SCENARIO 2 TTG Fashion Center is a large chain of fashion stores. The financial statements for TTG are given below. Income statement for the year ended 31 December 2021 2020 $m. $m. Revenue Cost of sales 146,000 160,000 87,600 91,200 Gross profit 58,400 68,800 Selling and distribution expenses 17,520 17,600 Administrative expenses 7,300 6,400 3 Operating profit 33,580 44,800 Interest expense 1,900 400 Profit before taxation 31,680 44,400 Income tax expense 6,336 8,880 Net profit 25,344 35,520 ASSETS Statement of financial position as at 31 December 2021 2020 $m. $m. Non-current assets Land and buildings Equipment 40,000 32,000 34,000 35,000 74,000 67,000 Current assets Inventories 20,000 12,000 Trade receivables 3,000 2,500 Cash 4,000 6,000 27,000 20,500 Total assets 101,000 87,500 EQUITY AND LIABILITIES Equity Share capital 4,000 4,000 Additional paid-in capital 35,000 35,000 Retained earnings 10,000 11,500 Total equity 49,000 50,500 Non-current liabilities Long-term borrowings 32,000 25,000 Current liabilities 8,000 5,000 12,000 7,000 20,000 12,000 101,000 87,500 Trade payables Short-term borrowings Total equity and liabilities 1. Calculate and present the following ratios for the year 2021: a) Total assets turnover b) Average inventory turnover period c) Average settlement period for trade receivables d) Average settlement period for trade payables e) Net profit margin f) Gross profit margin g) ROA h) ROE i) Current ratio j) Quick ratio k) Debt-to-equity ratio 1) Interest cover ratio 2. Using the ratios calculated in (1) and ratios below, compare the performance of TTG between 2021 and 2020. Industry 2020 2019 average Total assets turnover (times) 1.85 1.95 1.65 Average inventory turnover period (days) 32.20 30.50 38.00 Average settlement period for trade receivables (days) 6.15 6.05 6.50 Average settlement period for trade payables (days) 25.00 24.50 26.00 Net profit margin 22.20% 23.00% 18.00% Gross profit margin 43.00% 43.20% 41.00% ROA 28.50% 29.40% 27.00% ROE 51.20% 51.40% 50.00% Current ratio (times) 1.71 1.83 1.50 Quick ratio (times) Debt-to-equity ratio (times) Interest cover ratio (times) 0.71 0.78 0.65 0.50 0.48 0.55 112.00 115.00 50.00 3. Evaluate the performance of TTG over time using financial ratios with reference to relevant benchmarks above. 4. Critically evaluate financial statements to assess organisational performance using a range of measures and benchmarks to make justified conclusions