- 8 Marks
MA – L2 – Q58 – Performance analysis
Question
The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.
Statement of profit or loss for Akwasi
| ZC¢ | |
|---|---|
| Revenue | 150,000 |
| Cost of sales | (60,000) |
| Gross profit | 90,000 |
| Interest payable | (500) |
| Distribution costs | (13,000) |
| Administrative expenses | (15,000) |
| Profit before tax | 61,500 |
| Income tax expense | (16,605) |
| Profit for the period | 44,895 |
Statements of financial position for Akwasi and Kofi
| Akwasi | Kofi | |
|---|---|---|
| ZC¢ | ZC¢ | |
| Assets | ||
| Non-current assets | ||
| Property | 280,000 | |
| Plant and equipment | 190,000 | 500,000 |
| 190,000 | 780,000 | |
| Current assets | ||
| Inventories | 12,000 | 26,250 |
| Trade receivables | 37,500 | 105,000 |
| Cash at bank | 22,000 | |
| 49,500 | 153,250 | |
| Total assets | 240,000 | 933,250 |
| Equity and liabilities | ||
| 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 |
| Total equity and liabilities | 240,000 | 933,250 |
Required:
Define and calculate the following ratios for each company:
(a) Gross profit percentage (2 marks)
(b) Net profit percentage (2 marks)
(c) Return on capital employed (2 marks)
(d) Asset turnover (2 marks)
The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.
Statement of profit or loss for Akwasi
| ZC¢ | |
|---|---|
| Revenue | 150,000 |
| Cost of sales | (60,000) |
| Gross profit | 90,000 |
| Interest payable | (500) |
| Distribution costs | (13,000) |
| Administrative expenses | (15,000) |
| Profit before tax | 61,500 |
| Income tax expense | (16,605) |
| Profit for the period | 44,895 |
Statements of financial position for Akwasi and Kofi
| Akwasi | Kofi | |
|---|---|---|
| ZC¢ | ZC¢ | |
| Assets | ||
| Non-current assets | ||
| Property | 280,000 | |
| Plant and equipment | 190,000 | 500,000 |
| 190,000 | 780,000 | |
| Current assets | ||
| Inventories | 12,000 | 26,250 |
| Trade receivables | 37,500 | 105,000 |
| Cash at bank | 22,000 | |
| 49,500 | 153,250 | |
| Total assets | 240,000 | 933,250 |
| Equity and liabilities | ||
| 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 |
| Total equity and liabilities | 240,000 | 933,250 |
Required:
Define and calculate the following ratios for each company:
(a) Gross profit percentage (2 marks)
(b) Net profit percentage (2 marks)
(c) Return on capital employed (2 marks)
(d) Asset turnover (2 marks)
The statements of profit or loss and statements of financial position of two manufacturing companies in the same sector are set out below.
Statement of profit or loss for Akwasi
| ZC¢ | |
|---|---|
| Revenue | 150,000 |
| Cost of sales | (60,000) |
| Gross profit | 90,000 |
| Interest payable | (500) |
| Distribution costs | (13,000) |
| Administrative expenses | (15,000) |
| Profit before tax | 61,500 |
| Income tax expense | (16,605) |
| Profit for the period | 44,895 |
Statements of financial position for Akwasi and Kofi
| Akwasi | Kofi | |
|---|---|---|
| ZC¢ | ZC¢ | |
| Assets | ||
| Non-current assets | ||
| Property | 280,000 | |
| Plant and equipment | 190,000 | 500,000 |
| 190,000 | 780,000 | |
| Current assets | ||
| Inventories | 12,000 | 26,250 |
| Trade receivables | 37,500 | 105,000 |
| Cash at bank | 22,000 | |
| 49,500 | 153,250 | |
| Total assets | 240,000 | 933,250 |
| Equity and liabilities | ||
| 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 |
| Total equity and liabilities | 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
Answer
(a) Gross profit % = (Gross profit / Sales) × 100
Amir: (90,000 / 150,000) × 100 = 60%
Mo: (420,000 / 700,000) × 100 = 60%
(b) Net profit % = (Profit for the period / Sales) × 100
Amir: (44,895 / 150,000) × 100 = 29.93%
Mo: (263,530 / 700,000) × 100 = 37.65%
(c) Return on capital employed = (Profit before interest and tax / (Share capital and reserves + Long-term debt)) × 100
Amir: ((61,500 + 500) / (207,395 + 10,000)) × 100 = 28.5%
Mo: ((371,000 + 12,000) / (565,580 + 250,000)) × 100 = 47%
(d) Asset turnover = Sales / (Share capital and reserves + Long-term debt)
Amir: 150,000 / (207,395 + 10,000) = 0.7 times
Mo: 700,000 / (565,580 + 250,000) = 0.85 times
- Tags: Asset Turnover, Efficiency, Financial Ratios, Gross Profit, Net profit, Performance Analysis, Profitability, ROCE
- Level: Level 2
- Topic: Performance Analysis
- Uploader: Salamat Hamid