The following information is on Jims Pty Ltd performance in the previous two (2) financial years:

Sales 2012: $125,000, 2013: $130,000 Net Profit 2012: $25,000, 2013: 35,000 The cost of goods sold (COGS) margin in both years was 40% of revenues.

The tax rate is 30% and the interest expense was $5,000 each year. The company has had ten thousand shares on issues since 2011, with a share price of $13 on 30 June 2012 and $14 on 30 June 2013.

Formulas

• Profitability Ratios

Profit Margin = Net Income / Sales Revenue

Return on Equity = Net income / Average Shareholders Equity

Return on Assets = Net income / Average Total Assets

Earnings Per Share = Net income / Average Shares Outstanding

Price to Earnings = Share Price / Earnings per share

• Liquidity Ratios

Current Ratio = Current Assets / Current Liabilities

Quick Ratio = (Cash + Short-term Investments + Accounts Receivable) / Current Liabilities

Receivables Turnover = Sales Revenue / Average Accounts Receivable

Inventory Turnover = Cost of Goods Sold / Average Inventory

• Solvency Ratios

Debt to Assets Ratio = Total Liabilities / Total Assets

Debt to Equity Ratio = Total Liabilities / Total Equity

Times Interest Earned = (Net Profit + Tax expense + Interest Expense) / Interest Expense

Required

a. Calculate three profitability ratios for 2013 and comment on the firms performance.

b. Please provide at least two liquidity ratios for 2013 and comment on the liquidity of the firm

c. Discuss how sustainable investments can improve financial performance. Provide specific example