a) Return on year-end capital employed (profit before interest and tax over total assets less current liabilities) = 16,000/(258,000 - 44,000) x 100% = 7.5%

Net assets (equal to capital employed) turnover = Sales/ Total assets = 250,000/258,000 = 0.97

Net profit (before tax) margin = Net profit/Sales = (16,000/250,000) x 100% = 6.4%

Current ratio = Current Assets/ Current Liabilities = 38,000/44,000 = 0.86

Closing inventory holding period (in days) = (closing inventory x 365 days)/ cost of sales = (25,000 x 365 days)/ 200,000 = 45.63

Trade receivables' collection period (in days) = (average accounts receivable/ credit sales) x 365 = (13,000/ 250,000) x 365 = 18.98

Trade payables' payment period (based on cost of sales) (in days) = (average accounts payable/ cost of sales) x 365 = (23,000/ 200,000) x 365 = 41.98 days

Gearing (debt over debt plus equity) = (17,000 + 100,000)/ (117,000 + 114,000) x 100% = 50.65%

b) Return on Capital Employed
The return on capital employed has improved between 2010 and 2011 from 7.1% to 7.5% respectively. This is a good sign as it shows that the investors of Orchard Ltd have a higher return in 2011 compared to the previous year. Furthermore, the dividend payout to investors has increased by 25% to 10 cents per share. Hence, the investors would be happy and most likely remain as investors for the company or even put in a bigger investment.

Net Assets Turnover
The net assets turnover for Orchard Ltd has declined over the year from 1.6 to 0.97. It is a measure of how efficiently a company is using its asset base to generate earnings. When this ratio has declined, it usually means that management is buying assets which are not being used as efficiently as its previous asset base. On the other hand, Orchard Ltd has recently purchased the entire net assets of Scott Company for $100 million. This is a very likely