Exam 8: Analysis and Interpretation of Financial Statements

Using the information below find the average inventory turnover for Vox Ltd in days. Sales \ 1,800,000 Cost of sales 1,200,000 Stock on hand start 360,000 Stock on hand end 312,000

Ratios should not be used in isolation because:

Success Ltd has a price-earnings ratio of 5 and earnings per share of 22 cents.Its issued capital consists of 2,000,000 $1 ordinary shares.The market price per share is:

Solvent Ltd has a quick ratio of 1.2:1 and its current liabilities amount to $200,000.If it purchased $40,000 of inventory on credit,its new quick ratio would be:

Trendy Ltd's net profit after tax was $1,200 and its interest expense was $400.Assuming corporate tax is $400,what is the company's interest cover ratio?

Which of these is not an advantage of a shorter inventory turnover period?

The type of analysis being carried out when a company's gross profit ratio for three years is graphed and compared with the average industry gross profit ratio calculated over the same time period is:

Trendy Traders reported total sales amounting to $1,000,000 in the year 2015,of which 80% were on credit.At 31 December,customers owed $100,000.If the firm operates for 365 days a year,how long,on average,does it take to collect money from its debtors?

The ratio which is considered to be the primary measure of overall profitability as it assesses how effectively the business has used its funds is:

If the price-earnings ratio is 8 times,the earnings yield is:

If current assets exceed current liabilities,the payment of accounts payable will:

The formula for gross profit margin is gross profit divided by:

Which of these ratios measure returns to shareholders?

A firm has total assets of $800,000 and total liabilities of $300,000.There are no preference shareholders.Earnings before interest and taxes are $100,000.Interest is $21,000 and taxes are $34,000.The return on ordinary shareholders' funds is:

Which of these is not an advantage of using borrowed funds to finance a business?

If gross profit is $540,000,interest expense is $200,000,sales is $1,800,000 and total assets are $5,400,000,calculate the gross profit margin.

Use this data to calculate earnings per ordinary share (EPS)for Orange Ltd. Market price for each Orange Ltd share \ 7,80 Net Profit (after interest, tax) \ 6,400 Number of ordinary shares issued 15,000

Dividend yield on ordinary shares is calculated as:

Because a company's inventory is less liquid than its other current assets when investors are assessing liquidity,they should examine the:

$\text { Brad's Engineering Pty Ltd }$ 2015 2014 Statement of financial positions as at 30 June \& \ Total Current Assets 11,080 10,280 Total Fixed Assets 75,000 42,000 TOTAL ASSETS \8 6,080 \5 2,280 Total Current Liabilities 3,400 1,960 Long-term Liabilities 8,500 TOTAL LIABILITIES \2 3,400 \1 0,460 NET ASSETS (Assets - Liabilities) \ 62,680 \ 41,820 SHAREHOLDERS' EQUITY Share capital 40000 30000 Reserves and retained profits 22,680 11,820 \6 2,60 \4 1,820 Additional Information: 2015 2014 Net profit after interest \& tax \ 10,860 \ 6,000 Interest expense 2,000 900 Taxation expense 3,000 1,500 REQUIRED: a)From the information provided above,calculate each of the following ratios for each of the years ending 30 June 2014 and 2015. Gearing ratio.Use formula $\frac{\text {Long term liabilities }}{\text { Share capital and reserves + long term liabilities}}$ Interest cover ratio.Use formula $\frac{\text {Profit before interest and tax }}{\text {Interest }}$ b)Comment on the movements in the ratios over the two years and the adequacy of the level of gearing and interest cover.