Question 2 Riviana plc has embarked on a programme of growth through acquisitions and has identified Seminis Ltd and Odwalla Ltd as companies in the same industrial sector, as potential targets. Using recent financial statements of both Seminis and Odwalla and further information obtained from a trade association, Riviana plc has managed to build up the following comparability table: Odwalla Seminis Industrial average Profitability ratios ROCE before tax % 9.3 7.3 6.7 Return on equity % 7.3 6.0 5.0 Net profit margin % 1.7 3.7 2.3 Gross profit ratio % 4.0 8.3 6.7 Activity ratios Total assets turnover = times 0.5 Non-current asset turnover = times 4.0 0.8 1.7 Receivables collection period in weeks 1.7 2.2 Inventory holding period in weeks 1.3 7.0 4.3 Liquidity ratios Current ratio 0.6 0.9 Acid test 0.3 0.1 0.4 Debt-equity ratio % 6.7 26.7 21.7 1.3 0.8 2.7 0.6 Required: (a) Prepare a performance report for the two companies for consideration by the directors of Riviana plc indicating which of the two companies you consider to be a better acquisition. [30 marks] (b) Indicate what further information is needed before a final decision can be made (at least three points). [20 marks) 100