QUESTION 5 [25 MARKS]

Below are the extracts of Meraviglia Ltds financial statements:

Statement of financial positions as at 30 September

	2020	2019
	$000	$000
Non-current assets	24,500	22,600
Current assets
Inventory	2,500	2350
Trade receivables	3000	3300
Bank		1050
Assets classified as held for sale	7000
	12500	6700
Total assets	37,000	29300
Equity and liabilities
Equity shares of $1 each	15,000	15000
Retained earnings	2500	2500
	17500	17500
Non-current liabilities
7% loan notes	12000	5000
Current liabilities
Bank overdraft	2150
Trade payables	3400	3800
Tax payable	1950	3000
	7500	6800
	37000	29300

Statements of profit or loss for the year ended 30 September

	2020	2019
	$000	$000
Revenue	37600	31300
Cost of sales	(28,500)	(23,700)
Gross profit	9,100	7600
Operating expenses	(3,900)	(3,450)
Finance costs	(840)	(350)
Profit before tax	4360	3800
Tax expense	(1000)	(800)
Profit for the period	3360	3000

Meraviglia Ltd is a company operating in the production of foods which are supplied to hotels with rating above four. Due to the recent pandemic of Covid 19, the board has decided to close one of its divisions. The Chief Finance Officer has classified the assets of the division as held for sale since the criterion of IFRS 5 - Non-current Assets Held for Sale and Discontinued Operations has been satisfied. The carrying amount of the assets classified as held for sale at 30 September 2019 was $ 7.3 million

The following ratios have been calculated for Meraviglia Ltd for the year ended 30 September 2019:

	2019
Return on capital employed	27.3%
Gross profit margin	24.3%
Operating expenses to turnover	11.0%
Profit before interest and tax margin	13.3%
Net assets turnover	1.93 times
Current ratio	0.99
Quick ratio	0.64
Inventory turnover	36 days
Receivables days	38 days
Payables days	59 days
Gearing	22%

REQUIRED

(a) Calculate ratios for Meraviglia Ltd for the year ended 30 September 2020 equivalent to those calculated for the year ended 30 September 2019. [15 Marks]

(b) Assess the financial performance and position of Meraviglia Ltd for the two years ended 30 September 2020. [10 Marks]