QUESTION $3($C$5,$ PLO $3)$

You have been presented with the following data related to two companies that are of the same

size and operating in the same business sector:

Data from The Income Statement

Co$.$ A

$ millions

Co$.$ B

$ millions

REVENUE $3,8003,300$

OPERATING PROFIT $800800$

NET PROFIT AFTER TAX $500350$

NET INTEREST COST $60250$

DIVIDENDS FOR THE YEAR $200200$

Data from The Balance Sheet

Co$.$ A

$ millions

Co$.$ B

$ millions

TOTAL ASSETS $6,0006,000$

TOTAL CURRENT ASSETS $3,0003,500$

ALL INVENTORIES $1,0001,500$

ALL ACCOUNTS RECEIVABLE $1,0001,500$

CASH & CASH EQUIVALENTS $1,000500$

TOTAL CURRENT LIABILITIES $2,5004,000$

TOTAL LIABILITIES $3,5004,500$

TOTAL EQUITY $2,5001,500$

TOTAL BORROWINGS $1,0002,000$

CONFIDENTIAL January $2024/$ BBA$2234/$ Set A

$5$ CONTINUE

Compare the financial performance of the two companies above in the following areas, using

the following ratios:

Clues for the ratios are provided in brackets

$1.$ Net Profit margin $($NPAT$/$R$)$

$2.$ Asset Utilisation Ratio $($R $/$ TA$)$

$3.$ Net Return on Investment $($NPAT $/$ TA$)$

$4.$ Cash Ratio $($CCE $/$ CL$)$

$5.$ Current Ratio $($CA $/$ CL$)$

$6.$ Accounts Receivable Ratio $($AR $/$ CL$)$

$7.$ Gearing $($TB $/$ EQ$)$

$8.$ Interest Cover $($OP $/$ Int