The following ratio information about Quality pic for the year ended 31 December2014 has been provided to you along with the sector average ratios: Quality Sector average 12% 16.8% Return on capital employed Net asset turnover Operating margin 1.6 1.4 7.5% 12% Gearing (based on market value) see below 38% Quality's equity liabilities can be summarised as follows: Equity Ordinary 1 shares Reserves 5% Loan notes 14 At 31 December 2014, the market value of 1 Quality share is 2.50 and the value of each 100 bond is 105. Required: a) Calculate the gearing ratio for Quartile. b) Assess the position of Quartile in comparison to the sector averages for the ratios provided above. c) Discuss the limitations of ratio analysis. 15 12 Em