Profitability Ratios
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
The following information has been collected from two London-based companies. The accounts are drawn up to 31st December 2021.
Particulars | XYZ | ABC |
Sales | 3,690 | 4,586 |
Less: Cost of Goods Sold (Including purchases) | (2,146) | (2,690) |
Gross Profit | 1,544 | 1,896 |
Less: Selling & Distribution Expenses | ||
Less: |
(1,103) | (1,253) |
Earnings before Interest & Tax or Operating Profit | 441 | 643 |
Less: Interest | (225) | (192) |
Earnings before Tax | 216 | 451 |
Less: Taxes | (86) | (180) |
Earnings after Tax or Net Profit | 130 | 271 |
Assets | XYZ | ABC |
Fixed Assets | 4,542 | 4,790 |
Current Assets | ||
274 | 313 | |
Inventory | 654 | 702 |
Cash | 140 | 163 |
Total Current Assets | 1,068 | 1,178 |
Total Assets | 5,610 | 5,968 |
Liabilities | ||
Capital | 3,824 | 4,310 |
Long Term Debt | 883 | 760 |
Current Liabilities | ||
Account Payables | 519 | 572 |
Other Current Liabilities | 384 | 326 |
Total Current Liabilities | 903 | 898 |
Total Liabilities and Equity | 5,610 | 5,968 |
Required:
- Profitability Ratios - Calculate and analyse at least one of the following:
- Operating Profitability Ratio
- Net Profit Ratio
- Return on Equity (ROE)
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