The following are the financial statements of E Ltd for the years ended 31 March 20x2 and 20x3.

Balance sheets as at 31 December

20x3 20x2

$000 $000 $000 $000

Non current assets, at net book value 280 315

Current assets

Stock 290 240

Debtors 140 120

Bank 55 0

485 360 360

Total assets 765 675

Equity

Share capital 100 100

Reserves 315 85

415 185

Long term liabilities

8% Debentures (issued in 20x0) 240 240

Current liabilities

Creditors 110 100

Bank overdraft 0 150

110 250

110 250

Total equity and liabilities 765 675

Income statements for the years ended 31 March

20x3 20x2

$000 $000 $000 $000

Sales 1,700 1,500

Opening stock 240 200

Purchases 1,150 1,090

1,390 1,290

Less: Closing stock 290 240

Cost of sales 1,100 1,050

Gross profit 600 450

Less: Operating and finance costs 340 270

Net profit 260 180

Taxation 30 20

Net profit after taxation 230 160

REQUIRED:

(a) Calculate to one decimal place the following ratios for E Limited for both years 20x2 and 20x3. Show workings. (64 marks)

(i) Acid test ratio;

(ii) Current ratio;

(iii) Creditors repayment period (in days);

(iv) Debtors collection period (in days);

(v) Gearing ratio;

(vi) Gross profit to sales percentage;

(vii) Net profit (before interest and taxation) to sales percentage; and

(viii) Return on capital employed

(b) Comment on the performance of E Limited over the two year period using the ratios calculated in (a) in terms of: (36 marks)

(i) Liquidity

(ii) Long term solvency/risk

(iii) Profitability