Question 1 – Refer to the 2013 Woolworths financial statements in Appendix 1.
1.1 What were the two major liabilities as at 30 June 2013?
1.2 Calculate the following ratios for Woolworths (consolidated accounts):
2.1Cu
ent Ratio
2.2 Quick Ratio
2.3 Gross Profit Margin
2.4 Debt to Equity
Question 2 – As an analyst, you have extracted the following information from the accounts of Romeo Construction Co. Ltd.
Romeo Construction Co. Ltd
Statement of Comprehensive income for the years ended 30 June.
20X4
20X5
20X6
Sales
$60,000
$54,000
$75,000
Less Expenses
Material
$22,500
$21,000
$35,813
Labou
$15,000
$13,500
$18,000
Production Expenses
$7,500
$6,000
$6,750
Administrative Expenses
$7,500
$7,500
$8,250
Finance Expenses
$500
$1,500
$1,500
Profit for the yea
$6,000
$4,500
$4,687
Other Comprehensive Income
$0
$0
$0
Total Comprehensive Income
$6,000
$4,500
$4,687
Balance Sheet as at 30 June.
20X4
20X5
20X6
Work in progress
$60,000
$52,500
$67,500
Non-cu
ent assets
$30,000
$37,500
$37,500
$90,000
$90,000
$105,000
Bank Overdraft
$15,000
$18,000
$12,000
Other cu
ent liabilities
$15,000
$12,000
$18,000
Shareholder funds
$60,000
$60,000
$75,000
$90,000
$90,000
$105,000
Other information
All profits have been distributed as dividends each year.
The company issued $15,000 of shares in 20X6.
Required
2.1 Commence on the profitability of the business.
2.2 Comment on the financial situation of the business.
2.3 What action do you suggest for the coming year?
Question 3 – The balance sheets and selected information given below for Katrina Ltd and Catherine Ltd for the year ended 30 June 20X2.
KATRINA $
KATRINA $
CATHERINE $
CATHERINE $
Assets
Cu
ent assets
Cash at bank
80,000
220,000
Marketable securities
8,000
190,000
Accounts receivable (net)
100,000
130,000
Merchandise inventory
560,000
300,000
Total cu
ent asset
748,000
840,000
Non-cu
ent assets
Property, plant & equipment
1,200,000
1,280,000
Intangibles
6,000
0
Total non-cu
ent asset
1,206,000
1,280,000
Total assets
1,954,000
2,120,000
Liabilities and shareholders’ equity
Cu
ent Liabilities
180,000
310,000
Non-Cu
ent liabilities
340,000
330,000
Paid-up capital ($10 value)
1,300,000
1,300,000
Retained profits
134,000
180,000
Total liabilities and shareholders’ equity
1,954,000
2,120,000
Other information
Accounts receivable 1.7.X1
130,000
110,000
Merchandise inventory 1.7.X1
520,000
420,000
X1 – X2 Sales
Cash
852,000
400,000
Credit
1,100,000
1,500,.000
X1 – X2 Cost of goods sold
1,200,000
1,100,000
X1 – X2 Net profit
310,000
400,000
X1 – X2 Interest expense
60,000
40,000
Total shareholder’s equity 1.7.X1
1,334,000
1,380,000
Total assets, 1.7.X1
1,854,000
2,020,000
Tax rate: 30%
Required:
3.1 Calculate the cu
ent ratio, quick ratio, inventory turnover, accounts receivable turnover and average days sales uncollected for each company.
3.2 Which company do you think as a better liquid position? Why?
3.3 Calculate, for each company, the rate of return on total assets (ROA), asset turnover and net profit margin before after – tax cost of interest. Which company has the higher ROA? Why?
3.4 Calculate, for each company, the rate of return on ordinary shareholders’ equity (ROA), asset turnover and net profit margin and financial leverage ratios. Which company has the higher ROE? Why?
3.5 Which company is using leverage more effectively to increase the rate of return to ordinary shareholders? Explain.