Chelsea Ltd and Liverpool Ltd both began their operations on 1 January 2022. Summary financialinformation for both companies at the end of 2022 is presented below.Statement of Profit or lossfor the year ended 31 December 2022Chelsea LtdRevenuesLess: Cost of salesGross ProfitOther expensesDepreciationexpenseProfitCash at bankReceivablesInventoriesProperty plant andequipmentCurrent liabilitiesNon-current liabilitiesEquityRequireda.iii.iv.$1,000,000552,000448,000132,00040,000$276,000v.vi.vii.Statement of Financial Positionas at 31 December 2022Liverpool Ltd$1,000,000600,000400,000132,00080,000$188,000Chelsea LtdCalculate and interpret the following ratios for each companyLreturn on assetsil.return on ordinary equityprofit margincurrent ratio$80,000200,000208,000220,000120,000180,000408,000receivables turnoverinventory turnoverdebt ratio.Liverpool Ltd$80,000200,000160.000180,000120,000180,000320,000b. How could management of Chelsea Ltd and Liverpool Ltd utilise financial statement ratio analysis toachieve their business goals?c. Greg Norman is an investor who is contemplating on a $3 million investment in one of the aboveentities. Provide a recommendation on which entity Greg should invest based on the ratio analysis.

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Chelsea Ltd and Liverpool Ltd both began their operations on 1 January 2022. Summary financial information for both companies at the end of 2022 is presented below. Statement of Profit or loss for the year ended 31 December 2022 Revenues Less: Cost of sales Gross Profit Other expenses Depreciation expense Profit Cash at bank Receivables Inventories Property plant and equipment Current liabilities Non-current liabilities Equity i iv. V. Chelsea Ltd Liverpool Ltd vi. vii. $1,000,000 552.000 448.000 132,000 40,000 $276.000 Statement of Financial Position as at 31 December 2022 $1,000,000 600,000 400,000 132.000 80,000 $188,000 Chelsea Ltd Liverpool Ltd $80.000 $80,000 200,000 208,000 220,000 120,000 180.000 408.000 return on ordinary equity profit margin current ratio Required a Calculate and interpret the following ratios for each company i return on assets i receivables turnover inventory turnover debt ratio. 200,000 160,000 180,000 120,000 180,000 320,000

Chelsea Ltd and Liverpool Ltd both began their operations on 1 January 2022. Summary financial information for both companies at the end of 2022 is presented below. Statement of Profit or loss for the year ended 31 December 2022 Revenues Less: Cost of sales Gross Profit Other expenses Depreciation expense Profit Cash at bank Receivables Inventories Property plant and equipment Current liabilities Non-current liabilities Equity i iv. V. Chelsea Ltd Liverpool Ltd vi. vii. $1,000,000 552.000 448.000 132,000 40,000 $276.000 Statement of Financial Position as at 31 December 2022 $1,000,000 600,000 400,000 132.000 80,000 $188,000 Chelsea Ltd Liverpool Ltd $80.000 $80,000 200,000 208,000 220,000 120,000 180.000 408.000 return on ordinary equity profit margin current ratio Required a Calculate and interpret the following ratios for each company i return on assets i receivables turnover inventory turnover debt ratio. 200,000 160,000 180,000 120,000 180,000 320,000

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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