Assess the financial performance and position of Venice Ltd for the year ended 30 September 2011 compared to the previous year. Your answer should also refer to the information in the Chief Executive’s report and the impact of the purchase of the net assets of Roma Company.

Chief Executive’s report

To: Management
From: Accountant
Date: 7 December 2011
Subject: Financial Appraisal of Roma Company using Accounting Ratios

Introduction
The purpose of this report is to analyze the financial performance of Venice Ltd for the year ended 30 September 2011 compared to the previous year using the accounting ratios, and impact of the purchase of the net assets of Roma Company.
The report specifically comments on the following ratios.
1) Return on year-end capital employed
2) Net assets turnover
3) Net profit margin
4) Current ratio
5) Closing inventory holding period
6) Trade receivables’ collection period
7) Trade payables’ payment period
8) Gearing
The report also highlights of Venice’s performance for the year ended 30 September 2011:

Return on capital employed
Capital employed and operating profits are the main items. Capital employed may be defined in a number of ways. However, two widely accepted definitions are "gross capital employed" and "net capital employed". Gross capital employed usually means the total assets, fixed as well as current, used in business, while net capital employed refers to total assets minus liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and loss account balance), debentures and long term loans.
( http://www.accountingformanagement.com/return_on_capital_employed.htm
)
The return on capital employed has increased over the last year from 7.1% to 13.9%. This should be a cause for concern to the board of directors because if investors can obtain . A