Rose-Jewel sells jewellery through retail stores throughout the country. Over the last two years it has experienced declining profitability and is wondering if this is related to the sector as a whole. It has recently subscribed to an agency that produces average ratios across many businesses. Below are the ratios that have been provided by the agency for Rose-Jewel's business sector based on a year end of 30 September 2019. Return on year-end capital employed (ROCE) 16·8% Net asset (total assets less current liabilities) turnover 1-4 times Gross profit margin 35% Operating profit margin 12% Current ratio 1·25:1 Average inventory turnover 3 times Trade payables' payment period 64 days Debt to equity 38% The financial statements of Rose-Jewel for the year ended 30 September 2019 are: Income Statement RM'000 RM'000 Revenue 56 ,000 Opening inventory 8,300 Purchases 43,900 52,200 Closing inventory (10,200) (42,000) Gross profit 14,000 Operating costs (9,800) Finance costs (800) Profit before tax 3,400 Income tax expense (1,000) Profit for the year 2,400 Statement of financial position RM'000 RM'000 Assets Non-current assets Property and shop fittings 25,600 Deferred development expenditure 5,000 30,600 Current assets Inventory 10,200 Bank 1,000 11,200 Total assets 41,800 Equity and liabilities Equity Equity shares of RM1 each 15,000 Property revaluation reserve 3,000 Retained earnings 8,600 26,600 Non-current liabilities 10% loan notes 8,000 Current liabilities Trade payables 5,400 Current tax payables 1,800 7,200 Total equity and liabilities 41,800 Prepare the equivalent ratios that have been provided by the agency for Rose-Jewel.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Rose-Jewel sells jewellery through retail stores throughout the country. Over the last two years it has experienced declining profitability and is wondering if this is related to the sector as a whole. It has recently subscribed to an agency that produces average ratios across many businesses. Below are the ratios that have been provided by the agency for Rose-Jewel's business sector based on a year end of 30 September 2019.

 

Return on year-end capital employed (ROCE)

16·8%

Net asset (total assets less current liabilities) turnover

1-4 times

Gross profit margin

35%

Operating profit margin

12%

Current ratio

1·25:1

Average inventory turnover

3 times

Trade payables' payment period

64 days

Debt to equity

38%

 

The financial statements of Rose-Jewel for the year ended 30 September 2019 are:

Income Statement

 

RM'000

 

RM'000

Revenue

 

56 ,000

Opening inventory

8,300

 

Purchases

43,900

 

 

52,200

 

Closing inventory

(10,200)

(42,000)

Gross profit

 

14,000

Operating costs

 

(9,800)

Finance costs

 

(800)

Profit before tax

 

3,400

Income tax expense

 

(1,000)

Profit for the year

 

2,400

Statement of financial position

 

RM'000

 

RM'000

Assets

 

 

Non-current assets

 

 

Property and shop fittings

 

25,600

Deferred development expenditure

 

5,000

 

 

30,600

Current assets

 

 

Inventory

10,200

 

Bank

1,000

11,200

Total assets

 

41,800

Equity and liabilities

 

 

Equity

Equity shares of RM1 each

 

 

15,000

Property revaluation reserve

 

3,000

Retained earnings

 

8,600

 

 

26,600

Non-current liabilities

 

 

10% loan notes

 

8,000

Current liabilities

 

 

Trade payables

5,400

 

Current tax payables

1,800

7,200

Total equity and liabilities

 

41,800

  1. Prepare the equivalent ratios that have been provided by the agency for Rose-Jewel.
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