Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2014 and 2015 are as follows:
Dividends were paid on ordinary shares of £70,000 and £72,000 in respect of 2014 and 2015 respectively.
Required:
(a) Calculate the following financial ratios for both 2014 and 2015 (using year-end figures for statement of financial position items):
1 return on capital employed
2 operating profit margin
3 gross profit margin
4 current ratio
5 acid test ratio
6 settlement period for trade receivables
7 settlement period for trade payables
8 inventories turnover period.
(b) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.
please do "b"
Extracted text: Income statements for the year ended 30 June 2014 2015 Revenue Cost of sales £000 1,180 £000 1,200 750) (680) 500 Gross profit Operating expenses Depreciation Operating profit 450 (200) (208) (66) 234 (75) 167 Interest Profit before taxation 234 159 (48) 111 Taxation Profit for the year Statements of financial position as at 30 June 2014 L000 2015 £000 ASSETS Non-current assets Property, plant and equipment 702 687 Current assets Inventories 148 236 Trade receivables 102 156 Cash 253 955 396 1,083 Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (e1 shares, fully paid) Retained earmings 500 256 756 500 295 795 Non-current liabilities Borrowings - bank loan Current liabilities Trade payables Other payables and accruals 60 18 76 16 Taxation 40 81 24 Short-term borrowings (all bank overdraft) 122 199 955 238 1,083 Total equity and liabilities