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Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:  (refer to the images)   Required: a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio: i. Gross Profit Margin ii. Net Profit Margin iii. Inventory Turnover Period (days)

Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:  (refer to the images)   Required: a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio: i. Gross Profit Margin ii. Net Profit Margin iii. Inventory Turnover Period (days)

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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Alex is currently considering to invest his money in one of the companies between
Company A and Company B. The summarized final accounts of the companies for their
last completed financial year are as follows:  (refer to the images)

 

Required:
a. Calculate the following ratios for Company A and Company B. State clearly the
formulae used for each ratio:
i. Gross Profit Margin
ii. Net Profit Margin
iii. Inventory Turnover Period (days)
iv. Receivables Collection Period (days)
v. Payables Payment Period (days)
vi. Current Ratio
vii. Quick Ratio

b. Comment on each of the ratios calculated in part (a) above. 

Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows: Statements of Comprehensive Income Company A RM RM Company B RM RM Sales 160,000 (120,000) 40,000 240,000 (180,000) 60,000 Cost of sales Gross profit Less: Administration expenses Selling and distribution 12,000 18,000 6,000 9,500 expenses Other operating expenses Financial expenses 10,000 3,000 14,000 500 (31,000) 9,000 (42,000) 18,000 Net profit ..3/-
Transcribed Image Text:Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows: Statements of Comprehensive Income Company A RM RM Company B RM RM Sales 160,000 (120,000) 40,000 240,000 (180,000) 60,000 Cost of sales Gross profit Less: Administration expenses Selling and distribution 12,000 18,000 6,000 9,500 expenses Other operating expenses Financial expenses 10,000 3,000 14,000 500 (31,000) 9,000 (42,000) 18,000 Net profit ..3/-
Company A Company B RM RM RM RM Statements of Financial Position Non- current Assets 80,000 180,000 Current Assets Inventory Receivables 30,000 6,000 4,000 50,000 20,000 10,000 Bank 40,000 120,000 80,000 260,000 Total Asset Capital and reserves Ordinary share capital Accumulated profits 60,000 20,000 80,000 160,000 75,000 235,000 Non Current liabilities 10% Loan stock 30,000 5,000 Current liabilities Payables Total Capital and reserves 10,000 20,000 120,000 260,000
Transcribed Image Text:Company A Company B RM RM RM RM Statements of Financial Position Non- current Assets 80,000 180,000 Current Assets Inventory Receivables 30,000 6,000 4,000 50,000 20,000 10,000 Bank 40,000 120,000 80,000 260,000 Total Asset Capital and reserves Ordinary share capital Accumulated profits 60,000 20,000 80,000 160,000 75,000 235,000 Non Current liabilities 10% Loan stock 30,000 5,000 Current liabilities Payables Total Capital and reserves 10,000 20,000 120,000 260,000
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