Question 1 Your firm has been asked by Salford, a company owning a chain of hardware shops to carry out a preliminary investigation with a view to the possible acquisition of two smaller companies in the same trade, Feltham and Hounslow. You are not able to visit either of the companies' premises but have obtained copies of their latest accounts, both for the year ended 31 March 2013. The income statements and balance sheets are set out below: Balance sheet Feltham Hounslow 000 000 Non-current assets 216 268 Current assets Inventory 104 Receivables 38 Cash 437 eas 38 Capital and reserves Ordinary share capital Accumulated profits Non-current liabilities 10% Loan notes Bank loan (secured) * * * Current liabilities Payables Taxation Dividends 563 Income statements Feltham 000 840 (610) 230 (115 (30 Hounslow 000 762 (505) 257 (56 (57) 144 (10 (6) Sales revenue Cost of sales Gross profit Distribution costs Administrative expenses Operating profit Interest payable Profit before taxation Taxation Profit after taxation Dividends Retained profit/(loss) for the year Accumulated profits b/f Accumulated profits c/f 138 (40) (30) 98 (10) (33) Required: Write notes for a meeting with the directors of Salford to discuss your findings. Include the following in your notes: Appropriate accounting ratios indicating the profitability and liquidity of the two companies. Brief comments on these ratios. An indication of the reasons for which one company might be preferable to the other as an investment