This scenario relates to two requirements. You are working in the finance department for Deej Co. The directors of Deej Co want to compare their performance to others in the sporting goods industry. Your manager has asked you to assess the performance, position and cash flows of Deej Co compared to SG Co, its closest competitor. Both entities prepare financial statements to 31 December each year. Extracts from the financial statements of both companies have been provided below. Statement of profit or loss extracts for the year ended 31 December 20X2: Statement of financial position extracts as at 31 December 20X2: Statement of cash flows extracts for the year ended 31 December In addition to the extracts above, an analyst in your company has calculated the following which should help with your analysis: The following information is relevant: Both companies operate in the sporting goods sector, but Deej Co has (1) started to focus on athletic leisurewear over the last two years. This market has grown dramatically, and now makes up 70% of Deej Co's revenue. This has led to a move away from its tradition of selling sporting equipment. The Deej Co analysts have seen industry projections that the market for athletic leisurewear will grow by 10% per year for the next few years, while the sporting equipment market is predicted to remain stable. (2) SG Co continue to primarily sell sporting equipment. The sporting equipment is sold at lower margins than the industry average, with the aim of generating large volumes of sales. The only clothing items sold by SG Co are for specific sporting activities, with no focus on any athletic leisurewear. (3) Deej Co received a new loan in 202. This loan was used to rebrand their existing physical stores and open a number of new stores aligned with the fashionable nature of the Deej Co brand. (4) Throughout the year, Deej Co has paid famous individuals from both the sports and music industries to lead marketing campaigns. Deej Co has been able to secure exclusivity over the sale of several specific lines of premium footwear over the next few years, as it is now the largest seller of athletic leisurewear in the country. (5) SG Co has invested in the website and delivery aspect of the business, which has enabled it to significantly increase the online sales. I his investment was financed from its cash resources. SG Co has not invested substantially in its stores but has generated sales by setting very competitive prices for their products. (6) For the first time in a number of years, SG Co issued more shares These were issued to an overseas investor, with an aim to develop relationships which may lead towards expansion into that country. (7) Both SG Co and Deej Co lease a similar number of retail stores. SG Co generally signs up to long-term leases for retail stores in large retail parks outside of traditional city centres. Deej Co generally has smaller retail stores but in the most fashionable areas of city centres. Deej Co tries to keep its leases as short as possible, with most stores being on a maximum of five-year terms (a) Using the pre-formatted table provided, calculate the following ratios for both Deej Co and SG Co: - Gross profit margin; - Operating profit margin; - Return on capital employed; - Net asset turnover; and - Inventory turnover period (days). (6 marks) (b) Comment on the financial performance, position and cash flows of both Deej Co and SG Co for the year ended 31 December 202. (14 marks) This scenario relates to two requirements. You are working in the finance department for Deej Co. The directors of Deej Co want to compare their performance to others in the sporting goods industry. Your manager has asked you to assess the performance, position and cash flows of Deej Co compared to SG Co, its closest competitor. Both entities prepare financial statements to 31 December each year. Extracts from the financial statements of both companies have been provided below. Statement of profit or loss extracts for the year ended 31 December 20X2: Statement of financial position extracts as at 31 December 20X2: Statement of cash flows extracts for the year ended 31 December In addition to the extracts above, an analyst in your company has calculated the following which should help with your analysis: The following information is relevant: Both companies operate in the sporting goods sector, but Deej Co has (1) started to focus on athletic leisurewear over the last two years. This market has grown dramatically, and now makes up 70% of Deej Co's revenue. This has led to a move away from its tradition of selling sporting equipment. The Deej Co analysts have seen industry projections that the market for athletic leisurewear will grow by 10% per year for the next few years, while the sporting equipment market is predicted to remain stable. (2) SG Co continue to primarily sell sporting equipment. The sporting equipment is sold at lower margins than the industry average, with the aim of generating large volumes of sales. The only clothing items sold by SG Co are for specific sporting activities, with no focus on any athletic leisurewear. (3) Deej Co received a new loan in 202. This loan was used to rebrand their existing physical stores and open a number of new stores aligned with the fashionable nature of the Deej Co brand. (4) Throughout the year, Deej Co has paid famous individuals from both the sports and music industries to lead marketing campaigns. Deej Co has been able to secure exclusivity over the sale of several specific lines of premium footwear over the next few years, as it is now the largest seller of athletic leisurewear in the country. (5) SG Co has invested in the website and delivery aspect of the business, which has enabled it to significantly increase the online sales. I his investment was financed from its cash resources. SG Co has not invested substantially in its stores but has generated sales by setting very competitive prices for their products. (6) For the first time in a number of years, SG Co issued more shares These were issued to an overseas investor, with an aim to develop relationships which may lead towards expansion into that country. (7) Both SG Co and Deej Co lease a similar number of retail stores. SG Co generally signs up to long-term leases for retail stores in large retail parks outside of traditional city centres. Deej Co generally has smaller retail stores but in the most fashionable areas of city centres. Deej Co tries to keep its leases as short as possible, with most stores being on a maximum of five-year terms (a) Using the pre-formatted table provided, calculate the following ratios for both Deej Co and SG Co: - Gross profit margin; - Operating profit margin; - Return on capital employed; - Net asset turnover; and - Inventory turnover period (days). (6 marks) (b) Comment on the financial performance, position and cash flows of both Deej Co and SG Co for the year ended 31 December 202. (14 marks)