Condensed financial statements for Metro Ltd are presented as follows. 

Additional information:

1. The market price of Metro Ltd’s shares was $4.00 at 30 June 2015, $5.00 at 30 June 2016 and $7.95 at 30 June 2017.

2. All dividends were paid in cash.

3. On 1 January 2016, 4000 ordinary shares were issued.

Required

(a) Discuss the need for comparative analysis and identify the tools of financial statement analysis.

(b) Calculate the following for 2017 and 2016:

1. Profit margin ratio.

2. Gross profit margin.

3. Asset turnover.

4. Earnings per share. 

5. Price/earnings ratio.

6. Cash dividend payout ratio.

7. Debt to total assets ratio.

(c) Based on the ratios calculated, provide an overview of the changes in the financial position and operating results from 2016 to 2017. 

Transcribed Image Text:

Cash Receivables (net) Other current assets Investments Plant and equipment (net) Current liabilities Long-term debt Share capital, $10 each Retained earnings METRO LTD Statement of financial position as at 30 June 2017 2017 $ 25.000 50 000 90 000 75 000 400 000 $640 000 $ 75 000 80 000 340 000 145 000 $640 000 2016 $ 20 000 45 000 85 000 70 000 370 000 $590 000 $ 80 000 85 000 300 000 125 000 $590 000 2015 $ 18000 48 000 64 000 45 000 358 000 $533 000 $ 70 000 50 000 300 000 113 000 $533 000