Question 6: Financial Statement Analysis (22 marks)

The following details concern the business of D. Shakey, who is worried about the profitability and financial structure of his business at 30 June 2019, especially since the bank is requiring repayment of his overdraft.

	30 June 2018 $	30 June 2019 $
Sales revenue	60,000	90,000
Cost of sales	39,000	63,000
All other expenses	12,000	21,000
Cash at bank	12,000	0
Inventory	18,000	33,000
Accounts receivable (net)	12,000	30,000
Non-current assets (net)	24,000	48,000
Accounts payable	6,000	27,000
D. Shakey, Capital	60,000	72,000
(The D. Shakey, Capital balance at 1 July 2017 was $56,000)
Non-current liabilities	-	12,000
Inventory at 1 July 2017 was $15,000
Accounts receivable at 1 July 2017 were $10,000

Required:

1. Calculate the following ratios for 2018 and 2019:

1. Profit margin
2. Gross profit margin
3. Current ratio
4. Quick ratio
5. Gearing
6. Inventory turnover period

2. Write a short report to the owner about:

1. Profitability (3 marks)
2. Short-term liquidity (6 marks)
3. Long-term solvency (6 marks)

Question 6: Financial Statement Analysis (22 marks) The following details concern the business of D. Shakes, who is worried about the profitability and financial structure of his business at 30 June 2019, especially since the bank is requiring repayment of his overdraft 30 June 2018 Sales revenue Cost of sales All other expenses Cash at bank Inventory Accounts receivable (net) Non-current assets (net) Accounts payable D. Shakey, Capital (The D. Shakey, Capital balance at 1 July 2017 was $56,000) Non-current liabilities Inventory at 1 July 2017 was $15,000 Accounts receivable at 1 July 2017 were $10,000 60,000 39,000 12,000 12,000 18,000 12,000 24,000 6,000 60,000 30 June 2019 $ 90,000 63,000 21,000 0 33,000 30,000 48,000 27,000 72,000 12,000 3 Required: 1. Calculate the following ratios for 2018 and 2019 a. Profit margin b. Gross profit margin c. Current ratio d. Quick ratio e. Gearing f. Inventory turnover periode 2. Write a short report to the owner about: a Profitability (3 marks) b. Short-term liquidity (6 marks) c. Long-term solvency (6 marks) Question 6: Financial Statement Analysis (22 marks) 1. 2010 2019 Formula Calculation Ratio Calculation Ratio 3 Profit margin- Gross profit margin ROE 3 Current ratio Quick ratio Gearing Inventory turnover period 2