Match Ltd and Box Ltd both began operations on 1 January 2020. For illustrative purposes, assume that at that date their statement of financial positions were identical and that their operations during 2020 were also identical. The only difference between the two companies is that they elected to use different accounting methods as can be seen below:     Match Ltd   Box Ltd Inventories   FIFO   Weighted average cost Property, plant and equipment   Straight-line depreciation   Diminishing-balance depreciation Summary financial information for both companies at the end of 2020 is presented below. Statement of profit or loss for the year ended 31 December 2020     Match Ltd   Box Ltd Revenues   $260,000   $260,000 Less: Cost of sales   143,520   156,000 Gross profit   116,480   104,000 Other expenses*   44,000   50,000 Profit   72,480   54,000 * Includes finance costs of $8000. Depreciation expense was $10000 for Match Ltd and $20000 for Box Ltd. Assume no income tax. Statement of financial position for the year ended 31 December 2020     Match Ltd   Box Ltd Cash   $17,000   $17,000 Receivables   48,000   48,000 Inventories   48,000   35,000 Property, plant and equipment (net)   51,000   41,000     $164,000   $141,000 Current liabilities   $26,000   $26,000 Non-current liabilities   36,000   36,000 Equity   102,000   79,000     $164,000   $141,000 Calculate the following ratios for each company: (Round answers to 1 decimal place, e.g. 52.7.)         Match Ltd     Box Ltd   1.   Return on assets     %     % 2.   Rate of return on ordinary equity     %     % 3.   Profit margin     %     % 4.   Current ratio     : 1     : 1 5.   Receivables turnover     times     times 6.   Inventory turnover     times     times 7.   Debt ratio     %     %

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Match Ltd and Box Ltd both began operations on 1 January 2020. For illustrative purposes, assume that at that date their statement of financial positions were identical and that their operations during 2020 were also identical. The only difference between the two companies is that they elected to use different accounting methods as can be seen below:

    Match Ltd   Box Ltd
Inventories   FIFO   Weighted average cost
Property, plant and equipment   Straight-line depreciation   Diminishing-balance depreciation


Summary financial information for both companies at the end of 2020 is presented below.

Statement of profit or loss
for the year ended 31 December 2020
    Match Ltd   Box Ltd
Revenues   $260,000   $260,000
Less: Cost of sales   143,520   156,000
Gross profit   116,480   104,000
Other expenses*   44,000   50,000
Profit   72,480   54,000
* Includes finance costs of $8000. Depreciation expense was $10000 for
Match Ltd and $20000 for Box Ltd. Assume no income tax.



Statement of financial position
for the year ended 31 December 2020
    Match Ltd   Box Ltd
Cash   $17,000   $17,000
Receivables   48,000   48,000
Inventories   48,000   35,000
Property, plant and equipment (net)   51,000   41,000
    $164,000   $141,000
Current liabilities   $26,000   $26,000
Non-current liabilities   36,000   36,000
Equity   102,000   79,000
    $164,000   $141,000


Calculate the following ratios for each company: (Round answers to 1 decimal place, e.g. 52.7.)

        Match Ltd     Box Ltd  
1.   Return on assets  
 
%  
 
%
2.   Rate of return on ordinary equity  
 
%  
 
%
3.   Profit margin  
 
%  
 
%
4.   Current ratio  
 
: 1  
 
: 1
5.   Receivables turnover  
 
times  
 
times
6.   Inventory turnover  
 
times  
 
times
7.   Debt ratio  
 
%  
 
%
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