Question

Boom Ltd has the following comparative data.
			BOOM LTD
		Statement of financial position as at 30 June
		2020		2019
		$		$
Cash		19,980		29,550
Receivables (net)		64,720		59,020
Inventories		61,910		52,060
Property, plant and equipment (net)		200,600		174,340
		347,210		314,970
Accounts payable		49,160		58,060
Loan payable (15%)		102,000		102,000
Share capital, $10 each		136,000		119,000
Retained earnings		60,050		35,910
		347,210		314,970

Additional information for 2020:
1.	Profit was  $19,160
2.	Sales on account were $375,100.  Sales returns and allowances amounted to $29,200
3.	Cost of sales was $192,500
4.	Net cash provided by operating activities was $51,400
5.	The loan payable is a non-current liability in both years.
6.	Depreciation for the year was $22,500 and there were no disposals in the year.

Required

Calculate the following at 30 June 2020 (round your final answers to 2 decimal places):

a) Current ratio.

b) Quick ratio.

c) Average collection period.

d) Average days in inventory.

e) Cash return on sales ratio.

f) Cash debt coverage.

g) Current cash debt coverage.

h) Capital expenditure ratio

i) Free cash flow

Answer 1

Current ratio= Current assets/current liabilities	(Amount $)
Given:
Current assets:
cash	19,980.00
Receivables (net)	64,720.00
Inventories	61,910.00
(A)	146,610.00
Current Liabilities:
Accounts Payable	49,160.00
(B)	49,160.00
Current ratio=A/B=146610/49160	2.98
Quick assets ratio=(Current assets-Inventory)/Current liabilities
=(146610-61910)/49160	1.72
Average collection period:
Net Sales/Average Accounts receivable
Sales=375100
Sales returns=29200
Net sales= sales-sales returns=375100-29200=345900
Accounts receivable 2020=64720
Accounts receivable 2019=59020
Average accounts receivable= (accounts receivable 2020+accounts receivable 2019)/2
(64720+59020)/2=61870
Average collection period:	5.59
=345900/61870
Average days of inventory:
=Cost of goods sold/Average Inventory
Given:
Cost of goods sold=192500
Inventory 2020=61910
Inventory 2019=52060
Average inventory=(inventory 2020+inventory 2019)/2
(61910+52060)/2=56985
Average days of inventory:
192500/56985	3.38
e) Cash return on sale ratio
net cash provided by operating activities/Net sales
Given net cash from operating activities=51400
net sales=sales-returns=375100-29200=345900
cash return on sales ratio=51400/345900	0.15
f) Cash debt coverage
net cash provided by operating activities/Total Debt
Given: net cash provided by operating activities=51400
Total debt=102000
cash debt coverage ratio=51400/102000	0.50
g)current cash debt coverage ratio
Given:
Current cash=19980
Total debt=102000
formula=current cash/Total debt= 19980/102000	0.20
h) Capital expenditure ratio
=net cash from operating activities/capital expenditure
given: net cash from operating activities=51400
Capital expenditure:
Property ,plant and equip:
Given: closing balance 200600
add: depreciation for the year 22500
Less: opening balance 174340
balance is the capital expenditure spent in this year i.e 200600+22500-174340=48760
Therefore captial expenditure ratio=51400/48760	1.05
i) Free cash fflow
net cash from operating activities-capital expenditure=free cash flow
Given:
net cash from operating activities=51400
capital expenditure=48760
Therefore free cash flow=51400-48760=2640	2,640.00