Shown below are the recently issued (summarised) financial statements of Jones PLC, a listed company, for the year ended 30 September 2017, together with comparatives for 2016 and extracts from the Chief Executive's report that accompanied their issue.

Profit and loss account 2017 2016

'000 '000

Turnover 250,000 180,000

Cost of sales (200,000) (150,000)

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Gross profit 50,000 30,000

Operating expenses (26,000) (22,000)

Finance costs (8,000) (nil)

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Profit before tax 16,000 8,000

Corporation tax (at 25%) (4,000) (2,000)

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Profit for the period 12,000 6,000

Balance sheet20172016

Fixed assets

Goodwill 10,000 nil

Tangible fixed assets 210,000 90,000

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220,000 90,000

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Current assets

Stock 25,000 15,000

Debtors 13,000 8,000

Bank nil 14,000

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38,000 37,000

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Creditors: amounts falling due within one year

Bank overdraft 17,000 nil

Trade creditors 23,000 13,000

Corporation tax payable 4,000 2,000

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(44,000) (15,000)

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Creditors: amounts falling due after more than one year

8% loan notes (100,000) (nil)

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114,000 112,000

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Capital and reserves

Equity shares of 1 each 100,000 100,000

Profit and loss account 14,000 12,000

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114,000 112,000

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Extracts from the Chief Executive's report:

'Highlights of Jones Limited's performance for the year ended 30 September 2017:

• an increase in turnover of 39%
• gross profit margin up from 167% to 20%
• a doubling of the profit for the period.

In response to the improved position the Board paid a dividend of 10 cent per share in September 2017 an increase of 25% on the previous year.'

You have also been provided with the following further information.

On 1 October 2016 Jones PLC purchased the whole of the net assets of Smith Limited (previously a privately owned entity) for 100 million. The contribution of the purchase to Jones PLC's results for the year ended 30 September 2017 was:

'000

Turnover 70,000

Cost of sales (40,000)

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Gross profit 30,000

Operating expenses (8,000)

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Profit before tax 22,000

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There were no disposals of fixed assets during the year.

The following ratios have been calculated for Jones PLC for the year ended 30 September 2016:

Return on year-end capital employed 71% (profit before interest and tax over total assets less current liabilities)

Net profit (before tax) margin 44%

Current ratio 25

Closing stock holding period (in days) 37

Trade Receivables collection period (in days) 16

Trade Payables period (based on cost of sales) (in days) 32

Gearing (debt over debt plus equity) nil

Required:

(a)Calculate ratios for Jones PLC for the year ended 30 September 2017 equivalent to those calculated for the year ended 30 September 2016 (showing your workings).

(b)Assess the financial performance and position of Jones PLC for the year ended 30 September 2017 compared to the previous year. Your answer should refer to the information in the Chief Executive's report and the impact of the purchase of the net assets of Smith Limited.