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

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 $'000 $'000 280 20x2 $'000 $'000 315 Non current assets, at net book value Current assets Stock Debtors Bank 240 120 485 360 Total assets 765 Equity Share capital Reserves 100 100 315 415 85 185 Long term liabilities 8% Debentures (issued in 20x0) 240 Current liabilities Creditors Bank overdraft 110 100 110 250 250 Total equity and liabilities 110 765 Income statements for the years ended 31 March 20x2 $'000 $'000 1,500 Sales Opening stock Purchases 20x3 $'000 1,700 240 1,150 1,390 290 1,100 600 200 1,090 1,290 240 1,050 Less: Closing stock Cost of sales Gross profit Less: Operating and finance costs Net profit Taxation Net profit after taxation 340 450 270 260 REQUIRED: (a) Calculate to one decimal place the following ratios for E Limited for both years 20x2 and 20x3. Show workings. (64 marks) (1) Acid test ratio; (ii) Current ratio; (iii) Creditors' repayment period (in days); (iv) Debtors' collection period (in days); 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) (ii) (iii) Liquidity Long term solvency/risk Profitability