An investor is considering the purchase of shares in either AA plc or BB plc whose latest accounts are summarised below. Both companies carry on similar manufacturing activities with similar selling prices and costs of materials, labour and services.

Required:
(a) write a report to the investor, giving an appraisal of the results and state of each business; and
(b) advise the investor whether, in your opinion, the price/earnings ratios and market price of the shares can be justified in the light of the figures in the accounts, giving your reasons.

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Statements of Financial Position at 30 September 2017 (£000) AA plc Freehold property at revaluation 2017 Plant, machinery and equipment: at cost depreciation Goodwill Inventory: finished goods work in progress Accounts receivable Bank deposit Total assets Current liabilities Accounts payable Overdraft Non-current liabilities Total liabilities Net assets Equity Ordinary £1 shares Reserves 1,800 1,200 600 200 800 1,400 2,400 600 - 3,000 400 300 800 4,500 (2,200) 2,300 1,000 1,300 2,300 BB plc 1,800 400 900 900 1,000 1,400 800 2,200 200 100 500 400 3,400 (1,900) 1,500 500 1,000 1,500