The following information has been extracted from the published accounts of Gideon Plc.

Extracts from the profit and loss accounts

2004 2003

K000 K000

Sales revenue 22 400 19 500

Cost of sales 16 920 13 650

Net profit before tax 930 640

This is after charging:

Depreciation 720 560

Debenture interest 160 120

Audit fees 24 20

Balance sheet as at 31^st December

2004 2003

K000 K000

Non-current assets 3 700 2 860

Current assets:

Inventory 1 280 980

Trade receivables 2 460 2 160

Cash 160 240

3 900 3 380

Total assets 7 600 6 240

Capital and reserves:

Ordinary share capital 1 600 1 600

Reserves 2 490 1 750

4 090 3 350

Long-term liabilities:

10% debentures 1 600 1 200

Current liabilities:

Bank overdraft 220 160

Trade payables 1 500 1 380

Taxation 190 150

1 910 1 690

Total capital and liabilities 7 600 6 240

The latest industry average ratios are:

Current ratio 1.90

Quick ratio 1.27

Receivables turnover 52 days

Payables turnover 49 days

Inventory turnover 18.3 times

Required:

1. Calculate comparable ratios (to two decimal places where appropriate) for Gideon Plc for the years 2003 and 2004.
2. Comment on the liquidity and efficiency ratios of Gideon Plc, comparing the results

against the two years and against the industry.

Total (20 Marks)