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INTRODUCTION TO FINANCIAL ACCOUNTING (ACC2001) TUTORIAL SHEET UNIT 6 - RATIO ANALYSIS Tutorial class 1 Miguel Coley is a trader in auto accessories. The following financial statements were presented for 2015: Condensed statement of profit or loss Condensed statement of financial position Net sales 1.450,000 Non-current assets 1.420.000 Cost of goods sold Opening stock add Net purchases less Closing stock Gross profit Net operating expenses 32.000 610.000 (48.000) (594.000) 856,000 Current assets Stock Debtors Receivables Total assets 48,00 140,000 22.000 210,000 1.630,000 (310,000) PBIT less Interest Profit before tax less Tax PAT 546,000 (22.000) 524,000 (170.000) 354.000 Capital & reserves Ordinary shares a $0.50 10% pref shares S1 Reserves Retained profits 300,000 250.000 366,00 420.000 1.336.000 Non-current liability 10% Loan 220,000 117.000 471,000 (50,000) Retained earnings bid Total profit for the year less Transfer to reserves less Dividends Ordinary Preference Retained earnings e/d Current liabilities Creditors Bank Total equity & liabilities 44.XX 30.00 74.000 1.630,000 (30,000) (25.000) (55.000) 366.000 Price per share 3.11 The following are some key ratios for Dean James, a main competitor Gearing ratio 38% Stock turnover period 42. 12 days Times interest earned 28.48 times Current ratio 2051 Debtors turnover 6 84 times Return on capital employed 42.15% Total assets to total liabilities 4.02:1 Net profit margin 32 55% Required: a. Calculate the ratios for Miguel Coley in the areas of liquidity, solvency, profitability, asset management and investment. b. Using the corresponding ratios from (a), comment on the performance of Miguel Coley in comparison to Dean James c. What non-financial data would you find useful in making a more comprehensive analysis of the performance and financial position of Dean? d. State four limitations of ratios