The summarised consolidated financial statements for the year ended 30 September 20X5 (and the comparative figures) for the Tangier group are shown below. Consolidated statements of profit or loss for the year ended 30 September: Revenue Cost of sales Gross profit Administrative expense Distribution costs Finance costs Profit before taxation Income tax expense Profit for the year 20X5 Rm 2,700 (1,890) 810 (345) (230) (40) 195 (60) 135 Consolidated statements of financial position as at 30 September: 20X5 Rm 20X5 Rm 20X4 Rm 1,820 (1,092) 728 (200) (130) (5) 393 (113) 280 20X4 20X4 Rm Rm Consolidated statements of financial position as at 30 September: 20X5 Rm Non-current assets Property, plant and equipment Intangible asset: manufacturing licences goodwill Current assets Inventory 200 20X5 Rm 680 300 230 1,210 20X4 20X4 Rm Rm 110 310 100 200 610 Trade receivables Bank Total assets Equity and liabilities Equity shares of R1 each Other components of equity Retained earnings Non-current liabilities 5% secured loan notes 10% secured loan notes Current liabilities Bank overdraft Trade payables Current tax payable Total equity and liabilities 195 nil 395 1,605 330 100 375 805 100 300 400 110 210 80 400 1,605 75 120 305 915 250 nil 295 545 100 nil 100 nil 160 110 270 915 At 1 October 20X4, the Tangier group consisted of the parent, Tangier Co, and two wholly owned subsidiaries which had been owned for many years. On 1 January 20X5, Tangier Co purchased a third 100% owned investment in a subsidiary called Raremetal Co. The consideration paid for Raremetal Co was a combination of cash and shares. The cash payment was partly funded by the issue of 10% loan notes. On 1 January 20X5, Tangier Co also won a tender for a new contract to supply aircraft engines which Tangier Co manufactures under a recently acquired long-term licence. Raremetal Co was purchased with a view to securing the supply of specialised materials used in the manufacture of these engines. The bidding process had been very competitive and Tangier Co had to increase its manufacturing capacity to fulfil the contract. (a) Calculate appropriate ratios and comment on Tangier Co's profitability and gearing. Your analysis should identify instances where the new contract and the purchase of Raremetal Co have limited the usefulness of the ratios and your analysis. (22) Note: Your ratios should be based on the consolidated financial statements provided and you should not attempt to adjust for the effects of the new contract or the consolidation. Working capital and liquidity ratios are not required.