Question
Below is PTCG Ltd performance informaiton. 1. 5 year record of Sales Net Sales 2022 2021 2020 2019 2018 861,000 805,000 681,000 719,000 737,000 2.
Below is PTCG Ltd performance informaiton.
1. 5 year record of Sales
Net Sales | 2022 | 2021 | 2020 | 2019 | 2018 |
861,000 | 805,000 | 681,000 | 719,000 | 737,000 |
2. 5 year record of Cost of Goods sold
Cost of goods sold | 2022 | 2021 | 2020 | 2019 | 2018 |
516,000 | 511,000 | 491,000 | 450,000 | 471,000 |
3. A set of financial reports for years ending 30 June 2021 and 2022, respectively.
PTGC Ltd Comparative Income Statements For the years ended 30 June 2021 and 2022 | ||
2022 | 2021 | |
Net Sales | 861,000 | 805,000 |
Less: Cost of goods sold | 516,000 | 511,000 |
Gross Profit | 345,000 | 294,000 |
Other Revenues | ||
Interest revenue | 4,000 | - |
349,000 | 294,000 | |
Expenses | ||
Selling Expenses | 126,000 | 114,000 |
Administrative Expenses | 118,000 | 123,000 |
Interest expense | 24,000 | 14,000 |
Total Expenses | 268,000 | 251,000 |
Profit before Income tax expense | 81,000 | 43,000 |
Income tax paid | 33,000 | 17,000 |
Net Profit | 48,000 | 26,000 |
PTGC Ltd Comparative Balance Sheet As at 30 June 2021 and 2022 | ||
2022 | 2021 | |
Assets | ||
Current Assets | ||
Cash at bank | 29,000 | 32,000 |
Accounts receivable | 114,000 | 85,000 |
Inventories | 113,000 | 111,000 |
Prepaid Expenses | 6,000 | 8,000 |
Total Current Assets | 262,000 | 236,000 |
Non - current Assets | ||
Long-term investments | 18,000 | 9,000 |
Property, plant, and equipment (net accumulated depreciation) | 507,000 | 399,000 |
Total Non-current assets | 525,000 | 408,000 |
Total Assets | 787,000 | 644,000 |
Liabilities | ||
Current Liabilities | ||
Loan payable | 42,000 | 27,000 |
Accounts payable | 73,000 | 68,000 |
Accrued liabilities | 27,000 | 31,000 |
Total current liabilities | 142,000 | 126,000 |
Non-current Liabilities | ||
Long term borrowings | 289,000 | 198,000 |
Total liabilities | 431,000 | 324,000 |
Net Assets | 356,000 | 320,000 |
Shareholders' Equity | ||
Share Capital | 186,000 | 186,000 |
Retained earnings | 170,000 | 134,000 |
Total Shareholder's equity | 356,000 | 320,000 |
Additional information
- Inventory for 2020 was $109,000
- Shareholder's Equity for 2020 was 280,000
- Accounts receivable for 2020 was $80,000
- Total Assets for 2020 were 620,000
- During 2021 and 2022 when the business incorporated 93,000 ordinary shares were issued
- Share Price for 2021 $3.50
- Share price for 2022 $5
- Dividend paid 2021 10c per share
- Dividend paid 2022 12c per share
- All financial statements are prepared in accordance to AASB 101
Industry standards/benchmarks
Current Ratio 1.38:1
Liquid Ratio 1.18:1
Day's sales in ending Inventory 34 days
Inventory Turnover 6.28 times
Accounts receivable Turnover 7- 10
Debt to Equity ratio 75%
Day's sales in Receivables 39 days
Earnings per Share $0.35 per share
P/E ratio 18.86 times
Return on Equity 9.08%
Profit margin 22%
Times Interest Covered 3.74 times
Dividend yield 10%
Required:
(a) Calculate the following ratios:
- Current Ratio
- Liquid Ratio
- Day's sales in ending inventory
- Accounts Receivable Collection Period (days)/Turnover
- Inventory Turnover (times)
- Debt to Equity ratio
- Earnings Per Share
- Return on Equity
- Price Earnings
- Times Interest covered
- Gross Profit Margin
- Dividend yield.
(b) Draft a formal Financial Performance report to PTGC Ltd Management.
Your report should include the following:
- Client Name
- Your name (Person preparing the report as per SFBAG Pty Ltd policies and procedures)
- Executive Summary
- Title: Financial Analysis Report
- Introduction
- Financial Statement analysis items
- Ratio Analysis (of each Ratio group), commenting on ratios to provide managements with some suggestions on how the company could improve and the benefit of improving the ratios. Keeping in mind that some improvement suggestions to other ratios could result in worsening of other ratios.
Note: For each of the ratios your commentary should include
- A Summary grouping the ratios into 5 categories: Liquidity, Activity, Profitability, Leverage and Market Performance.
- A clear explanation of the purpose of each formula and include the workings.
- State what each ratio is used for and what the results show about the performance of the business compared to previous year and industry averages
- Compare ability to collect accounts receivable at the beginning of 2022 and at the end of 2022
- Showing any existing or problem areas
- Recommendations to improve problem areas
- Conclusion.
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