PART A (45 marks): The following are from the latest financial statements of Ytrew Limited and its main competitor, both of which are manufacturing rms: Income statement Vtrew Limited Competitor Net sales (all credit) 5 2,967,300 5 36,267,000 Cost of goods sold (2,344,167) (28,650,930) Gross prot 623,133 7,616,070 Operating expenses (356,076) (4,714,710) Operating profit 267,057 2,901,360 Interest expense (76,302) (644,747) Prot before tax 190,755 2,256,613 Tax (30%) (57,227) (676,984) Net profit 133,519 1,579,629 Balance sheet Ytrew Limited Competitor Current assets Cash 5 29,673 362,670 Accounts receivable 292,665 3,676,331 Inventories 68,946 866,2 10 Total current assets 391,254 4,907,261 Fixed assets 707,716 7,181,739 Total Assets 1,099,000 12,089,000 Current liabilities Accounts payable 9 59,346 5 725,340 Accrued expenses 29,673 362,670 Short-term notes payable 89,019 1,088,010 Total current liabilities 178,038 2,176,020 Long-term debt 267,057 3,264,030 Total liabilities 445,095 5,440,050 Shareholders' equity 653,905 6,648,950 Total liabilities and shareholders' equity 1,099,000 12,089,000 Required: 3] Calculate the following ratios for Ytrew Limited and its competitor (do not show formulasl): (14 marks) Average collection period Current ratio Debt ratio Equity multiplier Fixed asset turnover Gross profit margin Interest coverage ratio Inventory turnover Net profit margin Operating prot margin Quick ratio Return on assets Return on equity Total asset turnOver b) Based on your results from part 3), compare and discuss the liquidity and capital structure ofthe two rms. (16 marks) PART A is continued on the next page... c) Perform a decomposition of operating protability similar to that carried out in the textbook and compare the (8 marks) determinants of operating profitability for Ytrew and its competitor. Based on your analysis, discuss areas where Ytrew's management might seek improvements in order to match its competitor. d) Perform at DuPont decomposition of return of equity for Vtrew and its competitor and discuss any differences (7 marks) between the two firms. PART B: (45 marks) Dewqas Limited has prepared the following prot analysis, for the current nancial year: Sales (150,000 units) $ 1,485,000 Variable expenses $ 712,500 Contribution margin $ 772,500 Fixed Expenses $ 258,000 Prot $ 514,500 Management are considering a range of options to improve protability. These options include reducing the selling price by $0.25 per unit and updating machinery and production methods. If machinery and production methods are updated, xed expenses will
