Kopi Ltd and Teh Ltd are two companies competing in the same industry. Below are the summarized financial statements of the two companies for the year ended 31 December 20X7.

Required:

(a) For both companies, compute:

(i) The current ratio.

(ii) Days sales in inventory.

(iii) Days sales uncollected.

(b) Identify with justification the company that is of better-short term credit risk.

(c) For both companies, compute:

(i) Net profit margin.

(ii) Return on total asset.

(iii) Return on ordinary shareholders equity.

(iv) Price-earnings ratios.

(v) Dividend yield.

(d) Which company would you recommend as the better investment? Use the above ratios to analyse and explain why.

Statement of financial position as at 31 December 20X7 Kopi Ltd Teh Ltd Assets Property, plant and equipment, nt 522,000 547,920 Cash Accounts receivable, net Current notes receivable (trade) Merchandise inventory Prepaid expenses Total assets 35,100 67,320 16,380 151,992 9,000 61,200 103,320 12,960 238,500 12,510 976,410 80 1.792-07-10- Liabilities and Equity Current liabilities Long-term notes payable Share capital Retained earnings Total liabilities and equity 110,412 45,440 324,000 221,940 801.792 167,940 181,800 370,800 255,870 976,410