Statement of Financial Position as at 31st December, 2019

Olamide Ltd Kofi Ltd

Assets

Non current Assets (note 1) 9400 7500

Current Assets

Inventory 2000 2400

Trade Receivables 2400 3700

Bank 600 1200

5000 7300

Total Assets 14400 14800

Equity & Liabilities

Equity

Stated Capital ($1 each) 2000 2000

Retained Earnings 3500 800

5500 2800

Non Current Liability

7% Debenture 4800 6300

Current Liabilities

Bank Overdraft 400 1700

Trade Payables 3100 3800

Taxation 600 200

4100 5700

Total Equity & Liabilities 14400 14800

Statement of Comprehensive Income for the year ended 31st December, 2019

Olamide Ltd Kofi Ltd

$000 $000

Revenue 12000 20500

Cost of Sales 10500 17000

Gross Profit 1500 3500

Operating Expenses 240 500

Operating Profit 1260 3000

Finance Cost 210 600

Profit before tax 1050 2400

Tax Expense 150 400

Profit after tax 900 2000

Dividend paid for the year 250 700

Note that there were no disposals of plant during the year by either company.

With reference to the case study above. You are required to calculate for Kofi and Olamide Limited, two ratios of significance to:

(i) Management.

(ii) Creditors.

(iii) Shareholders.

(iv) Comment on the profitability ratios, liquidity ratios and efficiency ratios calculated between Kofi Limited and Olamide Limited for the period under review.

(v) Explain three (3) advantages for using ratio analysis.

(vi) Explain two (2) disadvantages associated with the use ratio analysis.