Question
Alpha plc & Beta plc are two companies operating in the same business sector. Their recent financial statements are as follows: Statement of financial position
Alpha plc & Beta plc are two companies operating in the same business sector. Their recent financial statements are as follows: | |||
Statement of financial position at 31 December 2020 | |||
Alpha plc | Beta plc | ||
m | m | ||
Non-current assets | 566 | 820 | |
Current assets: | |||
- Inventory | 280 | 320 | |
- Trade receivables/debtors | 180 | 166 | |
Total assets | 1026 | 1306 | |
Liabilities | |||
Current liabilities | |||
- Trade payables/creditors | 164 | 300 | |
- Bank overdraft | 38 | 234 | |
- Corporation tax | 40 | 34 | |
242 | 568 | ||
Non-current liabilities | 200 | 0 | |
Total liabilities | 442 | 568 | |
Equity | |||
Share capital (1 share each) | 330 | 510 | |
Retained profits | 254 | 228 | |
584 | 738 | ||
-------- | -------- | ||
Total liabilities and equity | 1026 | 1306 | |
Income statement for the year ended 31 December 2020 | |||
Alpha plc | Beta plc | ||
Sales | 1,600 | 1,280 | |
Cost of sales | 1,300 | 956 | |
Gross profit | 300 | 324 | |
Operating expenses | 156 | 198 | |
Operating profit | 144 | 126 | |
Finance expenses | 18 | 12 | |
Profit before tax | 126 | 114 | |
Tax | 40 | 34 | |
Profit after tax | 86 | 80 |
Additional notes:
- During the year Alpha plc proposed and paid a total dividend of 41M and Beta plc proposed and paid a total dividend of 38M.
- The price of each share at 31 December 2020 was 4.25 for Alpha plc and 3.26 for Beta plc
Question
- Calculate the following ratios, to one decimal place, for the two companies:
-
- Operating profit margin
- Quick ratio
- Current ratio
- Trade receivables/debtors collection period
- Trade payables payment period
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