Deriving financial data and calculating ratios

(1) Profit and profit margin data The following income figures have been taken from Mitica Company’s accounts for year 7. (Amounts are in millions.)

Income tax expense 1.8 Administration expense 9.3 Distribution expense 6.9 Revenues from sales 162.5 Interest income 0.9 Interest expense 1.0 Cost of goods sold 140.7 Dividends paid 4.6 Required A venture capital company, Croesus International, is thinking of investing in the company. It asks you to calculate, for year 7, Mitica Company’s:

(a) operating profit;

(b) net profit or loss;

(c) gross profit-to-sales ratio (in percentage terms).

(2) Balance sheet figures and profitability ratios You are then given the following balances, also taken from Mitica Company’s year 7 accounts.

(Amounts are in millions.)

Cash 11.4 Provisions for liabilities 4.0 Accounts payable 32.5 Share capital 10.8 Retained profits 36.9 Accounts receivable 41.6 Long-term investments 3.1 Long-term debt 6.8 Inventories 26.9 Property, plant and equipment 43.0 Short-term bank loan 3.2 Other current liabilities 17.6 Share premium 14.2 60 PART 1 • FOUNDATIONS Required Croesus International now asks you to calculate Mitica Company’s:

(a) end-year 7 current assets;

(b) end-year 7 fixed assets;

(c) end-year 7 shareholders’ equity;

(d) return on assets for year 7 in percentage terms (use end-year 7 assets in the denominator).

Check figure:

End-year 7 total assets 126.0 AppenedixLO1