The following information has been collected from two London-based companies. The accounts are drawn up to 31st December 2021. Profit and Loss Account for the year ended 31st December 2021 (Figures are in £000) Particulars XYZ ABC Sales 3,690 4,586 Less: Cost of Goods Sold (Including purchases) (2,146) (2,690) Gross Profit 1,544 1,896 Less: Selling & Distribution Expenses Less: Depreciation (1,103) (1,253) Earnings before Interest & Tax or Operating Profit 441 643 Less: Interest (225) (192) Earnings before Tax 216 451 Less: Taxes (86) (180) Earnings after Tax or Net Profit 130 271 Balance Sheet as at31st December 2021 (Figures are in £000) Assets XYZ ABC Fixed Assets 4,542 4,790 Current Assets Account Receivables 274 313 Inventory 654 702 Cash 140 163 Total Current Assets 1,068 1,178 Total Assets 5,610 5,968 Liabilities Capital 3,824 4,310 Long Term Debt 883 760 Current Liabilities Account Payables 519 572 Other Current Liabilities 384 326 Total Current Liabilities 903 898 Total Liabilities and Equity 5,610 5,968 Solvency Ratios - Calculate and analyse at least one of the following: Debt-equity Ratio Financial Leverage

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...

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Profit and Loss Account for the year ended 31st December 2021 (Figures are in £000)

Particulars	XYZ	ABC
Sales	3,690	4,586
Less: Cost of Goods Sold (Including purchases)	(2,146)	(2,690)
Gross Profit	1,544	1,896
Less: Selling & Distribution Expenses
Less: Depreciation	(1,103)	(1,253)
Earnings before Interest & Tax or Operating Profit	441	643
Less: Interest	(225)	(192)
Earnings before Tax	216	451
Less: Taxes	(86)	(180)
Earnings after Tax or Net Profit	130	271

Balance Sheet as at31st December 2021 (Figures are in £000)

Assets	XYZ	ABC
Fixed Assets	4,542	4,790
Current Assets
Account Receivables	274	313
Inventory	654	702
Cash	140	163
Total Current Assets	1,068	1,178
Total Assets	5,610	5,968
Liabilities
Capital	3,824	4,310
Long Term Debt	883	760
Current Liabilities
Account Payables	519	572
Other Current Liabilities	384	326
Total Current Liabilities	903	898
Total Liabilities and Equity	5,610	5,968

Solvency Ratios - Calculate and analyse at least one of the following:
1. Debt-equity Ratio
2. Financial Leverage

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