David and Roger Ltd is an expanding public company selling a variety of products (only on credit). Simplified income statements and balance sheets for the past 2 years, together with other selected information about the company, are provided below. Balance sheet of David and Roger Ltd 30 June 2017 30 June 2016 $’000 $’000 Current assets Cash 400 200 Accounts receivable 2 500 1 300 Inventory 1 150 750 Total current assets 4 050 2 250 Non-current assets Machinery (at net book value) 2 200 1 010 Land and buildings (at net book value) 3 950 3 015 Total non-current assets 6 150 4 025 Total assets 10 200 6 275 Current liabilities Bank overdraft 800 275 Accounts payable 1 700 600 Accruals 200 250 Total current liabilities 2 700 1 125 Non-current liabilities Long term loans 3 950 2 000 Total non-current liabilities 3 950 2 000 Total liabilities 6 650 3 125 Net assets 3 550 3 150 Shareholders’ equity Paid up capital (1 000 000 ordinary shares) 1 000 1 000 Retained profits 2 550 2 150 Total shareholders’ equity 3 550 3 150 Additional Information: Net cash flow from operations 1 200 950 Market price of a share in the company (30 June) $6.50 $4.00 Inventory at 30 June 2015 was $780 000 Accounts receivable at 30 June 2015 was $1 300 000 Total assets at 30 June 2015 was $5 000 000 Total shareholders’ equity at 30 June 2015 was $2 900 000 Income Statement of David and Roger Ltd for the year ending 30 June 2017 30 June 2016 $’000 $’000 Sales revenue 11 000 8 125 Less cost of sales 7 700 5 687 Gross profit 3 300 2 438 Less other operating expenses General 1 700 1 382 Interest 560 256 Total other operating expenses 2 260 1 638 Net profit before tax 1 040 800 Less income tax expense 160 150 Net profit after tax 880 650 Required: Calculate current ratio and quick ratio for the financial year 2017 a. None of answers given b. Current ratio 1.70 : Quick ratio: 2.00 c. Current Ratio 2 : Quick ratio: 1.5 d. Current ratio 2.5 : Quick ratio: 1.00
David and Roger Ltd is an expanding public company selling a variety of products (only on credit). Simplified income statements and balance sheets for the past 2 years, together with other selected information about the company, are provided below.
Balance sheet of David and Roger Ltd
30 June 2017 30 June 2016
$’000 $’000
Current assets
Cash 400 200
Accounts receivable 2 500 1 300
Inventory 1 150 750
Total current assets 4 050 2 250
Non-current assets
Machinery (at net book value) 2 200 1 010
Land and buildings (at net book value) 3 950 3 015
Total non-current assets 6 150 4 025
Total assets 10 200 6 275
Current liabilities
Bank overdraft 800 275
Accounts payable 1 700 600
Accruals 200 250
Total current liabilities 2 700 1 125
Non-current liabilities
Long term loans 3 950 2 000
Total non-current liabilities 3 950 2 000
Total liabilities 6 650 3 125
Net assets 3 550 3 150
Shareholders’ equity
Paid up capital (1 000 000 ordinary shares) 1 000 1 000
Retained profits 2 550 2 150
Total shareholders’ equity 3 550 3 150
Additional Information:
Net cash flow from operations 1 200 950
Market price of a share in the company (30 June) $6.50 $4.00
Inventory at 30 June 2015 was $780 000
Accounts receivable at 30 June 2015 was $1 300 000
Total assets at 30 June 2015 was $5 000 000
Total shareholders’ equity at 30 June 2015 was $2 900 000
Income Statement of David and Roger Ltd
for the year ending 30 June 2017 30 June 2016
$’000 $’000
Sales revenue 11 000 8 125
Less cost of sales 7 700 5 687
Gross profit 3 300 2 438
Less other operating expenses
General 1 700 1 382
Interest 560 256
Total other operating expenses 2 260 1 638
Net profit before tax 1 040 800
Less income tax expense 160 150
Net profit after tax 880 650
Required:Calculate current ratio and quick ratio for the financial year 2017
None of answers given
Current ratio 1.70 : Quick ratio: 2.00
Current Ratio 2 : Quick ratio: 1.5
Current ratio 2.5 : Quick ratio: 1.00
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