Example one The information below has been extracted from the recently published accounts of Gabby ltd: Extracts from the income statement to 30 April 2016; 2016 2015 (000) (000) Sales 11.200 9,750 Cost of sales Net profit before tax 8.460 6.825 465 320 The following expenses were charged Depreciation 360 280 Loan note interest 80 60 Interest on bank overdraft 15 9 Audit fees 12 10 Tax 40 30 Balance sheet as at 30th April: 2016 2015 (000) (000) 000) (000) Assets Fixed assets Current assets 1.850 1.430 Inventory 640 490 Receivables Cash Total assets Equity and liabilities Ordinary share capital 800 800 Retained earnings 1,310 2,110 930 1.730 1,230 1.080 80 1,950 120 1,690 3,800 3,120 18 Non current liabilities 10% loan stock Curre abilities Bank overdraft Payables Taxation 800 600 110 750 30 80 890 690 20 790 3.800 3.120 The following ratios were calculated by Gabby ltd based on its published financial statements for 2014 and also the latest industry average ratios; Current ratio Quick ratio Industry average 1.9 1.27 18.5% 4.73% 3.91x Gabby ltd 2014 2 1.42 ROCE 16.7% Net profit margin 3.9% Asset turnover 4.29x Gross profit margin 30% Accounts receivable collection period 40 days Accounts payable payment period Inventory turnover 30 days 13.9x 26.37% 35.23% 52 days 49 days 18.3x 32.71% Capital gearing Required a. Calculate comparable ratios for Gabby ltd. b. Compare your results against the previous year's and against the industrial average