The financial statements of Stone Limited for the most recent two years is shown below.

Extract from statement of profit or loss for the year ended 30 April

2019 2018 000 000

Revenue 224,000 195,000

Cost of sales (169,200) (136,500)

Gross profit 54,800 58,500

Administrative costs (32,700) (38,040)

Distribution cost (10,900) (12,680)

Finance cost -loan note interest (1,900) (1,380)

9,300 6,400

Statement of financial position as at 30 April.

2019 2018

Assets 000 000 000 000

Non-current assets 37,000 28,600

Current assets: Inventory 12,800 9,800

Trade receivables 24,600 21,600

Cash balance 1,600 2,400

39,000 33,800

Total assets 76,000 62,400

Equity and liabilities

Ordinary share capital 16,000 16,000

Retained earnings 26,200 18,600

42,200 34,600

Non-current liabilities:

10% loan notes 16,000 12,000

Current liabilities:

Bank overdraft 2,200 1,600

Trade payables 15,000 13,800

Taxation 600 400

17,800 15,800

Total equity and liabilities 76,000 62,400

The ratios for Stone Limited have been calculated below based on the previous year financial statement and latest industry average ratios.

Stone Ltd Industry 30 April 2018

Average Net profit margin 3.99% 4.73%

ROCE (Capital employed =equity +loan notes) 16.69% 18.50%

Asset turnover 4.19 times 3.91times

Current ratio 2.14:1 1.90:1

Quick ratio 1.52:1 1.27:1

Gross profit margin 30.0% 35.23%

Account receivables collection period 40 days 52days

Account payables payment period 17 days 49 days

Inventory turnover (Times) 13.9times 18.3times

Gearing ratio 25.75% 32.71%

Required:

1. Calculate the cash operating cycle of Stone Limited for the year ended 30 April, 2018 and 2019.

2. Calculate the comparative ratio(s) for Stone limited for the year ended 30 April 2019. (to two decimal places where appropriate).

3. Based on the result of the previous year end and the industry average. Draft a report addressed to the Board of Directors of Stone Limited analysing the performance of the company for the year 2019