Requirement (a) asked candidates to recalculate the given ratios after making appropriate adjustments for the favourable treatments.

Many candidates made a good attempt at the adjustments, the most problematic was an inability to correctly gross up the actual cost of sales by the 10% discount given by another family company.

Many calculated it at $4.5 million (10% of the $45 million cost of sales) apparently not realising that the cost of sales represented 90% of the 'full' cost and thus the discount was $5 million ($45 million/90% - $45 million).

A number of candidates reduced the cost of sales to $40.5 million and others even reduced revenue by 10%.

A substantial number of candidates added the new amount directors' remuneration to the old amount, whereas the new amount replaced the previous remuneration.

Other common errors were when calculating return on equity (ROE) many candidates instead calculated return on capital employed (ROCE), which is a very different ratio, and using equity (rather than capital employed) for net asset turnover.

Despite this, most candidates scored quite well with some gaining full marks.