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. 2018 GHS 2017 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 Profit or Loss for the year ended 31st December, 2018 Statement of Financial Position as at 31 December 2018 Assets 2018 GHS 2017 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: Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net profit margin 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)

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. 2018 GHS 2017 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 Profit or Loss for the year ended 31st December, 2018 Statement of Financial Position as at 31 December 2018 Assets 2018 GHS 2017 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: Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net profit margin 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)

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter6: Merchandising Transactions

Section: Chapter Questions

Problem 15EA: The following select account data is taken from the records of Reese Industries for 2019. A. Use the...

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Question

	2018 GHS	2017 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 Profit or Loss for the year ended 31st December, 2018

Statement of Financial Position as at 31 December 2018

Assets	2018 GHS	2017 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:
Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net profit margin
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)

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