Question 2Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio:i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days) Statements ofComprehenslveIncomeCompany ARMCompany BRMRMRMSalesCost of salesGross profitLess:Administration expensesSelling and distribution160,000(120.000)40,000240,000(180.000)60,00012,00018,0006,0009,500expensesOther operatingexpensesFinancial expenses10,0003,00014,000500(31,000)9,000(42,000)18,000Net profit.3/- Company ACompany BRMRMRMRMStatements ofFinanclalPositionNon- currentAssets80,000180,000Current AssetsInventoryReceivablesBank30,0006,0004,00050,00020,00010.00040,000120,00080,000260,000Total AssetCapital and reservesÖrdinary share capitalAccumulated profits60,00020,00080,000160,00075,000235,000Non Current liabilities10% Loan stock30,0005,000Current liabilitiesPayablesTotal Capital and reserves10,000120,00020,000260,000

Formula: Gross profit Margin = ( Gross profit / Net sales ) x 100

Answered: Alex is currently considering to invest…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question 2
Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:

a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio:

i. Gross Profit Margin
ii. Net Profit Margin
iii. Inventory Turnover Period (days)
iv. Receivables Collection Period (days)

Statements of
Comprehenslve
Income
Company A
RM
Company B
RM
RM
RM
Sales
Cost of sales
Gross profit
Less:
Administration expenses
Selling and distribution
160,000
(120.000)
40,000
240,000
(180.000)
60,000
12,000
18,000
6,000
9,500
expenses
Other operating
expenses
Financial expenses
10,000
3,000
14,000
500
(31,000)
9,000
(42,000)
18,000
Net profit
.3/-

Company A
Company B
RM
RM
RM
RM
Statements of
Financlal
Position
Non- current
Assets
80,000
180,000
Current Assets
Inventory
Receivables
Bank
30,000
6,000
4,000
50,000
20,000
10.000
40,000
120,000
80,000
260,000
Total Asset
Capital and reserves
Ördinary share capital
Accumulated profits
60,000
20,000
80,000
160,000
75,000
235,000
Non Current liabilities
10% Loan stock
30,000
5,000
Current liabilities
Payables
Total Capital and reserves
10,000
120,000
20,000
260,000

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