Question 7 Yellowstone Wolves Pty Ltd began operations on 1 January 2020. Below is selected information from their comparative financial statements for the year ended 31 December 2021: 2021 2020 Cash assets $28,000 $30,000 Receivables 70,000 65,000 Inventories 56,000 58,000 Property, plant and equipment (net) 63,000 66,000 Accounts Payable 22,000 25,000 Short-term Loan 20,000 24,000 Non-Current Liabilities 63,000 60,000 Revenue 240,000 250,000 Less: Cost of Sales 130,000 140,000 Gross Profit 110,000 110,000 Other Expenses 43,000 48,000 Profit 67,000 62,000 Required:

a) Calculate the following ratios for the year ended 2021 (to 1 decimal place).

1. Profit margin ratio. (2marks)

2. Current ratio. (2marks)

3. Receivables turnover ratio. (2marks)

4. Inventory turnover ratio. (2marks)

5. The debt ratio. (2marks)

b) After calculating the current ratio for Yellowstone Wolves Pty Ltd, the owner decided that the company was in a sound position for paying its liquid liabilities. As their bookkeeper discuss the limitations of the owners conclusion. (4 marks)

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part a)

	Ratio	Workings
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