ARG Inc, is a manufacturer of dairy products that was formed three years ago by three sisters who, as directors, retain sole ownership of its ordinary share capital. One third of the initial share capital was provided by each sister. However, the company has managed to return a profit in each year of operation as shown in the financial statements. ARG Inc. has an overdraft limit of $3.2 million and pays interest on its overdraft at a rate of 6 percent (6%) per year. The company currently has no long-term debt. Current liabilities consist of trade creditors and overdraft finance in each of the three years as follows: 2018 567 733 2019 Year Overdraft (S'000) Trade creditors (S'000) Interest 2017 50 400 1,167 1,133 The industry averages for firms similar to ARG Inc. are Net Profit 9% Creditor days 70 days Margin Interest cover Stock days Debtor days 15 times 85 days 75 days Current ratio Quick ratio DEBT/Equity ratio 21 times 0.8 times 40% (using llook value)
ARG Inc, is a manufacturer of dairy products that was formed three years ago by three sisters who, as directors, retain sole ownership of its ordinary share capital. One third of the initial share capital was provided by each sister. However, the company has managed to return a profit in each year of operation as shown in the financial statements. ARG Inc. has an overdraft limit of $3.2 million and pays interest on its overdraft at a rate of 6 percent (6%) per year. The company currently has no long-term debt. Current liabilities consist of trade creditors and overdraft finance in each of the three years as follows: 2018 567 733 2019 Year Overdraft (S'000) Trade creditors (S'000) Interest 2017 50 400 1,167 1,133 The industry averages for firms similar to ARG Inc. are Net Profit 9% Creditor days 70 days Margin Interest cover Stock days Debtor days 15 times 85 days 75 days Current ratio Quick ratio DEBT/Equity ratio 21 times 0.8 times 40% (using llook value)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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