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a. Calculate the following ratios:

i. Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net

profit margin

ii. Long term solvency and stability - Debt/Asset ratio, Gearing ratio and Interest cover

iii. Short-term solvency and liquidity Current ratio and Acid test ratio

iv. Efficiency (turnover ratios) Account receivable collection period, Account payable payment

period, Inventory turnover (times) (6 marks)

b. Prepare a report addressed to the Chief Executive Officer, assessing the relative performance and financial

position of Glory Ltd for the year ended 31st December, 2018

QUESTION 2 You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. Following are a Statement of Profit or Loss and Statement of Financial Position with comparatives for the year ended 31" December 2018 Statement of Profit or Loss for the year ended 31 December, 2018 Sales revenue Cost of sales Gross profit Interest receivable Administration expenses Operating profit Interest Profit before taxation Income tax expense Profit for the year 2018 GHS 3,095,576 2,402.609 692,967 744 333.466 360,245 18.115 342,130 74.200 267,930 2017 GHS 1.909.051 1,441,950 467,101 2,782 222,872 247,011 21,909 225,102 31.272 193.830 2017 GHS 656,071 86,550 807,712 45,729 68 363 1.008,354 1.664,425 Statement of Financial Position as at 31 December 2018 Assets 2018 GHS Non-current assets Property, plant and equipment 802.180 Current assets Inventory 64.422 Trade receivables 905,679 Prepayment and accrued income 97,022 Cash at bank and in hand 1.327 1,068,450 Total assets 1,870,630 Equity and liabilities Equity Ordinary shares 258,178 Income surplus 651,721 909.899 Non-current liabilities 10% loan stock 100,000 Current liabilities Trade payables 627,018 Accruals and deferred income 81.279 Corporate taxes 108.000 Other taxes 44.414 860.731 Total equity and liabilities 1.870,630 258,178 410.591 668,769 100.000 545 340 280,464 37.200 32,652 895.656 1.664,425

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