	1,575		2,020
Total Assets		6,175		8,720
Equity
Share capital		2,200		2,100
Retained Earnings		2,525		1,050
		4,725		3,150
Liabilities
Non-current liabilities
Long term loans		600		3,750
Current liabilities
Trade payable	475		1,140
Dividends payables	375		220
Bank Overdraft		850	460	1,820
		6,175		8,720

For both companies, all purchases and sales are made on credit terms

Required

Using the above Statement of Financial Position and Income Statements, evaluate both companies using ratio analysis. The following ratios are to be calculated

1. 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)

2. 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)

3. What further information should be requested form both companies (4 marks)