M K Berry Is the Managing Director of CE Ltd

question 175

Essay

M. K. Berry is the managing director of CE Ltd. a small, family-owned company which manufactures cutlery. His company belongs to a trade association which publishes a monthly magazine. The latest issue of the magazine contains a very brief article based on the analysis of the accounting statements published by the 40 companies which manufacture this type of product. The article contains the following table: CE Ltd's latest financial statements are as follows: The country in which the company operates has no corporate income tax. No dividends were paid during the year. All sales are on account. Required:
a. Calculate each of the ratios listed in the magazine article for this year for CE, and comment briefly on CE Ltd's performance in comparison to the industrial averages.
b. Explain why it could be misleading to compare CE Ltd's ratios with those taken from the article.

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Definitions:

Industry Structure

The organization and characteristics of a particular market or industry, including its competitive environment.

Strategic Choices

Decisions made by an organization's leaders about the direction and scope of the organization, influencing its competitive position and future success.

Diversification

A growth strategy to expand by acquisition of or investment in new and different business areas.

Complexity

The state or quality of being intricate or complicated.