Reference no: EM13341217

QUESTION 1

Answer the following question using an essay format with a maximum that ranges between 300 to 500 words for each question.

a)   There are three main forms of firm's ownership, sole proprietorships, partnerships and corporations in business organizations. Identify and explain these forms in private firms.

b)   There are three types of activities (operating, financing and investing) generate funds to the organization. Identify and explain with examples these activities in private firms

QUESTION 2

The following Balance Sheet and Income Statement are taken from the accounts of Gulf Corporation for wholesale carpet business. Answer the following question with establishing table for comparison between the financial position of the company in 2012 and 2013 and a report for your decision

Required

1.   Use the above Income Statement and the Balance Sheet to assess:

A.    Liquidity ratios

B.     Gearing ratio

C.    Efficiency ratios

• Inventory turnover period
• Settlement period for trade receivables

D.   Profitability ratios

• Return on ordinary shareholders' funds
• Return on capital employed
• Operating profit margin
• Gross margin profit

E.    Investment ratio

• Earnings Per Share (EPS)

2.   The company is applying for a bank loan. The bank manager seeks your advice on whether to lend the company in a form of a report. Base your report on the above results.

Statements of Financial Position (balance sheets) of Gulf Cooperation for wholesale carpet business as at 31 March 2013
2013	2012	Assets
		Non-current assets
		Plant and equipment (at cost less depreciation)
8000	5000	Land and buildings
4000	3000	Fixtures and fittings
12000	8000
		Current assets
1000	500	Inventories
1500	1000	Trades receivable
500	500	Cash at banks
3000	2000
15000	10000	Total Assets
		Equity and liabilities
		Equity
5000	4000	$ 0.50 ordinary shares
3000	2000	Retained earnings
8000	6000
		Non-current liabilities
3000	2000	Borrowing
		Current liabilities
2500	1500	Trade payables
1000	500	Taxation
500	0	Short-term borrowings (all bank overdraft)
4000	2000
15000	10000	Total Equity and Liabilities

 

Profit and Loss Accounts for the year ended 31 March 2013
2013	2012
8000	5000	Sales
6000	3000	Cost of sales
2000	2000	Gross profit
1000	1000	Operating expenses
1000	1000	Operating Profit
200	250	Interest payable
800	750	Profit before tax
100	100	Taxation
700	650	Profit for the year