Case study

When Amina Eqbal retired from her job as the management accountant from a reputed firm in Maldives in 2018, she decided to commence her dream come true project, a restaurant near beach in her island.

She started her business on 1 January 2018 and has successfully completed her 2 year of trading and considering an opportunity to grow financially by investing a sum of money in any of the public limited companies in Maldives. For this, she request your help to identify some companies listed in the Maldives stock exchange. She believed that the success of companies can be measured by profitability and can be analysed by using the ratios with the help of your report.

Mr. Akku Mohamed is willing to help her to identify the investment opportunities of two or three companies in Maldives. And she is confident that his suggestions would be helpful as he has completed his accounting post-graduation and working in an audit firm in Maldives.

But Mr. Akku advised her that the success of any firm depends not only on profitability and investment opportunities but on liquidity also. Therefore, she would like you to include the liquidity analysis also as part of your studies.

She requests you to analyse:

• the profitability and liquidity of any two companies and compare or
• compare only one companys profitability and liquidity from two consecutive years.
• Include any suggestions for improvement. (which she could potentially apply for her own business as well, for any such circumstances may arise in future)

Your studies are expected to include the following:

Profitability:

• Gross profit margin
• Profit to revenue
• Return on capital employed

Liquidity:

• Calculation of Working capital amount
• Current ratio
• Acid test ratio

Efficiency:

• Inventory turnover ratio (if trading firm)
• Trade receivables collection period
• Trade payables payment period

Assessment Instructions

Topic: Profitability and liquidity based on accounting ratio analysis

You are required to write a business report analysing and discussing the liquidity and profitability of:

1. Two businesses listed on The Maldives Stock Exchange from two different sectors.

Or

2. Any one business listed on The Maldives Stock Exchange from two consecutive years

The data you use must be post 2019 which means you can use only those companies who have published their financial statements with the balance sheet date of January 2019 onwards.

If you decided to do (a):

This should be achieved by calculating liquidity, profitability and efficiency ratios of these businesses.

You should evaluate the results by comparing your companies and research into the possible reasons for differences (if any). Your discussion should make references to the related theories on Accounting Ratios

If you decided to do (b)

This should be achieved by calculating liquidity, profitability and efficiency ratios of two consecutive years of the company

You should evaluate the results by comparison between your results of the two years and research into the possible reasons for differences (if any). Your discussion should make references to the related theories on Accounting Ratios

Required:

You have to produce the following coursework elements:

1. A REFLECTIVE SUMMARY:

that focuses on self-assessment and reflection learning based on the SWOT analysis on business liquidity and profitability.

Notes conducive to reflections on learning possible aspects to consider:

• Identifying strengths and weaknesses on the liquidity and profitability of the businesses or for the two accounting years
• Address weaknesses and difficulties and recommendations to improve