You are a loan officer for Best Essex Bank, ASOS PLC has applied for a 1 million loan from Best Essex Bank. As part of your loan processing work, you have been presented with income statement and balance sheet of ASOS PLC below:

ASOS PLC income statement

ASOS PLC balance sheet

Task:

For the year ended 31 August 2018 and 31 August 2019, calculate ratios a) to f) (show all your workings):

1. Gross profit margin (6 marks)
2. Net profit margin (6 marks)
3. Current ratio (6 marks)
4. Quick ratio (6 marks)
5. Gearing (6 marks)
6. Interest cover (6 marks)
7. By interpreting ratios you calculated in parts a) to f) for the years 2018 and 2019, recommend whether Best Essex Bank should (not) lend 1 million to ASOS PLC.