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 $3.2 million and pays interest on its overdraft at a rate of 6 percent (6%) per year. The company currently has no long-term debt. Current liabilities consist of trade creditors and overdraft finance in each of the three years as follows: Year Overdraft (S'000) Trade creditors ($'O00) Interest 2017 50 |400 2018 2019 567 1,167 733 1,133 ? ? The industry averages for firms similar to ARG Inc. are Net Profit 9% Creditor days 70 days Margin Interest cover 15 times Current ratio 2.1 times Stock days Debtor days 85 days 75 days Quick ratio 0.8 times DEBT/Equity ratio 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 $3.2 million and pays interest on its overdraft at a rate of 6 percent (6%) per year. The company currently has no long-term debt. Current liabilities consist of trade creditors and overdraft finance in each of the three years as follows: Year Overdraft (S'000) Trade creditors ($'O00) Interest 2017 50 |400 2018 2019 567 1,167 733 1,133 ? ? The industry averages for firms similar to ARG Inc. are Net Profit 9% Creditor days 70 days Margin Interest cover 15 times Current ratio 2.1 times Stock days Debtor days 85 days 75 days Quick ratio 0.8 times DEBT/Equity ratio 40% (using Book value)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question B:
What is the current financial position and recent financial performance of the company?
Transcribed Image Text: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 $3.2 million and pays interest on its overdraft at a rate of 6 percent
(6%) per year. The company currently has no long-term debt. Current liabilities consist of trade
creditors and overdraft finance in each of the three years as follows:
Year
Overdraft ($'000)
Trade creditors ($'000)
2017
2018
2019
50
567
1,167
400
733
1,133
Interest
?
?
The industry averages for firms similar to ARG Inc. are
Net
Profit 9%
Creditor days
70 days
Margin
Interest cover
15 times
Current ratio
2.1 times
Stock days
Debtor days
85 days
Quick ratio
0.8 times
75 days
DEBT/Equity ratio
40% (using Book value)
Transcribed Image Text:ARG INC
Income Statement for the years ending December 31
2019
2018
2017
(S'000)
(S'000)
(S'000)
Revenue
5,200
3400
2600
Cost of Goods sold
4570
2806
2104
Profit before interest & tax
630
594
496
Interest
70
34
3
Earnings before tax
560
560
493
Тах
140
140
123
Net Income
420
420
370
Dividends
20
20
20
Retained profit
400
400
350
ARG Inc
Balance Sheet as at December 31
2019
2018
2017
(S'000)
(S'000)
(S'000)
Fixed Assets
1,600
1,200
800
Current Assets
Inventory
Accounts Receivable
600
1,450
1,400
1,000
850
400
2,850
1,850
1,000
Total Assets
4,450
3,050
1,800
Current Liabilities
2,300
1,300
450
Ordinary shares
1,000
1,000
750
1,000
Reserves
1,150
350
Total Liabilities & Owners Equity
4,450
3,050
1,800
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