Scribd
Upload
37 views2 pages

Ratios Q2

The document presents a ratio analysis of two manufacturing companies, Amir and Mo, comparing their financial performance through various ratios. Key ratios calculated include gross profit percentage, net profit percentage, return on capital employed, asset turnover, current ratio, quick ratio, average receivables collection period, average payables period, and inventory turnover. The analysis highlights differences in profitability and efficiency between the two companies.

Uploaded by

Habumuremyi Jean Paul
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
37 views2 pages

Ratios Q2

The document presents a ratio analysis of two manufacturing companies, Amir and Mo, comparing their financial performance through various ratios. Key ratios calculated include gross profit percentage, net profit percentage, return on capital employed, asset turnover, current ratio, quick ratio, average receivables collection period, average payables period, and inventory turnover. The analysis highlights differences in profitability and efficiency between the two companies.

Uploaded by

Habumuremyi Jean Paul
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

Ratio Analysis Question 2

QUESTION 2: RATIO ANALYSIS


The income statements and statements of financial position of two manufacturing companies in
the same sector are set out below.

Amir Mo
$ $
Revenue 150,000 700,000
Cost of sales (60,000) (210,000)
Gross profit 90,000 490,000
Interest payable (500) (12,000)
Distribution costs (13,000) (72,000)
Administrative expenses (15,000) (35,000)
Profit before tax 61,500 371,000
Income tax expense (16,605) (100,170)
Profit for the period 44,895 270,830
Amir Mo
Non-current assets $ $
Property - 500,000
Plant and equipment 190,000 280,000
190,000 780,000
Current assets
Inventories 12,000 26,250
Trade receivables 37,500 105,000
Cash at bank 500 22,000
50,000 153,250
240,000 933,250

Equity
Share Capital 156,000 174,750
Retained earnings 51,395 390,830
207,395 565,580
Non-current liabilities
Long-term debt 10,000 250,000

Current liabilities
Trade payables 22,605 117,670
240,000 933,250

Required:
Define and calculate the following ratios for each company:
(a) Gross profit percentage.
(b) Net profit percentage
(c) Return on capital employed
(d) Asset turnover
(e) Current ratio
(f) Quick ratio
(g) Average receivables collection period
(h) Average payables period
(i) Inventory turnover

Page 1 of 2 (kashifadeel.com)
Ratio Analysis Question 2

ANSWER – QUESTION 2: RATIO ANALYSIS

Gross Profit % = Amir Mo


Gross profit 90,000 490,000
= 60% = 70%
Sales 150,000 700,000

Net Profit % =
Net profit 44,895 270,830
= 30% =39%
Sales 150,000 700,00

Return on capital employed =


PBIT 62,000 383,000
= 28.5% =47%
Equity + Long term loan 227,395 815,580

Asset Turnover =
Sales 150,000 = 0.7 700,000 = 0.85
Equity + Long term loan 227,395 times 815,580 times

Current ratio =
Current assets 50,000 = 2.2 153,250
= 1.3 times
Current liabilities 22,605 times 117,670

Quick ratio =
Current asset - inventory 38,000 = 1.7 127,000
= 1.4 times
Current liabilities 22,605 times 117,670

Average time to collect =


Trade receivables x 365 37,500 x 365 105,000 x 365
=91 days = 55 days
Sales 150,000 700,000

Average time to pay =


Trade payables x 365 22,605 x 365 117,670 x 365
= 137 days = 204 days
Cost of sales 60,000 210,000

Inventory turnover =
Inventory x 365 12,000 x 365 26,250 x 365
= 73days = 46days
Cost of sales 60,000 210,000

Page 2 of 2 (kashifadeel.com)

You might also like