QUESTION 2 You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. Following are a Statement of Profit or Loss and Statement of Financial Position with comparatives for the year ended 31" December 2018. Sales revenue Statement of Profit or Loss for the year ended 31" December, 2018 2018 2017 GHS GHS 3,095,576 1.909,051 Cost of sales 2,402,609 1,441,950 Gross profit 692,967 467,101 Interest receivable 744 2.782 Administration expenses 333,466 Operating profit 247,011 18,115 21.909 Profit before taxation 342,130 225,102 Income tax expense 74,200 Profit for the year 267,930 193,830 222,872 360.245 Interest 31.272 2 Statement of Financial Position as at 31 December 2018 Assets 2018 2017 GHS GHS Non-current assets Property, plant and equipment 802.180 656,071 Current assets Inventory 64,422 86,550 Trade receivables 905,679 807.712 Prepayment and accrued income 97,022 45,729 Cash at bank and in hand 1,327 68,363 1,068,450 1,008.354 Total assets 1,870,630 1,664,425 Equity and liabilities Equity Ordinary shares 258,178 258,178 Income surplus 651,721 410,591 909,899 668,769 Non-current liabilities 10% loan stock 100,000 100,000 Current liabilities Trade payables 627,018 545,340 Accruals and deferred income 81,279 280,464 Corporate taxes 108,000 37,200 Other taxes 44,434 32,652 860,731 895,656 Total equity and liabilities 1.870,630 1,664,425 Required: a. Calculate the following ratios: i. Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net profit margin ii. Long term solvency and stability - DebtAsset ratio, Gearing ratio and Interest cover Short-term solvency and liquidity - Current ratio and Acid test ratio iv. Efficiency (turnover ratios) - Account receivable collection period, Account payable payment period, Inventory turnover (times) (6 marks) iii. b. Prepare a report addressed to the Chief Executive Officer, assessing the relative performance and financial position of Glory Ltd for the year ended 31" December, 2018 (14 marks) (Total 20 marks)