Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem 1)

Directors of DPK Limited wish to compare the company’s most recent financial statements with those of the previous year. The company’s financial statements are given below:

                                                               DPK Limited                           
                                              Profit and Loss Accounts Year Ended
                                                                         30 June 2002                          30 June 2001
                                                                             Rs 000                                         Rs 000
Sales (note 1)                                                       2,500                                           1,800
Opening stock                                                         200                                              180
Purchases (all on credit)                                         1,960                                            1,220
                                                                             2,160                                            1,400
Less closing stock                                                   (360)                                             (200)
Cost of sales                                                           1,800                                            1,200
Gross profit                                                               700                                               600
Distribution costs                                                      (250)                                            (160)
Administrative expenses                                            (200)                                            (200)
Interest payable                                                         (50)                                               (50)
Profit before tax                                                          200                                               190
Taxation                                                                     (46)                                               ( 44)
Retained profit                                                            154                                                 146
Note 1: 80% of the sales are on credit.

Balance Sheets as at
                                                        30 June 2002             30 June 2001
                                                              Rs 000                           Rs 000
Non Current Assets                                  2,252                            1,886
Current assets Stock                                 360                                200
Debtors – trade                                         750                                400
Cash at bank                                             120                                 100
                                                                1,230                               700
Less current liabilities
Creditors – trade                                       (380)                               (210)
- sundry                                                     (430)                               (260)
Taxation                                                      (50)                                  (48)
                                                                   (860)                               (518)
Net current assets                                         370                                  182
Total assets less current liabilities                  2,622                               2,068
10% debentures                                          (500)                                (500)
                                                                   2,122                               1,568
Capital and reserves
Issued ordinary share capital                        1,200                                 1,000
Share premium account                                 600                                     400
Profit and loss account                                   322                                     168
                                                                   2,122                                  1,568
Required:

(a) Compute, for each of the two years, the following accounting ratios that must assist the directors for comparison.

(i) Current Ratio

(ii) Quick Ratio

(iii) Debtors Collection Period

(iv) Creditors Payment Period

(v) Gross Profit Margin

(vi) Return on Capital Employed

(vii) Return on Equity

(viii) Average Stock Turnover

(ix) Earnings per share

Demonstrate all your workings for each computations.

(b) Evaluate the liquidity position and the financial performance of the company at 30 June 2001 and 2002.

(c) Suggest possible reasons for changes in the ratios between the two years.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M96366

Have any Question? 


Related Questions in Basic Finance

What is the excess burden of taxation why is there an

What is the excess burden of taxation? why is there an excess burden, and what factors affect the size of the excess burden for a specific tax? if several goods are to be tax, how should the taxes be distributed to minim ...

At your discount brokerage firm it costs 995 per stock

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13?

1 deriving from the conclusion of proposition i what is the

1. Deriving from the conclusion of Proposition I, what is the crux of M&M Proposition II? What is the natural relationship between the required returns on debt and on equity that results from Proposition II? 2. In what w ...

1 which type of error do researchers usually regard as more

1. Which type of error do researchers usually regard as more serious? Why? 2. Explain what it means if a researcher sets the alpha level for a statistical test at .05. 3. What does it mean if the difference between two m ...

Wfm current dividend per share is 107 you expect dividends

Wfm current dividend per share is $1.07. You expect dividends to grow at 5% per year into perpetuity. Wfm beta is .85. The current risk free rate is 2.9%, and the expected return on the market portfolio is 7.4%. Use the ...

Explain how you would conduct the study you designed in

Explain how you would conduct the study you designed in Question 1 as a matched-subjects design. Question 1 Design a randomized groups experiment to test the hypothesis that children who watch an hour-long violent televi ...

Why might households and firms in a foreign country prefer

Why might households and firms in a foreign country prefer to use U.S. dollars rather than their own country's currency in making transactions? What advantages or disadvantages do foreign governments experience because o ...

What main effects and interaction could you test with the

What main effects and interaction could you test with the design you developed for Question 3? Are you predicting that you will obtain an interaction? Question 1 Build on the design you created in Question 1 to test the ...

1 explain why an option is a derivative security2 is buying

1. Explain why an option is a derivative security. 2. Is buying an option more or less risky than buying the underlying stock? 3. What is the difference between an option's price and its payoff? 4. List five factors that ...

1 for each of the following patterns of databull what is

1. For each of the following patterns of data, • What is the probability of the researcher having made a Type 1 error? • What is the probability of the researcher having made a Type 2 error? • Should the null hypothesis ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro