Question 4 The financial statements of Rossi plc are given below for the year ended 31 October 2020 along with some average ratios for the industry Statements of profit or loss for the year to 31 October 2020 6000 Sales revenue 9,400 Cost of sales 4,750 Gross profit 4,650 Operating expenses 3,194 Operating profit 1,456 Debenture interest Profit before taxation 1,372 Taxation 480 Profit for the year 892 Statement of financial position as at 31 October 2020 000 Assets Non-current assets Property, plant & equipment 3,770 84 000 Current assets Inventories Trade receivables Cash TOTAL ASSETS 620 1,540 1,200 3,360 7,130 Equity Ordinary share capital Retained earnings 450 4,040 Liabilities Non current liabilities UX Debentures 1,400 Current liabilities Trade payables Current tax liability 300 9-40 1.240 2.130 Notes: Page 7 of 0 1. The closing inventory on 31 October 2019 was 640,000 2. The directors have recommended a dividend of 36.7 cent per share for the year to 31 October 2020 3. The ordinary shares of Rossi plc have a nominal value of 0.60 per share. 4. The market price of a share in rossi plc at 31 October 2020, was 1.10. The following information has been made available to you: Rossi ple Industry 2019 Average Gross profit margin 54.0% 60.0% Operating profit margin 25.6% 30.2% ROCE 29.3% 35.2% Current ratio 1.9:1 2.4:1 Inventory turnover period 45 32 Gearing ratio 21.0% 18.0% Settlement days for receivables 57.3 62.4 Settlement days for payables 90.5 92.6 Earnings per share 92c 1.450 P/E ratio 15 17 Show workings to one decimal place. Required (a) Calculate ratios which measure: 1. Profitability: 2. Liquidity; 3. Efficiency, and 4. Gearing Write a report to the management of Rossi ple and comment of any feature of the that you consider to be significant, using appropriate ratios to support your views (21 marks) (b) Outline the three areas you would prioritise as a result of your analysis of the information in (a) above (9 marks) Total 30 marks END OF PAPER Page 6 of 8