The accountant of Maypole plc has just completed the financial reports for the year ended 31^st December 2017. The Financial Director has asked for a report to be prepared to enable the Board of Directors to get a clear picture of the performance and financial position of the company. The company produces only one product and it is sold worldwide.

Required

(a) Discuss the performance over the period from 2015 to 2017 and the financial position at the end of each year. In your answer, focus on the possible causes of the differences over the three year period.

(b) Suggest ways by which the Return on Capital Employed (ROCE) could be improved.

2015 300 2016 900 2017 1000 Sales - units Sales revenue Cost of sales Gross profit 000 84.0 21.0 63.0 E000 36.4 28.0 58.4 E000 38.0 32.0 66.0 Administration expenses Advertising and promotion expenses 16.0 20.6 36.6 18.9 27.8 46.7 22.0 30.0 52.0 26.4 11.7 14.0 5.0 9.0 Profit before interest and tax Interest expense Profit / (Loss) before tax Tax payable Profit for the year 13.0 5.0 3.3 Ratios (using the ratios in the course notes) Gross profit percentage Net profit percentage Return on Capital Employed Return on Shareholders Funds Inventory-days Receivables - days Gearing Times Interest Earned 75.0% 31.4% 13.3% 15.0% 139 67.6% 13.5% 6.6% 3.8 156 58 24.4% 2.3 67.3% 14.3% 6.3% 2.8% 194 82 34.5% 1.5 7.3% 26.4 2015 300 2016 900 2017 1000 Sales - units Sales revenue Cost of sales Gross profit 000 84.0 21.0 63.0 E000 36.4 28.0 58.4 E000 38.0 32.0 66.0 Administration expenses Advertising and promotion expenses 16.0 20.6 36.6 18.9 27.8 46.7 22.0 30.0 52.0 26.4 11.7 14.0 5.0 9.0 Profit before interest and tax Interest expense Profit / (Loss) before tax Tax payable Profit for the year 13.0 5.0 3.3 Ratios (using the ratios in the course notes) Gross profit percentage Net profit percentage Return on Capital Employed Return on Shareholders Funds Inventory-days Receivables - days Gearing Times Interest Earned 75.0% 31.4% 13.3% 15.0% 139 67.6% 13.5% 6.6% 3.8 156 58 24.4% 2.3 67.3% 14.3% 6.3% 2.8% 194 82 34.5% 1.5 7.3% 26.4