H pic manufactures vehicle parts. The company sells its products to a number of independent distributors who resell the goods to garages and other retail outlets in their areas. H pic has a policy of having only one distributor in any given geographical area. Distributors are selected mainly on the basis of financial viability. H pic is keen to avoid the disruption of sales and loss of credibility associated with the collapse of a distributor. The company is currently trying to choose between two companies which have applied to be its sole distributor in Geetown, a new sales area.
The applicants have supplied the following information:

Requirements:
(a) Explain why trends in accounting ratios could provide a more useful insight than the latest figures taken on their own.
(b) Using the information provided above, explain which of the companies appears to be the safer choice for the role of distributor.

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Applicant Y 994 ApplicantX 1995 12801600 2000 1805 9002000 24 9931994 20 12 1995 Salos (E 000) Gross profit % Return on capital 993 23 14 employed % Current ratio Quick ratio Gearing % 16 71191211 15 16 71 165 141111091 091 091 0.9 15 21 28 30 27