You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. The following are the Statement of Profit or Loss and Statement of Financial Position with comparatives for the year ended 31st December 2018. Statement of Profit or Loss for the year ended 31st December, 2018 2018 2017 GHS GHS Sales revenue 3,095,576 1,909,051 Cost of sales 2,402,609 1,441,950 Gross profit 692,967 467,101 Interest receivable 744 2,782 Administration expenses 333,466 222,872 Operating profit 360,245 247,011 Interest 18,115 21,909 Profit before taxation 342,130 225,102 Income tax expense 74,200 31,272 Profit for the year 267,930 193,830 Statement of Financial Position as at 31 December 2018 Assets 2018 2017 GHS GHS Non-current assets Property, plant and equipment 802,180 656,071 Current assets Inventory 64,422 86,550 Trade receivables 905,679 807,712 Prepayment and accrued income 97,022 45,729 Cash at bank and in hand 1,327 68,363 1,068,450 1,008,354 Total assets 1,870,630 1,664,425 Equity and liabilities Equity Ordinary shares 258,178 258,178 Income surplus 651,721 410,591 909,899 668,769 Non-current liabilities 10% loan stock 100,000 100,000 Current liabilities Trade payables 627,018 545,340 Accruals and deferred income 81,279 280,464 Corporate taxes 108,000 37,200 Other taxes 44,434 32,652 860,731 895,656 Total equity and liabilities 1,870,630 1,664,425 Required: a. Calculate the following ratios: i. Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net profit margin ii. Long term solvency and stability - Debt/Asset ratio, Gearing ratio and Interest cover iii. Short-term solvency and liquidity – Current ratio and Acid test ratio iv. Efficiency (turnover ratios) – Account receivable collection period, Account payable payment period, Inventory turnover (times) b. Prepare a report addressed to the Chief Executive Officer, assessing the relative performance and financial position of Glory Ltd for the year ended 31st December, 2018
You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. The following are the Statement of Profit or Loss and
December 2018.
Statement of Profit or Loss for the year ended 31st December, 2018
2018 2017
GHS GHS
Sales revenue 3,095,576 1,909,051
Cost of sales 2,402,609 1,441,950
Gross profit 692,967 467,101
Interest receivable 744 2,782
Administration expenses 333,466 222,872
Operating profit 360,245 247,011
Interest 18,115 21,909
Profit before
Income tax expense 74,200 31,272
Profit for the year 267,930 193,830
Statement of Financial Position as at 31 December 2018
Assets 2018 2017
GHS GHS
Non-current assets
Property, plant and equipment 802,180 656,071
Current assets
Inventory 64,422 86,550
Trade receivables 905,679 807,712
Prepayment and accrued income 97,022 45,729
Cash at bank and in hand 1,327 68,363
1,068,450 1,008,354
Total assets 1,870,630 1,664,425
Equity and liabilities
Equity
Ordinary shares 258,178 258,178
Income surplus 651,721 410,591
909,899 668,769
Non-current liabilities
10% loan stock 100,000 100,000
Current liabilities
Trade payables 627,018 545,340
Accruals and deferred income 81,279 280,464
Corporate taxes 108,000 37,200
Other taxes 44,434 32,652
860,731 895,656
Total equity and liabilities 1,870,630 1,664,425
Required:
a. Calculate the following ratios:
i. Profitability ratios -
- Return on Capital Employed,
- Return on Equity,
- Gross profit margin and
- Net profit margin
ii. Long term solvency and stability -
- Debt/Asset ratio,
- Gearing ratio and
- Interest cover
iii. Short-term solvency and
- Current ratio and
- Acid test ratio
iv. Efficiency (turnover ratios) –
- Account receivable collection period,
- Account payable payment period,
- Inventory turnover (times)
b. Prepare a report addressed to the Chief Executive Officer, assessing the relative performance and financial position of Glory Ltd for the year ended 31st December, 2018
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