Question number 01:

SOLUTION: (a)

SOLUTION: (b)

Between 2010 and 2011, there is a 3% drop in the gross profit margin of Janice, which indicates a slight drop in Janice’s trading performance, which would be either because selling price has fallen or costly of sales have increased. Despite the fall in gross profit margin, there is an improvement in the net profit margin by more than two percent, which indicates that Janice has a phenomenal control over expenses and expense to sales ratio fell from 22.5% to 17.4%, which is commendable. This can also be reflected from the fact that ROCE has improved by almost two percent, which slows growth in profitability. 

The current ratio was slightly higher than the ideal ratio in 2010, but in 2011 it came within the ideal limit similarly quick ratio has slightly increased and just above the ideal ratio in both the years. Inventory turnover days have dropped by three days, indicating that Janice can sell his inventory more conveniently and rapidly. There is a deterioration of six days in the receivables collection period indicating that Janice is having difficulty in collecting money from receivables and hence in return is paying his payables six days later which is not a very good strategy because by doing this he is not only forgoing discounts but is also compromising on his relationship with the supplier. The overall working capital cycle has slightly improved. 

There is a slight deterioration in utilizing resources, and if Janice takes corrective actions, both his profitability and liquidity will further improve. The comparison between 2010 and 2011 shows an overall improvement in Janice’s performance.