Reference no: EM132994985
Question - You have been approached by the owner of a local retailer Berrimah Stores Pty Ltd to give them advice on how their business is performing. You have been provided with a copy of the following draft financial statements.
Berrimah Stores Pty Ltd Statement of profit or loss For the year ended 30th June 2021
Sales revenue $607,500
Cost of sales 440,100
Gross profit 167,400
Expenses 97,200
Profit (after interest expenses $3,402 and income tax $34,020) $70,200
Berrimah Stores Pty Ltd Statement of financial position as at 30th June 2021
Current assets Cash $9,612
Accounts receivables $161,595
Less: Allowance for doubtful debts 10,206 151,389
Inventories 136,080
Total current assets 297,081
Non-current assets
Land 34,020
Building 122,040
Less: Accumulated depreciation 20,412 101,628
Fixtures and fittings 25,515
Less: Accumulated depreciation 14,714 10,801
Total non-current assets 146,449
Total assets $443,530
Asia Pacific College of Business and Law ACT507 Accounting for Managers Semester 1, 2021
Current liabilities Accounts payable $146,286
Income tax payable 15,650
Accruals 6,804
Total current liabilities 168,740
Non-current liabilities
Mortgage loan 34,020
Total liabilities $202,760
Equity
Share capital: 6% preference shares $27,000 Ordinary shares 136,080 Retained earnings 77,690 Total equity 240,770 Total liabilities and equity $443,530
You have also been provided with the following additional information:
Statement of financial position (extract) as at 30th June 2020
Required - Perform a ratio analysis to identify:
a. the entity's earning ability by calculating the ROE, ROA, Profit margin and the Gross profit margin,
b. how the business has financed its asset purchases by using equity with the debt ratio,
c. the length of time in days that it takes to collect the accounts receivable,
d. how long measured in days the inventory stays on the shelves before it is sold,
e. the ability of the business to use short term resources to meet its immediate liabilities if there are unanticipated financial demands,
f. the ability of the entity's profits to cover the interest payments.