Question 5: (20 marks) a. Annual reports provide valuable information to its users. Why annual reports are prepared? What type of information usually discussed in annual reports? (5 marks) b. Morning star plc. is a manufacturer of computer accessories. The following are selected items appearing in the income statement and balance sheet for the year ended December 31, 2015. Income Statement Net Sales Less: Cost of Goods Sold Gross Profit Selling and general expenses Net Operating profit Interest expenses Net Profit before ta Income tax 35% Net profit for the year 2,160,000 1,296,000 864,000 619,200 244,800 28,300 216,000 64,800 151,200 Balance Sheet Cash and short-term investments 38,400 Receivables 182,400 Inventories 192,000 Property, plant & Equipment 1,540,800 Total Assets 1,440,000 Total current liabilities 192,000 Total Non-current liabilities 288,000 Shareholder's Equity $10 par 384,000 Retained Earnings 576,000 Total Liabilities and Equity 1,440,000 Required: Using the information above, compute the Company's ratio below and comment on each: a. Current ratio b. Asset Turnover CEPS d. Interest cover e. Gearing ratio