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18. McBride plc is a company which uses a variety of component parts in its manufacturing operations. One of the company's suppliers has gone out of business and seeks an alternative source of supply for the component previously purchased fr that supplier. Two companies have been identified as potential suppliers and they prepare accounts to 31 December and McBride obtained the following copies of each company's financial statements for the year ended to 31 December 2020. Income Statement for the year ended to 31 December 2020 X Ltd Y Ltd £000 £000 Revenue 6,310 (3,840) | (4.240) 1,880 5,720 Cost of sales Gross Profit Operating expenses Operating profit 2,070 (760) (1.080) 990 1,120 (50) Interest (350) Profit before tax 1,070 640 Taxation (320) (210) Profit for the year 750 430 Statement of Financial Position for the year ended to 31 December 2020 X Ltd Y Ltd £000 6,330 £000 Non current assets 4,570 Current assets Inventory 510 890

18. McBride plc is a company which uses a variety of component parts in its manufacturing operations. One of the company's suppliers has gone out of business and seeks an alternative source of supply for the component previously purchased fr that supplier. Two companies have been identified as potential suppliers and they prepare accounts to 31 December and McBride obtained the following copies of each company's financial statements for the year ended to 31 December 2020. Income Statement for the year ended to 31 December 2020 X Ltd Y Ltd £000 £000 Revenue 6,310 (3,840) | (4.240) 1,880 5,720 Cost of sales Gross Profit Operating expenses Operating profit 2,070 (760) (1.080) 990 1,120 (50) Interest (350) Profit before tax 1,070 640 Taxation (320) (210) Profit for the year 750 430 Statement of Financial Position for the year ended to 31 December 2020 X Ltd Y Ltd £000 6,330 £000 Non current assets 4,570 Current assets Inventory 510 890

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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18. McBride plc is a company which uses a variety of component parts in its manufacturing operations. One of the company's suppliers has gone out of business and seeks an alternative source of supply for the component previously purchased from that supplier. Two companies have been identified as potential suppliers and they prepare accounts to 31 December and McBride obtained the following copies of each company's financial statements for the year ended to 31 December 2020. Income Statement for the year ended to 31 December 2020 X Ltd Y Ltd £000 6,310 (3.840) (4.240) 2,070 (760) (1.080) 1,120 (50) 1,070 (320) 750 £000 Revenue 5,720 Cost of sales Gross Profit 1,880 Operating expenses Operating profit Interest Profit before tax 990 (350) 640 (210) Таxation Profit for the year 430 Statement of Financial Position for the year ended to 31 December 2020 X Ltd Y Ltd £000 £000 Non current assets 4,570 6,330 Current assets Inventory Trade receivables 510 890 670 1,090 Cash 340 1,520 6,090 1,980 8,310 Total Assets X Ltd Y Ltd £000 £000 Equity Share capital Retained earnings 2,000 2,000 2.820 1.030 4,820 3,030 Non current liabilities Loan 500 3,500 Current liabilities Trade payables 450 1,130 210 Таxation 320 Bank 440 770 1.780 Total equity and liabilities 6,090 8,310
Transcribed Image Text:18. McBride plc is a company which uses a variety of component parts in its manufacturing operations. One of the company's suppliers has gone out of business and seeks an alternative source of supply for the component previously purchased from that supplier. Two companies have been identified as potential suppliers and they prepare accounts to 31 December and McBride obtained the following copies of each company's financial statements for the year ended to 31 December 2020. Income Statement for the year ended to 31 December 2020 X Ltd Y Ltd £000 6,310 (3.840) (4.240) 2,070 (760) (1.080) 1,120 (50) 1,070 (320) 750 £000 Revenue 5,720 Cost of sales Gross Profit 1,880 Operating expenses Operating profit Interest Profit before tax 990 (350) 640 (210) Таxation Profit for the year 430 Statement of Financial Position for the year ended to 31 December 2020 X Ltd Y Ltd £000 £000 Non current assets 4,570 6,330 Current assets Inventory Trade receivables 510 890 670 1,090 Cash 340 1,520 6,090 1,980 8,310 Total Assets X Ltd Y Ltd £000 £000 Equity Share capital Retained earnings 2,000 2,000 2.820 1.030 4,820 3,030 Non current liabilities Loan 500 3,500 Current liabilities Trade payables 450 1,130 210 Таxation 320 Bank 440 770 1.780 Total equity and liabilities 6,090 8,310
Required: (a) Calculate ROCE, Current ratio, Receivable period (days), Inventory period (days), Payable period (days) for X Ltd and Y Ltd. (b) Use the information provided by these ratios to explain to the management of McBride plc which of the two companies seems likely to be a more reliable source of supply.
Transcribed Image Text:Required: (a) Calculate ROCE, Current ratio, Receivable period (days), Inventory period (days), Payable period (days) for X Ltd and Y Ltd. (b) Use the information provided by these ratios to explain to the management of McBride plc which of the two companies seems likely to be a more reliable source of supply.
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