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Bragg Ple wants to acquire a majority holding in a private limited company. The Managing Director of Bragg plc has asked you to analyse the financial statements of two possible companies and to deal

Bragg Ple wants to acquire a majority holding in a private limited company. The Managing Director of Bragg plc has asked you to analyse the financial statements of two possible companies and to deal with some queries he has about financial statements. He has stated you to consider the profitability of the companies and their financial position. The financial statements of the two companies are below: Income and Statement For the year ended March 31, 2020 Roy Ltd. Ishiguro Ltd. S000 $000 evenue 8,483 10,471 Cost of sales (3.732) (5,026) Gross profit 4,751 5,445 Distribution costs (1,218) (1,483) Administrative costs (903) (1.658) 2,630 2,304 Interest paid and similar charges * (160) (520) Profit on ordinary activities before taxation 2,470 1.784 D Tax on profit on ordinary activities (593) Profit for financial year (428) Dividends 1,877 1,356 (400) Retained profit for the financial year Me ancome (800) 1.477 556 zhgëne Operating profit Polance Sheet Statement of Financial Position As at March 31, 2020 Roy Ltd. $000 6,806 Ishiguro Ltd. S000 12,579 Non-current Assets Current assets Stock Debtors Oje Recurtir Cash at bank and in hand CA Total assets 2,531 1,054 828 11.219 2,181 2,309 17,074 Equity and liabilities Capital and reserves Ordinary share capital of $1 each 2.000 2.000
Required: Prepare a report for Bragg ple that includes the following: A. Calculation of the following ratios of Roy Ltd and Ishiguroe Ltd: Return on equity • Gross profit percentage • Gearing Interest cover (10 marks) . . B. An explanation of the meaning of each ratio, and a comment on the relative profitability and financial position of the two companies based on the ratios calculated. (8 marks) C. Conclusion as to which company to invest in, based only on these ratios and your analysis.

Apr 25 2021 View more View Less

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