Malcolm, the son of the founder of Solverham plc, is aware that the managing director of the company believes that the company is strong, and is doing well, but the chief accountant says that the company’s position is rapidly deteriorating. You are required to produce a report on the company’s financial position and performance, based on the information given for question 2. Your answer should include calculations of the ratios shown below for each year, and comments on them.

a Current ratio 

b Liquidity ratio 

c Capital gearing ratio 

d Interest times cover 

e Return on shareholders’ funds 

f Return on total long-term capital employed 

g Operating profit as a percentage of sales 

h Asset turnover 

i Gross profit ratio

j Distribution costs as a percentage of sales 

k Administrative expenses as a percentage of sales 

l Sales/non-current assets 

m Sales/current assets 

n Inventory turnover ratio 

o Trade receivables ratio 

p Trade payables ratio