The financial statements for Harridges plc are given below for each of the last two years ended 31 December. Harridges plc operates a large chain of retail stores.

Dividends were paid on ordinary shares of £65 million and £75 million in respect of the year before last and last year, respectively.

Required:

(a) Choose and calculate eight ratios that would be helpful in assessing the performance of Harridges plc. Use end-of-year values and calculate ratios for both years.

(b) Using the ratios calculated in (a) and any others you consider helpful, comment on the business’s performance from the viewpoint of a prospective purchaser of a majority of shares.

Transcribed Image Text:

Harridges Ltd Income statement for the years ended 31 December Sales revenue Cost of sales Gross profit Wages and salaries Overheads Depreciation Operating profit Interest payable Profit before taxation Taxation Profit for the year Year before last £m 2,600 (1,560) 1,040 (320) (260) (150) 310 (50) 260 (105) 155 Last year £m 3,500 (2,350) 1,150 (350) (200) (250) 350 (50) 300 (125) 175