Valley Company Ltd is a holding company with subsidiaries that have diversified interests. Valley Company Ltd$$s board of directors is interested in the group acquiring a subsidiary in the Machine tools manufacturing sector. Two companies have been identified as potential acquisitions: A Ltd and B Ltd$.$ Summaries of these companies$$ accounts are shown below:

Statement of profit or loss for the year ended $30$th April $2022$

A Ltd TZS $000$ B Ltd TZS $000$

Turnover $985,000560,000$

Cost of goods sold:

Opening stock $150,000145,000$

materials $255,000136,000$

Labour $160,000125,000$

Factory overheads $205,000111,000$

Depreciation $35,00020,000$

Closing stock $(155,000)(140,000)$

$650,000397,000$

Gross profit $335,000163,000$

Selling and administration expenses $(124,000)(75,000)$

Interest $(35,000)(10,000)$

Profit before taxation $176,00078,000$

Taxation $(65,000)(25,000)$

Profit after taxation $111,00053,000$

Statement of financial position as at $30$th April $2022$

A Ltd TZS $000$ B Ltd TZS $000$

Fixed assets $($Net$)765,000410,000$

stock $155,000140,000$

Debtors $170,000395,000$

Bank $50,00045,000$

Total current assets $375,000580,000$

Total assets $1,140,000990,000$

Trade creditors $235,000300,000$

Other $130,000125,000$

Debentures $220,00070,000$

Total liabilities $585,000495,000$

Total assets less total liabilities $555,000495,000$

Share capital $450,000440,000$

Profit or loss account $105,00055,000$

Total Equity $555,000495,000$

REQUIRED;

a$)$ Calculate the following ratios for each company:

i$)$ Return on capital employed

ii$)$ Total assets turnover

iii$)$ Fixed assets turnover

iv$)$ Gross profit as a percentage of turnover

v$)$ Profit before tax and interest as a percentage of turnover

vi$)$ Current ratio

vii$)$ Acid test ratio

viii$)$ Debtors ratio $($in weeks$)$

ix$)$ Gearing ratio

x$)$ Shareholders$$ funds as a percentage of tangible assets.

b$)$ On the basis of ratios you have calculated in $($a$)$ above, prepare a report for the board of Valley Company Ltd assessing the financial performance and position of A Ltd and B Ltd$.$ Your report should be prepared in the context of Valley Company Ltd$$s interest in the two companies.