The following are key extracts from the financial statements and market data of King’s Motors PLC and its competitor LSE Motors PLC for financial years ending 31st of December 2020 and 2021:

King’s Motors PLC			LSE Motors PLC
	2020 £	2021 £		2020 £	2021 £
Revenue	26,000,000	132,000,000	Revenue	900,000,000	950,000,000
Gross Profit	15,000,000	80,000,000	Gross Profit	300,000,000	320,000,000
Operating Profit	(35,000,000)	12,000,000	Operating Profit	120,000,000	160,000,000
Interest Expense	(2,000,000)	(8,000,000)	Interest Expense	(20,000,000)	(30,000,000)
Profit for The Year	(37,000,000)	4,000,000	Profit for The Year	100,000,000	130,000,000
Trade Receivables	3,000,000	19,000,000	Trade Receivables	25,000,000	30,000,000
Inventories	5,000,000	12,000,000	Inventories	80,000,000	90,000,000
Cash	36,000,000	60,000,000	Cash	50,000,000	60,000,000
Trade Payable	5,000,000	18,000,000	Trade Payable	120,000,000	150,000,000
Long term Loan	4,000,000	35,000,000	Long term Loan	250,000,000	400,000,000
Share Capital (£100)	5,000,000	25,000,000	Share Capital (£1)	250,000,000	300,000,000
Retained Earnings	7,000,000	11,000,000	Retained Earnings	200,000,000	285,000,000
Dividends (Total Payout)	0	0	Dividends (Total Payout)	30,000,000	45,000,000
Share Price (per share)	20	100	Share Price (per share)	670	650
Cash from operations	2,000,000	6,000,000	Cash from operations	(35,000,000)	(50,000,000)

1. Adopting the perspective of a financial analyst, evaluate the performance of King’s Motors PLC and its biggest competitor LSE Motors PLC. Please advise on which of the two companies you would invest in given the information above and why? Please state your rationale behind your chosen investment. In your answer, please also discuss what further information you might seek to support your decision.

Answer rating: 100% (QA)

The Net Profit Ratio is calculated as Net profit Revenue Where in this case Kingsla Motors will b... View the full answer