Study the following financial statements of two companies and then answer the questions which follow. Both companies are wholesalers of household products. The values shown are in £000s.

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(a) Calculate the following ratios for both Abraxas Ltd and Buscema Ltd:
(i) gross profit as percentage of sales;
(ii) net profit as percentage of sales;
(iii) expenses as percentage of sales;
(iv) inventory turnover;
(v) rate of return of net profit on capital employed (for the purpose of this question only, take capital as being total of share capitals + reserves at the date of the balance sheet);
(vi) current ratio;
(vii) acid test ratio;
(viii) trade receivable days;
(ix) trade payable days.

(b) Comment briefly on the performance of the two companies based on the ratios you have calculated, suggesting possible reasons for your observations.

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Income Statements Sales Less Cost of goods sold Opening inventory Add Purchases Less Closing inventory Gross profit Less Expenses Wages and salaries Directors' remuneration Other expenses Net profit Balance Sheets Non-current assets Equipment at cost Less Accumulated depreciation Vans Less Accumulated depreciation Current assets Inventory Trade receivables Bank Total assets Less Current liabilities Trade payables Net assets Equity Issued share capital Retained earnings Total equity Abraxas Ltd 000 410 2,340 (460) 712 85 147 474 (212) 213 (85) 460 524 8 000 3,300 (2,290) 1,010 (944) 66 262 128 390 992 1,382 (744) 638 260 378 638 Buscema Ltd 000 216 1,697 (233) 569 175 168 210 (52) 117 (55) 233 106 21 000 2,700 (1,680) 1,020 (912) 108 158 62 220 *** 360 580 (179) 401 80 321 401