Ask Question, Ask an Expert


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

(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

A random sample of the birth weights of 186 babies has a

A random sample of the birth weights of 186 babies has a mean of 3103 g and a standard deviation of 691 g. Construct a 98% confidence interval estimate of the mean birth weight for all such babies. What is the confidence ...

A spherical pellet containing pure solid a is suspended in

A spherical pellet containing pure solid A is suspended in a flowing liquid stream at 20°C. The initial diameter of the pellet is 1.0 cm, and the bulk liquid velocity is 5 cm/s. Component A is soluble in the liquid, and ...

Two astronauts with masses m1 and m2 say good-bye and push

Two astronauts with masses m1 and m2 say good-bye and push each other off in the space. The initial velocity of both was v0, and after the push-off the astronaut with the mass m1 moves with the velocity v1 in the same di ...

1 when are correlational research designs used in

1. When are correlational research designs used in behavioral research? What are their advantages and disadvantages? 2. What are a linear relationship and a curvilinear relationship? What does it mean if two variables ar ...

You are assigned a paper and excel backup on exxon company

You are assigned a paper and excel backup on EXXON company. You will utilize all the material we have covered to analyze and assess the corporate health of the company. I provide some leading questions to be answered in ...

Formulate a polling station location problem taking into

Formulate a polling station location problem, taking into account the following binding constraints: (a) the number of polling stations is fixed for each municipality and calculated according to the number of resident vo ...

Using the navier-stokes equations in appendix e solve

Using the Navier-Stokes equations in Appendix E, solve Problem 8.13. Problem 8.13 The device in the schematic diagram below is a viscosity pump. It consists of a rotating drum inside of a stationary case. The case and th ...

What is the firms goal in short-term investing how does it

What is the firm's goal in short-term investing? How does it use money market mutual funds? Describe some of the popular money market financial instruments in each of the following groups: a. U.S. Treasuries b. Federal a ...

1 in what way is the npv consistent with the principle of

1. In what way is the NPV consistent with the principle of shareholder wealth maximization? What happens to the value of a firm if a positive NPV project is accepted? If a negative NPV project is accepted? 2. Can you nam ...

In a 1-page word document consider the following activities

In a 1-page Word document, consider the following activities and their durations. The original project schedule, using early activity starts, is shown below. Activity Task Predecessors Duration Activity Cost A Sign Contr ...

  • 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

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

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen