- 20 Marks
IA – OCT 2022 – L1 – Q5 – Accounting Ratios
Compute specified accounting ratios for 2020 and 2021 using the provided financial statements of AGN Company Limited.
Question
- Using the financial information below, compute the following accounting ratios for the years 2020 and 2021
a. Net Profit/(Loss) Margin
b. Asset Turnover
c. Return on Capital Employed
d. Debt to Equity Ratio
e. Receivable Collection Period
(Total: 20 marks)
AGN COMPANY LIMITED
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31st DECEMBER 2021
| 2021 GH¢ | 2020 GH¢ | |
|---|---|---|
| Sales | 5,945,975 | 2,466,948 |
| Cost of Sales | (5,690,168) | (2,222,661) |
| Gross Profit | 255,807 | 244,287 |
| Other Income | 187,858 | – |
| Administration Expenses | (840,942) | (743,454) |
| Distribution Expenses | (35,418) | – |
| Profit/(Loss) Before Interest & Tax | (432,695) | (499,167) |
| Finance Cost | (165,932) | – |
| Net Profit/(Loss)Before Tax | (598,627) | (499,167) |
| Taxation | – | – |
| Profit/(Loss) After Taxation | (598,627) | (499,167) |
RETAINED EARNINGS ACCOUNT FOR THE YEAR ENDED DECEMBER 31, 2021
| 2021 GH¢ | 2020 GH¢ | |
|---|---|---|
| 1st January | (499,167) | – |
| Net Profit/(Loss) for the Year | (598,627) | (499,167) |
| 31st December | (1,097,794) | (499,167) |
AGN COMPANY LIMITED
STATEMENT OF FINANCIAL POSITION AS AT 31ST DECEMBER 2021
| 2021 GH¢ | 2020 GH¢ | |
|---|---|---|
| NON CURRENT ASSETS | ||
| Property, Plant and Equipment | 376,237 | 136,600 |
| Total Non Current Assets | 376,237 | 136,600 |
| CURRENT ASSETS | ||
| Inventories | 2,413,383 | 1,920,452 |
| Trade Receivables | 489,162 | 310,682 |
| Taxation | 17,223 | 8,970 |
| Cash and Cash Equivalent | 797,585 | 293,406 |
| Total Current Assets | 3,717,353 | 2,533,510 |
| TOTAL ASSETS | 4,093,590 | 2,670,110 |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||
| CURRENT LIABILITIES | ||
| Accounts Payable | 3,792,030 | 1,570,073 |
| Total Liabilities | 3,792,030 | 1,570,073 |
| SHAREHOLDERS’ EQUITY | ||
| Stated Capital | 1,399,354 | 1,399,354 |
| Director’s Account | – | 199,850 |
| Retained Earnings | (1,097,794) | (499,167) |
| Total Shareholders’ Equity | 301,560 | 1,100,037 |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 4,093,590 | 2,670,110 |
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