You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. Following are a 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 31 st 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 3 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. Following are a
Statement of Profit or Loss and
December 2018.
Statement of Profit or Loss for the year ended 31 st 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
342,130
225,102
Income tax expense
74,200
31,272
Profit for the year
267,930
193,830
3
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
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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