Question
The financial statements of Al Rami are presented below for the year ended 31 December 2020. Al Rami Company Balance Sheet As at 31 December
The financial statements of Al Rami are presented below for the year ended 31 December 2020. Al Rami Company Balance Sheet As at 31 December 2020 Cash $1,200 Bank overdraft $6,000 Accounts receivable 24,800 Accounts payable 18,600 Inventory 21,650 Term loan 31,250 Land 16,800 Shareholders' capital 83,000 Building 15,600 Plant & equipment 57,600 Investments 1,200 Total assets 138,850 138,850 Al Rami Company Balance Sheet For the year ended 31 December 2020 Sales 75,250 Less Cost of goods sold 56,500 Gross profit 18,750 Less expenses 7,500 Earnings before interest and tax 11,250 Less interest 2,500 Net Profit 8,750 Taxes 4,200 Net profit after tax 4,550 Required: a) Calculate the following ratios: (12 Marks) 1. Current and Quick ratios 2. Inventory turnover ratio 3. Accounts receivable turnover 4. Debt/equity ratio 5. Return on assets ratio b)Evaluate the financial position of Al Rami based on industry average. Al Rami has collected the following information: (6 Marks) Current ratio 2.93 Quick ratio 1.92 Inventory turnover 2.6 Accounts receivable turnover 4.8 Debt/equity ratio 1.05 Return on assets 5%
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