required

1. compare the performance of company X and company Y using the relevant ratios, making recommendations as how

performance could be improved

2. A discussion of each ratio explaining its purpose, your observations and your interpretations.

3. summarize your observation in relation to which company is better for investment.

Company X INCOME STATEMENTS '000 '000 Turnover 80,000 Opening inventory 26,000 Purchases 51,000 77,000 Closing inventory (14,000) Cost of Sales |(63,000) Company Y '000 '000 110,000 20,500 90,5001 111,000 (18,000) |(93,000) 17,000 17,000 Gross profit Expenses Depreciation Other expenses (4,000) (4,500 Operating profit Interest paid Profit before tax Taxation Net Profit (1,200) (9,300) (10,500) 6,500 (500) 6,000 (1,400) 4,600 (8,500) 8,500 (1,000) 7,500 (1.700) 5,800 22,5001 (6,500) Statement of Financial Position ASSETS Non-current Assets Equipment at cost 12,000 Depreciation (8,000) Net Book Value Current Assets Inventory 14,000 Receivables 22,000 Bank 6,000 4,000 16,000 18,0001 19.000 3,500 42,000 40,500 (7,000) (12,000) LIABILITIES Current Liabilities Trade payables Non-current Liabilities Bank loan Net Assets (5,000) 34,000 (10,000) 34,500 CAPITAL Ordinary share capital Retained profit 15.000 19,000 34,000 22.000 12,500 34,500 '000 '000 3,300 Dividend Paid 2,250 You are required to: Write a report comparing the performance of company X and company Y using the relevant ratios, making appropriate recommendations as how performance could be improved. Discuss their relevant strengths and weaknesses of each ratios used. Requirements of the report The report should have: 1. A word count of 1,500 words; 2. A table of contents and a summary: 3. A discussion of each ratio explaining its purpose, your observations and your interpretations. 4. An overall conclusion summarizing your observations in relation to which company is better for investment; 5. Good spelling and grammar: 6. Appendices that support your arguments and calculations; 7. You should clearly show all the formulae and calculations in the appendices. The figures should be rounded to 2 decimal places. A specified word count of Task 2 refers to the main body of the report and does not include the title page, contents page and appendices. Both Task 1 and Task 2 to be completed in the word document