Question 2 (CLO 5) Two companies Ebony and Ivory trade in the same market. Their financial statements for the year ended 31 October 2017 are summarized below: Income statements for the year ended 31 October 2017 Ebony Ivory S s $ s Sales revenue 284,000 305.000 Cost of sales (155,000) (151,000) Gross profit 129,000 154,000 Expenses: Administrative (24.000) (37,000) Selling and distribution (35,000) (53,000) Depreciation (9.000) (12.000) Loan note interest (5,000) (68.000) (107.000) Net profit 61.000 47.000 Balance sheets as at 31 October 2017 Ebony Ivory Assets S S S Non-current assets At cost 320,000 515,000 Accumulated depreciation (75,000) (96,000) 245.000 419.000 Current assets Inventory 91,000 293.000 Receivables 46.000 75,000 Bank 64.000 201.000 15.000 383.000 Total assets 446.000 802.000 Equity and liabilities Share capital and reserves Share capital Retained earnings 10% Loan note Current liabilities Total equity and liabilities 150,000 108.000 250,000 177,000 50,000 325.000 802.00.0 188.000 446.000 Required: Page 5 of 14 (a) Calculate the following ratios for Ebony and Ivory. (Show The formulas used for the calculations.) Profitability ratios: Gross profit percentage Net profit percentage Return on capital employed Liquidity ratios: Current ratio Quick ratio (acid test ratio) Average collection period (15 marks) (b) Compare and comment on the performance of the companies using any two ratios from each of the categories in part (a). (10 marks)