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