Reference no: EM132961022
The following information is an extract from BLUETAX Ltd.'s financial statements for the 2021 - 2022 financial year:
Average Inventory $650,000
Average Net receivables $650,000
Net credit sales $1,500,000
Current assets $930,000
Non-current assets $750,000
Account payable $350,000
Bank Bill (Short term) $370,000
Long Term debt $250,000
Ordinary equity $940,000
Net operating income $701,300
Cost of goods sold $433,000
Interest expense $75,000
Tax rate 30%
Ratios
Industry Benchmark (Average)
Current ratio 2:1
Receivable turnover 8 to 10 times
Average age of receivables 40 days
Inventory Turnover 10 times
Debt -to-equity ratio 1.5:2
Net working capital Positive
Return on assets 7.95%
Return on equity 9.05%
Required:
Problem 1: Calculate the following ratios and compare your results with industry benchmark stated above:
a) Current ratio: Current assets/Current liabilities
b) Receivable turnover: Total Credit Sales / Average Accounts Receivable
c) Average age of receivables: (Accounts Receivable * 365) / Sales Revenue
d) Inventory Turnover: Sales / Inventory
e) Debt -to-equity ratio: Total Debts / Total Equity
f) Net working capital: Current Assets - Current Liability
g) Return on assets: Net Income / Average Total Assets
h) Return on equity: Net Income / Average Shareholders' Equity
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