Income Statements and Balance Sheets

Income Statements and Balance Sheets
You are to prepare a report on the past performance of Blue Ltd.  You will use the financial ratios set out below.  These are based on the Income Statements and Balance Sheets of Blue Ltd and show the performance of Blue Ltd over the last three years of trading.
 
Financial years
2011               2012               2013
 
Fixed assets turnover ratio                         2.1 times        2.3 times       2.5 times
Gross profit margin                                      19.0%             23.5%             28.6%
Administration expenses to sales                         8.0%               5.3%               4.5%
Distribution costs to sales                          7.0%               7.9%               12.9%
Net profit margin                                          9.9%               12.3%             11.1%
Current assets ratio (to 1)                           1.43                1.66                1.42
Acid test ratio (to 1)                                      0.95                1.10                0.85
Mark up                                                          25%                26%                29.7%
Stock turnover ratio (times)                        15.0                16.9                15.5
Trade collection period (days)                   44                    40                    55
Trade payables period (days)                    50                    52                    44
Return on capital employed                       13.0%             15.4%             13.9%
 
Required:
 
You will prepare a report  which will be set out in four parts as shown below:
 
Part 1
 
Part 1 of the report is an introduction.  It should explain how business accounts can be interpreted and better understood through the use of vertical analysis, horizontal analysis, trend analysis and ratio analysis.
Part 2
 
This part of the report should examine each financial ratio shown overleaf and explain the value and purpose of each using academic references where appropriate.
Part 3
The report should evaluate and interpret the above ratios and provide a detailed analysis of the performance of Blue Ltd over the last three years including consideration of any strengths and weaknesses identified.
Part 4
Finally, part 4 of the report should identify any other relevant business or market information that can be used in the appraisal of company performance.  A full explanation should be given describing how items identified could have been used in the appraisal of Blue Ltd.

Your report should include a bibliography listing all academic sources used which must conform to University requirements.  (The bibliography is not included in the word count).
Learning outcomes
 
 
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