You have the following financial statements for two building companies and have been asked to compare them: Income statements for the year to 31st December 2019 Rachel Ltd Ronald Ltd £`000 £`000 Sales 2500 3600 Cost of Sales (450) (600) Gross Profit 2050 3000 Operating expenses (150) (350) Operating Profit 1900 2650 Interest Payable (40) (56) Profit Before Taxation 1860 2594 Taxation (68) (75) Profit After Taxation 1792 2519 Dividends (30) (43) Retained Profits 1762 2476 Statements of financial position as at 31st December 2019 Rachel Ltd Ronald Ltd £`000 £`000 Non-current assets 3056 3868 Current assets Inventories 70 35 Trade receivables 200 260 Cash at bank 56 20 Less: Current liabilities Trade payables (70) (65) Taxation (50) (42) Non-current liabilities Long-term loan (700) (1000) Net assets 2562 3076 Shareholders' funds £1 ordinary shares 800 600 Retained earnings 1762 2476 2562 3076 Additional information: All purchases and sales were on credit” Calculate the following ratios for each company: can you please only answer the underlined part the rest have been calculated. Pre-tax Return on Equity (use total shareholders’ funds as your denominator) Operating profit margin Net profit (before tax) margin Trade receivable (debtor) period in days Current ratio Acid test ratio (Quick ratio) Gearing ratio (use debt + equity as your denominator) Interest cover Dividend cover Dividend per share (in pence)

Financial Accounting

15th Edition

ISBN:9781337272124

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter2: Analyzing Transactions

Section: Chapter Questions

Problem 23E: The following data (in millions) are taken from the financial statements of Target Corporation: a....

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You have the following financial statements for two building companies and have been asked to compare them:

Income statements for the year to 31st December 2019

	Rachel Ltd	Ronald Ltd
	£`000	£`000
Sales	2500	3600
Cost of Sales	(450)	(600)
Gross Profit	2050	3000
Operating expenses	(150)	(350)
Operating Profit	1900	2650
Interest Payable	(40)	(56)
Profit Before Taxation	1860	2594
Taxation	(68)	(75)
Profit After Taxation	1792	2519
Dividends	(30)	(43)
Retained Profits	1762	2476

Statements of financial position as at 31st December 2019

	Rachel Ltd	Ronald Ltd
	£`000	£`000
Non-current assets	3056	3868

Current assets
Inventories	70	35
Trade receivables	200	260
Cash at bank	56	20

Less: Current liabilities
Trade payables	(70)	(65)
Taxation	(50)	(42)

Non-current liabilities
Long-term loan	(700)	(1000)

Net assets	2562	3076

Shareholders' funds
£1 ordinary shares	800	600
Retained earnings	1762	2476
	2562	3076

Additional information:

All purchases and sales were on credit”

Calculate the following ratios for each company:

can you please only answer the underlined part the rest have been calculated.

Pre-tax Return on Equity (use total shareholders’ funds as your denominator)
Operating profit margin
Net profit (before tax) margin
Trade receivable (debtor) period in days
Current ratio
Acid test ratio (Quick ratio)
Gearing ratio (use debt + equity as your denominator)
Interest cover
Dividend cover
Dividend per share (in pence)

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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