The following information has been collected from two London-based companies. The accounts are drawn up to 31st December 2021.Profit and Loss Account for the year ended 31st December 2021 (Figures are in £000)ParticularsXYZABCSales3,6904,586Less: Cost of Goods Sold (Including purchases)(2,146)(2,690)Gross Profit1,5441,896Less: Selling & Distribution Expenses Less: Depreciation(1,103)(1,253)Earnings before Interest & Tax or Operating Profit441643Less: Interest(225)(192)Earnings before Tax216451Less: Taxes(86)(180)Earnings after Tax or Net Profit130271Balance Sheet as at31st December 2021 (Figures are in £000)AssetsXYZABCFixed Assets4,5424,790Current Assets Account Receivables274313Inventory654702Cash140163Total Current Assets1,0681,178Total Assets5,6105,968Liabilities Capital3,8244,310Long Term Debt883760Current Liabilities Account Payables519572Other Current Liabilities384326Total Current Liabilities903898Total Liabilities and Equity5,6105,968 Required: Profitability Ratios - Calculate and analyse at least one of the following: Operating Profitability RatioNet Profit RatioReturn on Equity (ROE)

Ratio analysis plays an important part in determining the performance of the business. Various…

Answered: Profitability Ratios

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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The following information has been collected from two London-based companies. The accounts are drawn up to 31^st December 2021.

Profit and Loss Account for the year ended 31st December 2021 (Figures are in £000)

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: Depreciation	(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

Balance Sheet as at31st December 2021 (Figures are in £000)

Assets	XYZ	ABC
Fixed Assets	4,542	4,790
Current Assets
Account Receivables	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:
1. Operating Profitability Ratio
2. Net Profit Ratio
3. Return on Equity (ROE)

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