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Dangal Co

Shown below are the recently issued (summarised) financial statements of Dangal Co, a listed company, for the year ended 30 September 20X7, together with comparatives for 20X6 and extracts from the chief executive's report that accompanied their issue.

 20X7 20X6 $000$000 Revenue 250,000 180,000 Cost of sales (200,000) (150,000) Gross profit 50,000 30,000 Operating expenses (26,000) (22,000) Finance costs (8,000) Nil Profit before tax 16,000 8,000 Income tax expense @ 25% (4,000) (2,000) Profit for the year 12,000 6,000

 Statement of financial position 20X7 20X6 Assets $000$000 Non-current assets Property, plant and equipment 210,000 90,000 Goodwill 10,000 Nil 220,000 90,000 Current assets Inventories 25,000 15,000 Trade receivables 13,000 8,000 Cash and cash equivalents Nil 14,000 38,000 37,000 Total assets 258,000 127,000 Equity and liabilities Equity Equity shares of $1 each 100,000 100,000 Retained earnings 14,000 12,000 114,000 112,000 Non-current liabilities 8% loan notes 100,000 Nil Current liabilities Bank overdraft 17,000 Nil Trade payables 23,000 13,000 Current tax payable 4,000 2,000 44,000 15,000 Total equity and liabilities 258,000 127,000 Extracts from the chief executive's report: 'Highlights of Dangal Co's performance for the year ended 30 September 20X7: An increase in sales revenue of 39% Gross profit margin up from 16.7% to 20% A doubling of the profit for the period In response to the improved position, the board paid a dividend of 10 cents per share in September 20X7 an increase of 25% on the previous year. You have also been provided with the following further information. On 1 October 20X6 Dangal Co purchased the whole of the net assets of Ruso Co (previously a privately owned entity) for$100 million, financed by the issue of $100,000 8% loan notes. The contribution of the purchase to Dangal Co's results for the year ended 30 September 20X7 was:$'000

Revenue                                                                                     70,000

Cost of sales                                                                             (40,000)

Gross profit                                                                              30,000

Operating expenses                                                                   (8,000)

Profit before tax                                                                      22,000

There were no disposals of non-current assets during the year.
The following ratios have been calculated for Dangal Co for the year ended 30 September.

 20X6 Return on year‐end capital employed (ROCE) - (profit before interest and tax over total assets less current liabilities) 7.10% Net asset (equal to capital employed) turnover 1.6 Net profit (before tax) margin 4.4% Current ratio 2.50% Closing inventory holding period (in days) 37 Trade receivables' collection period (in days) 16 Trade payables' payment period (based on cost of sales) (in days) 32 Gearing (debt over debt plus equity) Nil

Required
A. Calculate equivalent ratios for Dangal Co for 20X7
B. Assess the financial performance and position of Dangal Co for the year ended 30 September 20X7 compared to the previous year. Your answer should refer to the information in the chief executive's report and the impact of the purchase of the net assets of Ruso.