QUESTION 2 [25 MARKS]

The following information has been extracted from the recently published accounts of By Fire By Force Ltd.

EXTRACTS FROM THE STATEMENTS POF PROFIT OR LOSS TO 30 APRIL:

	2019	2018
	N$000	N$000
Revenue	11,200	9,750
Cost of sales	8,460	6,825
Net profit before tax	465	320
This is after charging:
Depreciation	360	280
Loan note interest	80	60
Interest on bank overdraft	15	9
Audit fees	12	10

STATEMENTS OF FINANCIAL POSITION AS AT 30 APRIL:

	2019		2018
	N$000	N$000	N$000	N$000
Assets
Non-current assets		1,850		1,430
Current assets
Inventories	640		490
Trade receivables	1,230		1,080
Cash and cash equivalents	80		120
		1,950		1,690
Total Assets		3,800		3,120
Equity and Liabilities
Equity :
Ordinary share capital	800		800
Retained Earnings	1,310		930
		2,110	1,730
Non-current liabilities:
10% loan stock		800		600
Current Liabilities:
Bank overdraft	110		80
Trade and other payables	750		690
Taxation	30		20
		890		790
Total Equity and liabilities		3,800		3,120

The following ratios are those calculated for By Fire By Force Company, based on its published accounts for the previous year and also the latest industry average ratios:

	By Fire By Force Co 30April 2018	Industry Average
ROCE(Capital employed=equity and debentures)	16.30%	18.50%
Profit/sales	3.90%	4.73%
Asset turnover	4.19	3.91
Current ratio	2.14	1.90
Quick ratio	1.52	1.27
Gross profit margin	30.00%	35.23%
Accounts receivable collection period	40 days	52 days
Accounts payable payment period	37 days	49 days
Inventory turnover (times)	13.90	18.30
Gearing	26.76%	32.71%

Required:

1. Calculate comparable ratios (to two decimal places where appropriate) for By Fire By Force Ltd for the year ended 30 April 2019. All calculations must be clearly shown. (10)
2. Write a report to your board of directors analyzing the performance of By Fire By Force Ltd, comparing results against the previous year and against the industry average. (15)