a. Annual reports are prepared to serve different functions. Why annual reports are prepared? What type of information usually discussed in annual reports? (5 marks)

b. Morning star plc. is a manufacturer of computer accessories. The following are selected items appearing in the income statement and balance sheet for the year ended December 31st, 2015.

Income Statement
Net Sales	540,000
Less: Cost of Goods Sold	324,000
Gross Profit	216,000
Selling and general expenses	154,800
Net Operating profit	61,200
Interest expenses	7,200
Net Profit before ta	54,000
Income tax 35%	16,200
Net profit for the year	37,800

Balance Sheet
Cash and short-term investments	9,600
Receivables	45,600
Inventories	48,000
Property, plant & Equipment	385,200
Total Assets	360,000
Total current liabilities	48,000
Total Non-current liabilities	72,000
Shareholders Equity $10 par	96,000
Retained Earnings	144,000
Total Liabilities and Equity	360,000

Required:

Using the information above, compute the Companys ratio below and comment on each:

a. Current ratio

b. Asset Turnover

c. EPS

d. Interest cover

e. Gearing ratio