Question

 

XYZ Company’s financial statements contain the following information. Appraise the financial position of the company from the point of view of:

1. Liquidity (Current and Acid ratios),
2. Profitability (Gross Profit, Net Profit, Return on Total Asset, Return on Capital employed, Return on Equity Funds ratios), and
3. Activity (Debtors Turnover, Stock Turnover and Total Assets Turnover ratios).

	2007	2008
	Rs.	Rs.
Cash	200,000	160,000
Sundry debtors	320,000	400,000
Temporary Investments	200,000	320,000
Stock	1,840,000	2,160,000
Prepaid Expenses	28,000	12,000
Total Current Assets	2,588,000	3,052,000
Total Assets	5,600,000	6,400,000
Current Liabilities	640,000	800,000
Loans	1,600,000	1,600,000
Capital	2,000,000	2,000,000
Retained Earning	468,000	812,000

   

Statement of Profit & Loss of the Current Year

	Rs.
Sales	4,000,000
Less cost of goods sold	(2,800,000)
Less interest	(160,000)
Net Profit	1,040,000
Less taxes @ 50%	520,000
Profit after tax	520,000
Profit distributed	220,000

Answer 1