REQUIRED: You must understand
(a) Calculate the following six ratios for both companies, clearly showing the ratio formula and figures used: (data to be provided)
(i) Current ratio
(ii) Quick ratio (acid test ratio)
(iii) Receivables collection period
(iv) Return on capital employed
(v) Gross profit percentage
(vi) Net profit percentage

(b) Using the ratios calculated in part (a) prepare a report for the investor providing comments on the performance and position of Wallace and Gromit. You are required to critically evaluate the advantages and limitations of using ratio analysis in part (a) as an analytical technique in assessing the performance of firms.

(c) Critically discuss what further information might be useful to the potential investor before they decide in which company to invest.

(d) Gromit is planning an expansion of their production facilities which will cost £2.5million. Critically discuss how this might be financed and how potential problems can affect financial ratios associated with the methods you have chosen.


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