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Below are the financial statements for XYZ Sdn Bhd as at 31 December 2020. The company is applying for a loan from EEE Bank. In

Below are the financial statements for XYZ Sdn Bhd as at 31 December 2020. The company is applying for a loan from EEE Bank. In order to evaluate the company as a potential debtor, the bank would like to compare the XYZ Sdn Bhd performance with the industry.

STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2020

Cash

20,000

Account payable

40,000

Marketable securities

55,000

Accrued expenses

20,000

Account receivables

30,000

Tax accrual

40,000

Prepaid expenses

15,000

Long term debt

80,000

Inventory

70,000

Common Stock

20,000

Net land and building

80,000

Retained earnings

70,000

270,000

270,000

INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2020

Sales

120,000

Cost of good sold

55,000

Gross Profit

65,000

Selling Expenses

30,000

Earning Before Interest and Tax

35,000

Interest Expense

8,200

Earning Before Tax

26,800

Tax Expenses

25,520

Profit After Tax

1,280

INDUSTRY AVERAGE RATIO

Current ratio

1.60 x

Average collection period

120 Days

Quick ratio

1.00 x

Inventory turnover

1.30 x

Debt ratio

40%

Return on assets

10%

Time interest earned

6.3 x

Net profit margin

22%

Based on the given financial statements:

  1. Compute the indicates ratios as listed in industry average ratio for XYZ Sdn Bhd.
  2. Analyse the overall performance of the company according to liquidity, activity, profitability and leverage ratios.

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