Income Statements for Mosaic PLC for the year ended 31 March

	2022	2021
	£m	£m
Sales Revenue	1,980	1,860
Costs of Goods Sold	1,030	990
Gross Profit	950	870
Staff Costs	400	380
Rent and Rates	210	200
Depreciation	140	130
Other Costs	50	40
Operating Profit (PBIT)	150	120
Finance Costs	30	25
Profit (loss) before Taxation	120	95
Taxation	25	20
Profit (loss) for the period	95	75

Statements of Financial Position for Mosaic PLC as at 31 March

	2022	2021
	£m	£m
Non-current Assets
Property, Plant & Equipment	1,400	1,320
Purchased Goodwill	420	370
Total Non-current Assets	1,820	1,690
Current Assets
Inventories	420	380
Trade Receivables	60	40
Cash at Bank	390	380
Total Current Assets	870	800
Total Assets	2,690	2,490
Equity
Share Capital (Equity Shares of £2 each)	1100	1100
Retained Earnings	350	300
Total Equity	1,450	1,400
Non-current Liabilities
Bank Loan	950	850
Total Non-current Liabilities	950	850
Current Liabilities
Trade Payables	270	220
Taxation Payable	20	20
Total Current Liabilities	290	240
Total Equity and Liabilities	2,690	2,490

Additional Information:

As at 31 March 2020; Capital Employed was £2,250 (m) and Inventories were £360 (m).

Question 1

What does the Return on Capital Employed (ROCE) ratio measure? Comment on the Return on Capital Employed ratios calculated above for Mosaic PLC and explain what the ratios tell us about the financial performance of the company. Use the information from the case study to inform your answer. Up to 130 words max.

Question 2

What does the Gearing Ratio measure? Comment on the ratios calculated above for Mosaic PLC and explain what the ratios tell us about the financial position and health of the company. Explain the reasons for the changes in the Gearing ratio. 

Question 3

What does the Gross Profit Margin measure? Comment on the Gross Profit Margin ratios calculated above for Mosaic PLC and. Explain the reasons for the changes in the ratio. 

Question 4

Ratio analysis is a very useful tool to understand company’s profitability and financial position. However, financial ratios have some flaws. Outline main disadvantages and limitations of using financial ratios.

Answer rating: 100% (QA)

Question 1 The Return on Capital Employed ROCE ratio measures the profitability of a companys capital investments and indicates how efficiently a company is utilizing its capital to generate profits I... View the full answer