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Question 5

The financial ratios and accounting information related to Ahmed Petroleum Company for the past two years are as follows:

a

Particulars	31st December, 2019	31st December, 2018
Operating profit margin	14%	12%
Return on capital employed (ROCE)	28.8%	18.5%
Current ratio	2.1 : 1	2.1:1
Acid test ratio	1.3:1	1.6:1
Inventory turnover ratio (based on closing inventory)	4.35 times	5.85 times
Interest coverage ratio	15.4 times	12.5 times
Gearing (Debt/Equity) Ratio	20.5%	18.5%
Gross Profit	$ 695,000,000	$ 542,000,000
Profit from Operations	$ 385,000,000	$ 295,000,000
Tax	$ 88,000,000	$ 75,000,000
Total Assets	$ 2,482,000,000	$ 2,185,000,000
Inventories	$ 325,000,000	$ 249,000,000
Current liabilities	$ 730,000,000	$ 682,000,000m
Trade receivables	$ 632,000,000	$ 604,000,000
Administration costs	$ 115,000,000	$ 120,000,000
Non-current liabilities	$ 1,028,000,000	$ 678,000,000
Total Shareholders Equity	$ 724,000,000	$ 935,000,000

• Trade and other payables are the only current liability.
• Current Assets includes inventory, trade receivables, cash and cash equivalents.

Additional information

• Revenue for the year 2018 was $ 295 million. Ahmed Petroleum Company maintained its dividend payments at $112 million for both 2018 and 2019.
• The companys oil reserves are at record high levels at the end of the 2019 financial year. The price of oil has increased by approximately 3% over the course of the 2019 financial year. The financial costs of the oil spill has been problematic for Ahmed Petroleum Company in many ways. $78 million had been expended by year-end and, whilst the future cost of cleanup and compensation payments has been estimated and provided for, it is likely that not all related costs have yet been identified.
• Fines have been levied in respect of past incidents, some in excess of $350 million.

Required

(a) Calculate the following items of Ahmed Petroleum Company for the year ended 31 December, 2019.

1. Sales Revenue
2. Non-current assets
3. Finance costs
4. Current assets
5. Cash at bank

(b) Based on the above information, prepare the statement of comprehensive income for the year ended 31December 2019.

(c) Prepare the statement of financial position Ahmed Petroleum Company as on 31December 2019.

(d) You are required to evaluate the financial performance of Ahmed Petroleum Company in comparison to its previous year covering all the areas of Ratios and include the results obtained from the financial statements.

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