Question 1 You work for Solomon Holding Ltd which has a policy of growth through acquisitions. You are a member of a team which is investigating the possible purchase of Rudolf Ltd which manufactures a product which would enable Solomon Holding Ltd to diversify into a new market. You are assigned to prepare a report evaluating the recent performance of Rudolf Ltd, the quality of its management, and its potential to enhance the overall performance of Solomon Holding Ltd. You have the following financial information which has been derived from the financial statements of Rudolf Ltd for the three years ended 30 September 2015, 2016 and 2017. 2015 2017 3,460 2016 3,633 114 3,452 -178 50 19% 13% 23% 3.71 88% 3.60 2.44 89% 89% 6% 5% 3.2% Financial year ended 30 September 1 Turnover ($000) 2 Cash and cash equivalents ($000) Return on equity 4 Sales revenue to total assets (times) 5 Cost of sales to sales revenue 6 Operating expenses to sales revenue Net income to sales revenue 8 Current ratio (to 1) 9 Acid test ratio (to 1) 10 Inventory turnover (months) 11 Credit to customers (months) 12 Credit from suppliers (months) 13 Net assets per share (cent per share) 14 Dividend per share (cent per share) 15 Earnings per share (in cent) 2.6% 1.58 1.25 8% 1.8% 1.01 0.80 0.5 0.6 1.5 2.0 1.51 1.23 0.4 1.5 1.2 0.96 10.0 22.5 1.2 2.0 1.00 1.01 14.0 19.2 14.0 12.8 Required: Using the above information prepare a report which reviews the performance of Rudolf Ltd as evidenced by the above ratios, makes recommendations as to how the overall performance of Rudolf Ltd could be improved, and indicates any limitations in your analysis. (20 marks)