Question

From the following financial statement calculate the following Ratios:

Liquidity:

a) Current Ratio

b) Inventory Turnover

Solvency:

c) Debt to Total Assets Ratio

d) Times Interest Earned Ratio

Profitability:

e) Return on Assets

f) Profit Margin

9 Selected Statement of Financial Position Information 2019 ($'000) 2018 ($'000) 10 11 Cash and Cash Equivalents 12 Trade Receivables 13 Inventories 14 Total Current Assets 15 Total Assets 16 Total Current Liabilities 17 Total Liabilities 18 Retained Earnings 19 Shareholders Equity 20 21 Selected Statement of Financial Performance Information 119.21 236.0 886.7 1,276.5 2,548.8 927.1 1,504.7 555.6) 1,044.1 72.0 204.7 891.1 1,210.5 2,491.7 917.2 1,544.1 463.2 947.61 2019 ($'000) 22 23 Revenue (cash and credit sales) 24 Income Tax Expense 25 Interest Expense (Finance Costs) 26 Cost of Sales 27 Gross Profit 28 Operating Expenses 29 Profit After Tax 30 31 Selected Other Financial Information (including Cash Flow Information) 7,095.3 109.5 14.3 5,568.21 1,527.1 1,155.9 249.8 2019 ($'000) 301.6 157.4 32 33 Net Cash Provided by Operating Activities 34 Dividends paid 35 Weighted Average Number of Ordinary Shares 36 37 Market Price per share ($) as at 30 June 2019 38 116.1 25.66 20

Answer 1

Answer :

Liquidity:

a) Current Ratio = Current assets/ Current liabilities

= 1276.5 / 927.1 = 1.38

b) Inventory Turnover = Cost of goods sold/ Average Inventory

Cost of goods sold = 5568.2

Average Inventory = (886.7 + 891.1)/2 = 888.9

Inventory Turnover = 5568.2 / 888.9 = 6.26

Solvency:

c) Debt to Total Assets Ratio = Debt/ Total assets

Total assets = 2548.8

Total Debt = Total liabilities = 1504.7

Debt to total assets ratio = 1504.7 / 2548.8 = 0.59

d) Times Interest Earned Ratio = EBIT / Total Interest Expense

EBIT = Profit after tax + tax expense + interest expense

= 249.8 + 109.5 + 14.3 = 373.6

Total Interest Expense = 14.3

Times Interest Earned Ratio = 373.6 / 14.3 = 26.13 times

Profitability:

e) Return on Assets = Net income / Average total assets

Net income = 249.8

Average total assets = (2548.8 + 2491.7) / 2 = 2520.25

Return on Assets = 249.8 / 2520.25 = 9.91%

f) Profit Margin =

Gross profit margin = Gross profit/ net sales = 1527.1 / 7095.3 = 21.52%

Net profit margin = Net profit/ net sales = 249.8 / 7095.3 = 3.52%