The following data and question is given. I would like to cross check my answer with the self learning book questions:
Refer to the following financial statements of PBT & Co.. for 2018: Statement of Profit or Loss for the Year Ending 31 December 2018 48 USD (000's) USD (000's) Revenue 3,393 Cost of goods sold 2,482 Gorss profit 911 Less: operating expenses - Selling, general and administrative expenses 492 - Depreciation 147 639 Operating income 272 Other income Earnings before interest and tax (EBIT) Interest expense Profit before tax 245 Corporation tax 74 Profit after tax 171 Preferred dividends 20 Earnings attributable to ordinary shareholders 151 Ordinary dividends 50 Retained earnings 101 Statement of Financial Performance as at 31 December 2018 320 75 USD (000's) USD (000's) Non-current assets Current liabilities Property, plant and equipment 2,135 Trade creditors 321 Less: depreciation (810) Other creditors and accruals 80 1,325 Short-term borrowings 335 Investments 375 736 1,700 Current assets Long-term liabilities Stocks (inventories) 435 Long-term borrowings 707 Trade debtors Deferred tax Other debtors and prepayments 883 Cash at bank and in hand Shareholders'equity 1,182 Ordinary shares 100 Preference shares 48 Capital reserves Retained earnings 602 Treasury stock (39) 1,263 441 176 90 216 552 2,882 2,882 a. Gross profit; operating profit; and net profit after tax margins b. Current and acid-test ratios C. Debt ratios and interest cover ratios d. Provide two comments on the performance of PBT & Co. for 2018 Question No. Ib 1(c) i(d) Type of ratio Performance result Gross profit ratio 26.85% Operating profit ratio 9.43% Net profit after tax margin ratio 5.04% Current ratio 1.61 Acid test ratio 1.02 Debt ratio 41.15% Interest cover ratio 3.27 times a) Easier to obtain funding in the future based on the ability to fill short term obligations and liabilities and ability to pay back debts Based on the current and acid-test ratios, it is only fair to say that the company's current assets are more than the current liabilities, enabling the company to pay for its short term obligations. Also. based on the interest cover ratio, it was found that the company is able to generate sufficient profit for the year at 3.27 times to service the existing debts. This value is very significant to the company as it will provide a strong basis to enable them to seek funding from creditors to grow the company in the future b) Company's performance for 2018 is able to provide inestent attractiveness Given all the ratio parameters specified above and the positive value of operating performance 23 detailed out in the gross profit, operating profit and net profit after tax margin ratios, the company is managing the sales efficiently in order to make profit for the company and attract investors to invest in the company
