Note: The rate of interest on Epona’s overdraft is 10 per cent per annum.
Required:
a. Calculate four ratios for each company showing profitability and five showing liquidity. (Use 365 days a year. Round your trade receivable days and credit period ratio answers to 1 decimal place, and all other answers to 2 decimal places.)
The following are the summarized financial statements of Ingrid Ltd and Epona Ltd, two firms that operate in identical industries.
Summarized statements of profit and loss Ingrid Ltd Epona Ltd 000 '000 Sales revenue 6,140 7,320 Cost of goods sold 4,600 5,656 Gross profit 1,540 1,664 Overhead expenditure 1,180 1,300 (including interest) Profit for the year 360 364
Summarized statements of financial position ASSETS Non-current assets 790 1,040 Current assets Inventories 1,240 1,840 Trade receivables 760 1,240 Bank 230 2,230 3,080 Total assets 3,020 4,120 EQUITY AND LIABILITIES Equity Share capital and retained earnings 1,540 2,200 Non-current liabilities 5% long-term loan 540 Current liabilities Trade payables 940 1,080 Bank overdraft 840 Total current liabilities 940 1,920 Total liabilities 1,480 1,920 Total equity and liabilities 3,020 4,120
Note: The rate of interest on Epona's overdraft is 10 per cent per annum.
