QUESTION 3 Two competing companies, Baba Bhd, and Gapa Bhd. have provided their Statement of Profit or Loss and Statement of Financial Position for the financial year 2019. Statement of Profit or Loss For the year ended 31 December 2019 Sales Revenue Cost of goods sold Gross Profit Depreciation expense Other operating expenses Profit for the year Baba Bhd. RM 815,000 (600,000) 215,000 (25,000) (90,000) 100,000 Gapa Bhd. RM 1,182,500 (960,000) 222,500 (12,500) (60,000) 150,000 Statement of Financial Position As at, 31 December 2019 Baba Bhd. RM Property, Plant and Equipment Accumulated depreciation Carrying amount 500,000 (200,000) 300,000 Gapa Bhd. RM 250,000 (50,000) 200,000 Inventory Accounts receivable Cash and cash equivalent Total Assets Ordinary share capital Retained earnings 150,000 250,000 50,000 750,000 530,000 70,000 170,500 200,000 29,500 600,000 380,000 120,000 Long-term borrowing 100,000 Accounts payable Total Liabilities + Total Equity 50,000 750,000 100,000 600,000 Selected previous year's (2018) figures are as follows. Accounts receivable for Baba Bhd.; RM270,000 and Gapa Bhd.; RM180,000 Inventory for Baba Bhd.: RM250,000 and Gapa Bhd.; RM220,500 Total assets for Baba Bhd.; RM900,000 and Gapa Bhd.; RM700,000 Required: a) Calculate the following ratios for Baba Bhd. and Gapa Bhd. 1. Gross profit ratio 2. Net profit margin 3. Return on assets 4. Return on equity 5. Current ratio 6. 7. 8. 9. 10. Acid-test ratio Days in account receivable Inventory turnover ratio Debt to asset Times interest earned ratio (17 marks) b) Compare and contrast the ratios calculated for Baba Bhd. and Gapa Bhd in part (1) above and comment on the profitability, liquidity, and solvency positions of both companies