Q Income Statement $($profit and loss account$)$ for the year ended

$31$ December $2019.$

Required:

$($a$)$ Calculate the percentage increase in sales.

$($b$)$ Carry out a vertical analysis of the Income Statement $($i$.$e$.$ calculate every line

of the Income Statement as a percentage of sales$).$ Using the figures you

have calculated, compare the $2019$ results with the $2018$ results and suggest

reasons why the relationships might have changed.

$($c$)$ Calculate the following accounting ratios for both $2019$ and $2018.$

$($i$)$ Gearing ratio.

$($ii$)$ Interest cover.

$($iii$)$ Current ratio.

$($iv$)$ Acid test $($quick$)$ ratio.

$($d$)$ Comment on the ratios in c$)$ above, whilst discussing the long and short$-$term

liquidity of the company. Also discuss the benefits or otherwise of increasing

or decreasing the gearing of a company.

Ratios in b$)$ and c$)$ should be calculated on year$-$end numbers and not

averages. A selection of formulae for ratios is attached at the end of this

paper on pages $9$ and $10.$ Not all of these formulae may be relevant.