Question 5 The new Chief Executive Officer (CEO) of Grenger plc wants to review the position of his new company in the marketplace and wants to use the accounts of the top performing competitor for this purpose. The market in which Grenger plc operates is in the expansion stage. The CEO believes there is significant scope for Grenger plc to grow and increase profits. Grenger plc's Board has been presented with key financial data for the year ended 31 December 2019 for itself and Harrison plc (a competitor): Income Statements for the year ended 31 December 2019 Grenger '000 Harrison '000 Revenue 485 825 (518) (312) 173 307 (10) Cost of sales Gross profit Distribution costs Administration costs Operating profit Finance costs (11) (89) 73 (110) 187 (1) (15) Profit before tax 72 172 (43) Tax expense Profit for the year (18) 54 129 Statements of Financial Position as at 31 December 2019 Grenger Harrison E'000 E'000 ASSETS Non-current assets 208 425 197 295 Current assets Total assets 405 720 40 50 EQUITY AND LIABILITIES Share capital Retained earnings Total equity 255 420 295 470 Non-current liabilities Long-term borrowings 19 110 Current liabilities 91 140 110 Total liabilities Total equity and liabilities 250 720 405 (a) Calculate the following ratios for both Grenger plc and Harrison plc: Return on Capital Employed (ROCE); Gross Profit ratio; Gearing Ratio, Interest cover ratio, Current Ratio. (10 marks) (b) Analyse what these ratios tell the CEO about the performance of Grenger plc, with reference where possible to Harrison plc. MOMN07556