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: Year Overdraft (S'000) Trade creditors (S'000) Interest 2017 2018 2019 50 567 1167 1133 400 733 The industry averages for firms similar to ARG Inc. are Profit 9% Creditor days 70 days Net Margin Interest cover Stock days Debtor days 15 times 85 days 75 days Current ratio Quick ratio DEBT/Equity ratio 21 times 0.s times 40% (using Book 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: Year Overdraft (S'000) Trade creditors (S'000) Interest 2017 2018 2019 50 567 1167 1133 400 733 The industry averages for firms similar to ARG Inc. are Profit 9% Creditor days 70 days Net Margin Interest cover Stock days Debtor days 15 times 85 days 75 days Current ratio Quick ratio DEBT/Equity ratio 21 times 0.s times 40% (using Book value)

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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