Question Four Using the provided information, compute the relevant ratios for 2019 and 2018 for an analysis and evaluation of the change in the company’s liquidity position and management of working capital. Comment on your findings.Ezwini (Pty) Ltd. sells electrical goods throughout the country and its main customer base are self- employed electricians who purchase on credit. Their purchases are largely on account with their suppliers being concentrated in KwaZulu-Natal. Below are the company’s abbreviated statements of comprehensive income for the period ended 30 April 2019 and statement of financial position at the same date. Comprehensiveincomet20192018statemenR'000R'000Sales85 00074 000Cost of sales-63 670-54 695Gross profit21 33019 305Operating costs-13 646-11 845Profit before interest and tax7 6847 460Interest expense-2 230-1 385Profit before tax5 4546 075Taxation-1 527-1 701Profit after tax for the year3 9274 374Statement of financial position20192018R'000R'000ASSETSProperty, plant and equipment9 5508 740 Current assets35 94529 533Inventory21 38714 850Accounts receivable11 6889 990Cash2 8704 693Total assets45 49538 273EQUITY AND LIABILITIESShareholders' equity17 4775 120Issued capital6 7506 750Retained earnings10 7278 370Long-term loan12 65010125Current liabilities15 36813 028Accounts payable4 8004 200Bank overdraft10 5688 828Total equity and liabilities45 49538 273

Liquidity ratio = These ratio help to determine the liquidity position of the company. Common type…

Answered: Bank overdraft 10 568 8 828 Total…

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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Question Four Using the provided information, compute the relevant ratios for 2019 and 2018 for an analysis and evaluation of the change in the company’s liquidity position and management of working capital. Comment on your findings. Ezwini (Pty) Ltd. sells electrical goods throughout the country and its main customer base are self- employed electricians who purchase on credit. Their purchases are largely on account with their suppliers being concentrated in KwaZulu-Natal. Below are the company’s abbreviated statements of comprehensive income for the period ended 30 April 2019 and statement of financial position at the same date.

Comprehensive
incomet
2019
2018
statemen
R'000
R'000
Sales
85 000
74 000
Cost of sales
-63 670
-54 695
Gross profit
21 330
19 305
Operating costs
-13 646
-11 845
Profit before interest and tax
7 684
7 460
Interest expense
-2 230
-1 385
Profit before tax
5 454
6 075
Taxation
-1 527
-1 701
Profit after tax for the year
3 927
4 374
Statement of financial position
2019
2018
R'000
R'000
ASSETS
Property, plant and equipment
9 550
8 740

Current assets
35 945
29 533
Inventory
21 387
14 850
Accounts receivable
11 688
9 990
Cash
2 870
4 693
Total assets
45 495
38 273
EQUITY AND LIABILITIES
Shareholders' equity
17 477
5 120
Issued capital
6 750
6 750
Retained earnings
10 727
8 370
Long-term loan
12 650
10125
Current liabilities
15 368
13 028
Accounts payable
4 800
4 200
Bank overdraft
10 568
8 828
Total equity and liabilities
45 495
38 273

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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