1) Briefly comment after calculating ratios which measure:

a) liquidity and the use of working capital;

b) management performance; and

c) gearing.

You may assume the opening stock of year 3 is the same as the closing stock, and also the purchase for year 3 and 4 is equal to the cost of goods sold. You may also assume all sales are credit sales

Exercise 11 The following financial statements relate to Small Limited Income statement (profit and loss account) for the year ended 30 June Year 4 Year 3 $000s S000s Revenue 6,800 5.500 Cost of sales (2,600) (2.100) Gross profit 4,200 3.400 Administration and selling expenses (2,400) (1.800) Operating profit 1,800 1.600 Debenture interest (90) Profit before taxation 1,710 1,510 Taxation (513) (453) Profit for equity holder 1,197 1.057 (90) Balance sheet as at 30 June Year 3 S000s SOOO $000s 2,150 5000 2,200 620 1.638 420 2,678 Year 4 SOOCs S000 Non-current (fixed assets) net of depreciation Current assets: Stocks and work in progress 620 Trade receivables (debtors) 1.840 Cash 500 2,960 less: Current liabilities: Trade payables (creditors) (300) Other creditors and accruals (940) (1.240) Net current assets Total assets less current liabilities Non-current liabilities 6% debentures Total net assets Share capital and reserves Issued share capital: 900.000 ordinary shares of $0.5 nominal value Retained earnings (500) (1.200) (1.700) 1.720 3,870 978 3,178 (1.400) 2.470 (1.400) 1.778 450 2020 2.470 450 1.328 1,778 Exercise 11 The following financial statements relate to Small Limited Income statement (profit and loss account) for the year ended 30 June Year 4 Year 3 $000s S000s Revenue 6,800 5.500 Cost of sales (2,600) (2.100) Gross profit 4,200 3.400 Administration and selling expenses (2,400) (1.800) Operating profit 1,800 1.600 Debenture interest (90) Profit before taxation 1,710 1,510 Taxation (513) (453) Profit for equity holder 1,197 1.057 (90) Balance sheet as at 30 June Year 3 S000s SOOO $000s 2,150 5000 2,200 620 1.638 420 2,678 Year 4 SOOCs S000 Non-current (fixed assets) net of depreciation Current assets: Stocks and work in progress 620 Trade receivables (debtors) 1.840 Cash 500 2,960 less: Current liabilities: Trade payables (creditors) (300) Other creditors and accruals (940) (1.240) Net current assets Total assets less current liabilities Non-current liabilities 6% debentures Total net assets Share capital and reserves Issued share capital: 900.000 ordinary shares of $0.5 nominal value Retained earnings (500) (1.200) (1.700) 1.720 3,870 978 3,178 (1.400) 2.470 (1.400) 1.778 450 2020 2.470 450 1.328 1,778