You have the following financial statements for two building companies and have been asked to compare them:

Income statements for the year to 31st December 2019

	Potts Ltd	Tony Ltd
	`000	`000
Sales	2500	2880
Cost of Sales	(1800)	(1900)
Gross Profit	700	980
Operating expenses	(460)	(590)
Operating Profit	240	390
Interest Payable	(47)	(66)
Profit Before Taxation	193	324
Taxation	(90)	(78)
Profit After Taxation	103	246
Dividends	(25)	(50)
Retained Profits	78	196

Statements of financial position as at 31st December 2019

	Potts Ltd	Tony Ltd
	`000	`000
Non-current assets	2,056	2,168
Current assets
Inventories	450	345
Trade receivables	270	257
Cash at bank	340	400
Less: Current liabilities
Trade payables	(500)	(259)
Taxation	(68)	(42)
Non current liabilities
Long-term loan	(800)	(1000)
Net assets	1,748	1,869
Shareholders' funds
1 ordinary shares	1,500	1,350
Retained earnings	248	519
	1,748	1,869

Additional information:

• All purchases and sales were on credit

Required:

1. Calculate the following ratios for each company.

1. Pre-tax Return on Equity (use total shareholders funds as your denominator)
2. Operating profit margin
3. Net profit (before tax) margin
4. Trade receivable (debtor) period in days
5. Current ratio
6. Acid test ratio (Quick ratio)
7. Gearing ratio (use debt + equity as your denominator)
8. Interest cover
9. Dividend cover
10. Dividend per share (in pence)

[30 marks]

2. Besides accounting ratios, financial statement information may be analyzed using other methods. Explain any three techniques that can be used to analyze financial statements.(Maximum word count: 100 words)

[5 marks]