Answer Happy

6. The following financial statements relate to Thunderstruck Ltd: Figure 1. Income statement (profit & loss account) for the years ended 2020 and 2021 2020 (in £000) 584 31 405 47 195 2021 (in £000) 972 47 700 62 287 ဝ Revenue Opening inventory Purchases Closing inventory Gross profit Less expenses: Wages and salaries Depreciation Other expenses Operating profit Less Loan interest (10%) Net income before tax Taxation Net income after tax 78 16 54 47 101 31 62 93 8 85 39 46 47 16 31 In addition we know that: Proposed dividend Retained profit for the year 16 15 23 23
Figure 2. Statement of financial position (balance sheet) for the years ended 2020 and 2021 2020 2021 (in £000) (in £000) Non-current assets 280 428 Current assets: Inventories 47 62 Trade receivables 70 156 Cash at bank 39 16 156 234 Total assets 436 662 Current liabilities: Trade payables Taxation Proposed dividends 39 16 16 71 109 39 23 171 Long-term liabilities: 10% Loan Total liabilities 80 251 71 Equity: Share capital Retained earnings Total equity Total liabilities & equity 272 93 365 436 295 116 411 662 Figure 3. Financial ratio template Gross profit margin Operating profit margin Net profit margin ROCE Current ratio Quick ratio Noncurrent asset turnover Inventories turnover in days Receivables turnover in days Payables turnover in days Gearing Interest cover Industry average 2021 35% 15% 5% 15.6% 1.65 1.20 2.06 40 days 36 days 45 days 42% 4.8 times
Ratio formulas Return on capital employed (ROCE) Operating profit X 100 (Equity + Noncurrent liabilities) Gross profit Gross profit margin X 100 Revenue = Operating profit margin Operting profit X 100 Revenue Current ratio = Current assets Current liabilities Quick/Acid Test ratio = (Current assets – inventories) Current liabilities Revenue Noncurrent asset turnover ratio = Noncurrent Assets Inventories turnover in days = Avg. Inventories x 365 days Cost of sales Trade receivables Trade receivables turnover in days = x 365 days Sales revenue on credit Trade payables turnover in days Trade payables x 365 days Purchases on credit Noncurrent liabilities Gearing ratio = Equity X 100 Operating profit Interest cover ratio = Interest payable