Current Ratio – Knowsia

FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

Question

BNN Co is considering acquiring an interest in its competitor JB Co Ltd. The managing director of BNN Co has obtained the three most recent statements of financial position of JB Co Ltd as shown below.

JB Co Ltd – Statement of Financial Position at 31st December

	20X7 GH$’000	20X8 GH$’000	20X9 GH$’000
Non-current assets
Land and buildings	11,460	12,121	11,081
Plant and equipment	8,896	9,020	9,130
	20,356	21,141	20,211
Current assets
Inventories	1,775	2,663	3,995
Trade receivables	1,440	2,260	3,164
Cash	50	53	55
	3,265	4,976	7,214
Total assets	23,621	26,117	27,425
Equity
Share capital	8,000	8,000	8,000
Retained earnings	6,434	7,313	7,584
	14,434	15,313	15,584
Non-current liabilities
12% debentures 20X9–20Y2	5,000	5,000	5,000
Current liabilities
Trade payable	390	388	446
Bank	1,300	2,300	3,400
Income taxes payable	897	1,420	1,195
Dividend payable	1,600	1,696	1,800
	4,187	5,804	6,841
Total equity and liabilities	23,621	26,117	27,425

Required:
Prepare a report for the managing director of BNN Co. commenting on the financial position of JB Co Ltd. and highlight any areas that require further investigation (using gearing and liquidity ratios only).

Answer

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Tags: Comparative Analysis, Corporate Acquisition, Current Ratio, Debt Ratio, Financial analysis, Financial Position, Gearing Ratios, Liquidity Ratios, Quick Ratio, Statement of Financial Position
Level: Level 2

Topic: Presentation of Financial Statements

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

Question

Zestco is an importer and retailer of vegetable oils. Extracts from the financial statements for this year and last are set out below.

Statements of profit or loss for the years ended 30 September

	Year 7	Year 6
	ZC¢’000	ZC¢’000
Revenue	2,160	1,806
Cost of sales	(1,755)	(1,444)
Gross profit	405	362
Distribution costs	(130)	(108)
Administrative expenses	(260)	(198)
Profit before tax	15	56
Income tax expense	(6)	(3)
Profit for the period	9	53

Statements of financial position as of 30 September

	Year 7	Year 6
	ZC¢’000	ZC¢’000
Assets
Non-current assets
Property, plant and equipment	78	72
Current assets
Inventories	106	61
Trade receivables	316	198
Cash	6
	428	259
Total assets	506	331
Equity and liabilities
Equity
Ordinary shares	110	85
Preference shares	23	11
Share premium	15
Revaluation reserve	20
Retained earnings	78
Current liabilities
Bank overdraft	49
Trade payables	198
Current tax payable	7
Total equity and liabilities

Required:

Define and calculate the following ratios for each year:

(a) Gross profit percentage

(b) Net profit percentage

(d) Asset turnover

(e) Current ratio

(f) Quick ratio

(g) Average receivables collection period

(h) Average payables period

(i) Inventory turnover.

Answer

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Tags: Asset Turnover, Current Ratio, Efficiency, Financial Ratios, Gross Profit, Liquidity, Net profit, Performance Analysis, Profitability, Quick Ratio, ROCE
Level: Level 2

Topic: Performance Analysis

FA – L1 – Q104 – Statement of Cash Flows

Explain terms from IAS 7: statement of cash flows, cash, cash equivalents, operating, investing, and financing activities.

Question

ZOE INFANT CO LTD

(a) Explain what is meant by the following terms from IAS 7:

(i) Statement of cash flows

(ii) Cash

(iii) Cash equivalents

(iv) Operating activities

(v) Investing activities

(vi) Financing activities

(b) Calculate the following ratios:

(i) Current Ratio

(ii) Quick Ratio

Answer

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Tags: Current Ratio, Financial Ratios, Liquidity Ratios, Quick Ratio, Working Capital
Level: Level 1

Topic: Interpretation of Financial Statements (Financial Ratios)

FA – L1 – Q103 – Interpretation of Financial Statements

Calculate five financial ratios for KK Enterprises based on its 20X8 financial statements.

Question

KK is the owner of a business supplying goods to other traders. He has just received the financial accounts for his business for the year ended 31st December 20X8 from his accountant. These are reproduced below.

Statement of profit or loss for the year ended 31st December 20X8

GH¢	GH¢
Sales
Cost of sales
Gross profit
Expenses
Net profit

Statement of financial position as at 31st December 20X8

GH¢	GH¢
Non-current assets (net)
Current assets
Inventory	52,000
Receivables	15,000
Cash	100

Total assets
Current liabilities
Payables	6,000
Bank	2,500

Capital
Balance b/d	200,000
Net profit	30,000
Drawings	(21,400)

Total capital and liabilities

Note: Inventory on 1st January 20X8 was valued at GH¢ 48,000.

Required:
Calculate for KK Enterprises each of the following ratios for the year ended 31st December 20X8 (where appropriate, calculations should be approximated to two decimal places):
(i) Net profit margin.
(ii) Return on capital employed (using the closing year-end value for capital employed).
(iii) Current ratio.
(iv) Liquid (acid test) ratio.
(v) Rate of inventory turnover.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Current Ratio, Financial Ratios, Financial Statement Analysis, Inventory Turnover, Liquidity Ratios, Net Profit Margin, Profitability Ratios, Return on Capital Employed, Sole Trader
Level: Level 1

Topic: Interpretation of Financial Statements (Financial Ratios)

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FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

FA – L1 – Q104 – Statement of Cash Flows

Explain terms from IAS 7: statement of cash flows, cash, cash equivalents, operating, investing, and financing activities.

FA – L1 – Q103 – Interpretation of Financial Statements

Calculate five financial ratios for KK Enterprises based on its 20X8 financial statements.

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FR – L2 – Q100 – Presentation of Financial Statements

Prepare a report analyzing JB Co Ltd's financial position using gearing and liquidity ratios, highlighting areas for further investigation.

You're reporting an error for "FR – L2 – Q100 – Presentation of Financial Statements"

MA – L2 – Q57 – Performance analysis

Evaluate KINTAMPO LTD's performance using financial ratios for two divisions, Amir and Mo.

You're reporting an error for "MA – L2 – Q57 – Performance analysis"

FA – L1 – Q104 – Statement of Cash Flows

Explain terms from IAS 7: statement of cash flows, cash, cash equivalents, operating, investing, and financing activities.

You're reporting an error for "FA – L1 – Q104 – Statement of Cash Flows"

FA – L1 – Q103 – Interpretation of Financial Statements

Calculate five financial ratios for KK Enterprises based on its 20X8 financial statements.

You're reporting an error for "FA – L1 – Q103 – Interpretation of Financial Statements"

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