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Mohammed Abdullah is a trade supplier who has been approached by ABC Builders who are requesting credit terms for the first time. Their managing director
Mohammed Abdullah is a trade supplier who has been approached by ABC Builders who are requesting credit terms for the first time. Their managing director has provided Mohammed Abdullah with the following extracts from the final accounts for the past two years and Mohammed Abdullah has approached you for advice. Details Purchases Purchase returns Sales turnover Cost of goods sold Buildings Inventory Operating expenses Ordinary share capital Long term loan Retained earnings Bank Debtors Creditors 2018 (OMR) 120.000 20,000 800,000 350,000 148,000 25,000 210,000 300,000 40,000 175,000 (30,000) 128,000 85,000 2019 (OMR) 250,000 30,000 850,000 240,000 126,000 68,000 270,000 300,000 70,000 240,000 15,000 148.000 90,000 a) As a student of financial management course, how do you evaluate and compare Profitability and Liquidity performance of ABC Builders with the support of the ratio analysis for the two years given above? b) You are required to offer an advice to Mohammed Abdullah based on your calculations with regards to the viability of engaging in a credit relationship with ABC Builders. Justify with logical reasons
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