You work for Euroc, a limited liability company, which seeks growth through acquisitions. You are a member of a team that is investigating the possible purchase of Choggerell, a limited liability company that manufactures a product complementary to the products currently being sold by Euroc.
Your team leader wants you to prepare a report for the team evaluating the recent performance of Choggerell and the quality of its management, and has given you the following financial information which has been derived from the financial statements of Choggerell for the three years ended 31 March 2006, 2007 and 2008.

Required:
Use the above information to prepare a report for your team leader which:
(a) Reviews the performance of Choggerell as evidenced by the above ratios;
(b) Makes recommendations as to how the overall performance of Choggerel could be improved; and
(c) Indicates any limitations in youranalysis.

2006 2,2432,355 2007 Financial year ended 31 March Turnover ( million) Cash and cash equivalents ( million) Return on equity Sales revenue to total assets Cost of sales to sales revenue 13% 2.66 85% 1 1% 2.6% 1.12 0.80 0.6 2.66 82% 12% 43% 1.44 1.03 0.7 2008 2237 -97 19% 2.01 79% 15% 4.2% l.06 0.74 1.0 perating expenses to sales revenue Net income to sales revenue Current/Working Capital ratio (to l) Acid test ratio (to l) Inventory turnover (months) Credit to customers (months) Credit from suppliers (months) Net assets per share (cents per share) Dividend per share (cents per share) Earnings per share (cents per share) 0.86 0.0 1.5 2.0 0.97 14.0 18.7 14.0 20.1