Samoco plc operates a chain of in town grocery convenience stores and edge of town supermarkets across the UK. The company is expanding rapidly and is adding new stores every year.

Below are the income statements for the company for the years ended 31 May 2016 and 31 May 2015 together with statements of financial position at those dates.

Notes to the above financial statements:
• Samoco Pic's sales are made on an entirely cash basis, with no credit being allowed to customers at its convenience stores and supermarkets. Therefore, at 31 May 2016 and 31 May 2015 there were no monies owed by trade receivables.
• Finance expense is made up entirely of interest payable on the long-term borrowings.
•  Samoco Plc’s long-term borrowings are repayable over the next 10 years.

Required

(a) Using the financial statements for Samoco plc calculate for both years:

•  Current ratio 

• Quick ratio 

• Inventory days 

• Payables days 

• The cash conversion cycle 

• Gearing %

• Debt ratio 

• Interest cover

(b) Using the ratios you have calculated and the financial statements above, evaluate the liquidity, working capital and long-term solvency of Samoco plc at 31 May 2016.

Transcribed Image Text:

Samoco plc: income statements for the years ended 31 May 2016 and 31 May 2015 2016 2015 m m Revenue 13,663 12,249 Cost of sales 12,570 11,330 Gross profit 1,093 919 Distribution and selling costs 121 108 Administration expenses 240 225 Operating profit 732 586 Finance income 20 15 Finance expense 104. 84 Profit before tax 648 517 Income tax 162 129 Profit for the year 486 388