G plc is a holding company with subsidiaries that have diversified interests. G plc’s board of directors is interested in the group acquiring a subsidiary in the machine tool manufacturing sector.
Two companies have been identified as potential acquisitions, A Ltd and B Ltd. Summaries of both these companies’ accounts are shown below:

You are required to prepare a report for the board of G plc assessing the financial performance and position of A Ltd and B Ltd. Your report should be prepared in the context of G plc’s interests in these two companies and should be illustrated with financial ratios where appropriate. You should state any assumptions you make as well as any limitations of your analysis.

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Revenue Cost of goods sold Statements of Profit or Loss for the year ending 30 April 2018 Opening inventory Materials Labour Factory overheads Depreciation Closing inventory Gross profit Selling and administration expenses Interest Profit before taxation Taxation Profit for the year A Ltd £000 985 150 255 160 205 35 (155) 650 335 (124) (35) 176 (65) 111 B Ltd £000 560 145 136 125 111 20 (140) 397 163 (75) (10) 78 (25) 53