The following are the summarized financial statements of Alpha and Omega, two companies that operate in the same industry:

Required
a. Using ratio analysis, comment on the profitability, efficiency, liquidity and gearing of both companies.
b. List three limitations of ratio analysis for the purposes of interpreting financial statements.

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Summarized statement of financial position Alpha Omega ASSETS Non-current assets Current assets Inventories Trade receivables Bank 790 000 1,200 1,800 720 1,200 190 2,110 3,000 2,900 4,000 Total assets EQUITY AND LIABILITIES Equity Capital Retained earnings Total equity Non-current liabilities Loan Current liabilities Trade payables Bank overdraft Total current liabilities Total liabilities Total equity and liabilities 1,160 ,756 404 1,500 2,160 340 500 900 1040 800 900 1,840 1,400 1,840 2,900 4,000 Summarized statements of profit and loss Alpha Omega Em 7,200 Revenue Less: Cost of goods sold Opening inventory Add: purchases 6,000 1,000 4,760 5,760 1,200 4,560 1, 1,500 5,916 7,416 1,800 5,616 Less: closing inventory Gross profit 1,440 1584 Overhead expenditure Profit for the yeor 1,100 340 1,180) 404