QUESTION 3

Rob is one of the main shareholders in Fefo Ltd. He wishes to assess the management effecitivness and the company liquidity in utilising the resources. He has approched you to assist him by analysing the financial statements of Fefo Ltd. for the previous two years as follows:

Required:

a) Calculate the following ratios for every year:

i) Return on Capital Employed

        ii) Return on ordinary shareholders’ funds 

iii) Gross Profit margin 

iv) Net Profit margin

v) Current Ratio

b) Discuss the limitations of ratio analysis.

c) Comment critically on the financial position of Fefo Ltd. and how this has changed over the two-year period.