Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2018 and 2019 are as follows: See images Dividends were paid on ordinary shares of £70,000 and £72,000 for 2018 and 2019, respectively. Required: (a) Calculate the following financial ratios for both 2018 and 2019 (using year-end figures for statement of financial position items): 1 return on capital employed 2 operating profifit margin 3 gross profifit margin 4 current ratio 5 acid test ratio 6 settlement period for trade receivables 7 settlement period for trade payables 8 inventories turnover period.
Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2018 and 2019 are as follows:
See images
Dividends were paid on ordinary shares of £70,000 and £72,000 for 2018 and 2019, respectively.
Required:
(a) Calculate the following financial ratios for both 2018 and 2019 (using year-end figures for
1 return on capital employed
2 operating profifit margin
3 gross profifit margin
4
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.
![Income statements for the year ended 30 June
2018
2019
£000
£000
Sales revenue
1,180
1,200
(750)
450
Cost of sales
(680)
Gross profit
500
Operating expenses
Depreciation
Operating profit
(200)
(66)
(208)
(75)
234
167
Interest
(-)
(8)
Profit before taxation
234
159
Taxation
(80)
(48)
Profit for the year
154
111](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F13ec58cf-0db6-4496-bf07-17b4b80fafa0%2Ffcd49c4b-b215-412f-8db2-b31f14b4d48c%2Fspk3zdg_processed.png&w=3840&q=75)
![Statements of financial position as at 30 June
2018
2019
£000
£000
ASSETS
Non-current assets
Property, plant and equipment
702
687
Current assets
Inventories
148
236
Trade receivables
102
156
Cash
3
4
253
396
Total assets
955
1,083
EQUITY AND LIABILITIES
Equity
Ordinary share capital (£1 shares, fully paid)
Retained earnings
500
500
256
295
756
795
Non-current liabilities
Borrowings – bank loan
50
Current liabilities
Trade payables
60
76
Other payables and accruals
18
16
Тахation
40
24
Short-term borrowings (all bank overdraft)
81
122
199
238
Total equity and liabilities
955
1,083](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F13ec58cf-0db6-4496-bf07-17b4b80fafa0%2Ffcd49c4b-b215-412f-8db2-b31f14b4d48c%2Flqmyx7j_processed.png&w=3840&q=75)
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