Wrench Limited produces metal components for industrial machinery. The income statements and statements of financial position for 2019 and 2020 are as follows:

Income statements for the year ended 31 December
	2019		2020
	'000		'000
Revenue	2240		2190
Cost of sales	-1240		-1460
Gross profit	1000		730
Operating expenses	-380		-360
Depreciation	-132		-160
Operating profit	488		210
Interest payable	0		-16
Profit before taxation	488		194
Taxation	-160		-96
Profit for the year	328		98
Statements of financial position as at 31 December
	2019		2020
ASSETS	'000		'000
Non-current assets
Property, plant and equipment	1404		1374
Current assets
Inventories	283		430
Trade receivables	194		286
Cash	15		23
	492		739
Total assets	1896		2113
EQUITY AND LIABILITIES
Equity
Ordinary share capital	1000		1000
Retained earnings	512		590
	1512		1590
Non-current liabilities
Borrowings - bank loan	0		100
Current liabilities
Trade payables	106		143
Other payables and accruals	36		32
Taxation	80		48
Short-term borrowings	162		200
	384		423
Total equity and liabilities	1896		2113

1. Calculate the following ratios for 2019 and 2020 from the income statements and statements of financial position provided above (ratio formulas included at the end of the booklet).

• Return on capital employed
• Gross profit margin
• Operating profit margin
• Current ratio
• Quick ratio
• Average inventories turnover period
• Average settlement period for receivables
• Average settlement period for trade payables

(8 marks)

2. Using the information provided in the financial statements and the ratios that you have calculated, write a management report to the board of directors commenting on the companys operations for the financial year end 31^st December 2020 compared to the previous year.

(17 marks)

TOTAL 25 MARKS