Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2009 and 2010 are as follows:

Dividends were paid on ordinary shares of £70,000 and £72,000 in respect of 2009 and 2010, respectively.
Required:

(a) Calculate the following financial ratios for both 2009 and 2010 (using year-end figures for statement of financial position items):
1 return on capital employed 2 operating profit margin 3 gross profit margin 4 current ratio 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.

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Income statements for the year ended 30 June 2009 000 1,180 (680) 500 (200) (66) Revenue Cost of sales Gross profit Operating expenses Depreciation Operating profit Interest Profit before taxation Taxation Profit for the year ASSETS Non-current assets Property, plant and equipment Current assets Inventories Trade receivables Cash 234 Total assets EQUITY AND LIABILITIES Equity Ordinary share capital (1 shares, fully paid) (-) 234 Statements of financial position as at 30 June 2009 000 (80) 154 702 148 102 3 253 955 500 2010 000 1,200 (750) 450 (208) (75) 167 (8) 159 (48) 111 2010 000 687 236 156 4 396 1,083 500