- 8 Marks
CR – May 2018 – L3 – Q4c – Analysis and Interpretation of Financial Statements
Analyze and compare the financial performance of two companies in terms of operating performance, liquidity, gearing, and investment ratios.
Question
Fordland Ltd and Fiatland Ltd are two companies in the garment industry. The following are financial ratios computed by the Research Department of ICAG as part of analyzing companies’ performance industry by industry:
| Ratios | Fordland Ltd | Fiatland Ltd |
|---|---|---|
| Return on Capital Employed (ROCE) | 24.10% | 30% |
| Net Assets Turnover | 1.9 times | 2.5 times |
| Gross Profit Margin | 35% | 20% |
| Net Profit Margin | 10.50% | 38% |
| Current Ratio | 1.0:1 | 2.0:1 |
| Quick Ratio | 0.8:1 | 1.0:1 |
| Inventory Holding Period | 60 days | 90 days |
| Receivables Collection Period | 58 days | 60 days |
| Payables Payment Period | 50 days | 50 days |
| Debt to Equity Ratio | 50% | 30% |
| Dividend Yield | 3% | 2% |
| Dividend Cover | 2 times | 1.5 times |
Required:
Write a report analyzing and comparing the financial performance of Fordland Ltd and Fiatland Ltd. The report should cover operating performance, liquidity, gearing, and investment ratios. (8 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Financial Performance, Gearing, Investment, Liquidity, Operating performance, Ratio Analysis
- Level: Level 3
- Topic: Analysis and Interpretation of Financial Statements
- Series: MAY 2018
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