Financial statements of Nimbin Pty Ltd are presented below:

Nimbin P/L

Statement of Financial Position

As at 30 June 2015 and 2016

($000)

2016 2015

Current assets

Cash and cash equivalents $1,645 $2,110

Accounts receivables (all trades) 4,100 3,675

Inventories 7,000 6,930

______ _____

Total current assets 12,745 12,715

______ ______

Non-current assets

Property, plant and equipment 17,190 15,330

_______ ______

Total non-current assets 17,190 15,330

_______ _______

Total assets $29,935 $28,045

======= ======

Current liabilities

Payables $5,780 $5,990

_______ ______

Total current liabilities 5,780 5,990

_______ ______

Non-current liabilities

Interest-bearing liabilities 9,940 9,450

_______ _____

Total non-current liabilities 9,940 9,450

_______ _______

Total liabilities $15,720 $15,440

====== ======

Equity

Share capital $7,700 $7,700

Retained earnings 6,515 4,905

_______ _______

Total equity $14,215 $12,605

====== ======

Nimbin P/L

Income Statement

As at 30 June 2016

($000)

Revenues (net sales) $55,000

Less: cost of sales 35,100

_______

Gross profit 19,900

_______

Less: Expenses

Selling and distribution expenses 7,100

Administrative expenses 4,970

Finance costs 1,560

______

Total expenses 13,630

______

Profit before income tax 6,270

Income tax expense 1,908

______

Profit $4,362

=====

Nimbin P/L

Statement of changes in Equity

For the year ended 30 June 2016

($000)

Share capital

Ordinary (7,200.000 shares)

Balance at start of period $7,200

______

Balance at end of period 7,200

_______

Preference (250,000 shares)

Balance at start of period 500

______

Balance at end of period 500

______

Total share capital $7,700

======

Retained Earnings

Balance at start of period $4,905

Total income for the period 4,362

Dividends paid ? ordinary (2,702)

Dividends paid ? preference (50)

______

Balance at end of period $6,515

======

Additional information:

Payables include $5,620 (2016) and $5,730 (2015) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2016): Ordinary $12; Preference $6.70.

Required:

1. Calculate the following ratios for 2016. The industry average for similar businesses is shown. (6 marks)

Industry average

1. Rate of return on total assets 22%

2. Rate of return on ordinary equity 20%

3. Profit margin 4%

4. Earnings per share 45c

5. Price-earnings ratio 12.0

6. Dividend yield 5%

7. Dividend payout 70%

8. Current ratio 2.5:1

9. Quick ratio (acid ratio) 1.3:1

10. Receivables turnover 13

11. Inventory turnover 6

12. Debt ratio 40%

13. Times interest earned 6

14. Assets turnover 1.8

Given the above industry averages, comment on the company?s profitability, liquidity and use of financial gearing.

Financial statements of Nimbin Pty Ltd are presented below: Nimbin P/L Statement of Financial Position As at 30 June 2015 and 2016 ($000) Current assets Cash and cash equivalents Accounts receivables (all trades) Inventories Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets Current liabilities Payables Total current liabilities Non-current liabilities Interest-bearing liabilities Total non-current liabilities Total liabilities Equity Share capital Retained earnings Total equity Nimbin P/L Income Statement As at 30 June 2016 2016 2015 $1,645 4,100 7,000 ______ 12,745 ______ $2,110 3,675 6,930 _____ 12,715 ______ 17,190 _______ 17,190 _______ $29,935 ======= 15,330 ______ 15,330 _______ $28,045 ====== $5,780 _______ 5,780 _______ $5,990 ______ 5,990 ______ 9,940 _______ 9,940 _______ $15,720 ====== 9,450 _____ 9,450 _______ $15,440 ====== $7,700 6,515 _______ $14,215 ====== $7,700 4,905 _______ $12,605 ====== ($000) Revenues (net sales) Less: cost of sales Gross profit Less: Expenses Selling and distribution expenses Administrative expenses Finance costs Total expenses Profit before income tax Income tax expense Profit $55,000 35,100 _______ 19,900 _______ 7,100 4,970 1,560 ______ 13,630 ______ 6,270 1,908 ______ $4,362 ===== Nimbin P/L Statement of changes in Equity For the year ended 30 June 2016 ($000) Share capital Ordinary (7,200.000 shares) Balance at start of period Balance at end of period Preference (250,000 shares) Balance at start of period Balance at end of period Total share capital Retained Earnings Balance at start of period Total income for the period Dividends paid - ordinary Dividends paid - preference Balance at end of period $7,200 ______ 7,200 _______ 500 ______ 500 ______ $7,700 ====== $4,905 4,362 (2,702) (50) ______ $6,515 ====== Additional information: Payables include $5,620 (2016) and $5,730 (2015) trade accounts payable; the remainder is accrued expenses. Market prices of issued shares at year-end (2016): Ordinary $12; Preference $6.70. Required: A. Calculate the following ratios for 2016. The industry average for similar businesses is shown. (6 marks) 1. Rate of return on total assets 2. Rate of return on ordinary equity 3. Profit margin 4. Earnings per share 5. Price-earnings ratio 6. Dividend yield 7. Dividend payout 8. Current ratio 9. Quick ratio (acid ratio) 10. Receivables turnover 11. Inventory turnover 12. Debt ratio 13. Times interest earned 14. Assets turnover Industry average 22% 20% 4% 45c 12.0 5% 70% 2.5:1 1.3:1 13 6 40% 6 1.8 Given the above industry averages, comment on the company's profitability, liquidity and use of financial gearing