Vocational scenario DELTA/Aelta is a sole proprietorship accounting firm. The company was founded last year to provide business-consulting services to their existing and new clients. They have a headquarters in Amman, which is located in Jordan. Having successfully completed your six-month probation as a Graduate Trainee at the accountancy firm, you have now been attached to a unit in the firm that deals with the provision of accountancy and consultancy services to small businesses that are typically set up as sole traders, not for profit and partnerships. The firm is careful about which small and emerging businesses it works with as it seeks to spot growth potential, identify, and work with clients that have scalable business models. Task 3: Learning outcome 3 After completing the previous task, your supervisor, asked you to interpretation of financial statements using financial ratios for Omega Company. Q1: Compute and interpret Omega company financial ratios for year 2019: (liquidity, profitability, efficiency, investment) Omega Company Income Statement for the year ended 31 December Revenue Cost of Sales Gross profit Operating expenses 2019 24,000 10,500 13,500 Administrative expenses 4,550 Salaries & wages Expenses 6,450 Supplies Expenses Utility Expenses Net profit 700 450 1,350 Omega Company Statement of financial position for the year ended 31 December 2019 Current assets Cash at bank 4,715 Account receivables 6,000 Prepaid 70 Inventories 9,000 Total current Assets 19,785 Non-current assets equipment 3,950 buildings 23,750 Total non-current Assets 27,700 Total assets 47,485 Current liabilities Account payables 7,300 Notes Payable 555 Tax payable 500 Interest payable 430 Total current liabilities 8,785 Non-current liabilities Borrowings 11,000 Total non-current liabilities 11,000 Total liabilities Equity share capital Retained earnings Total equity 19,785 14,500 13,200 27,700 Total equity & liabilities 47,485 Additional Information to use when calculate the ratios: 1. The number of shares equal 10,000 shares 2. Dividend announced during the period 2000 Q1- Ratio Current ratio Acid Ratio Inventory turnover Accounts receivable turnover Profit margin Return on Assets Return on equity Dividend per share (DPS) Earnings per share (EPS) Ratio Formula 2019 Ratio interpretation Q2: use the calculated financial ratio below; compare the performance of Omega Company between 2020 and 2021: 2021 2020 Industry Average Current ratio Acid ratio 2.5 1.1 2 1.5 0.8 1.25 Inventory turnover 1.4 0.6 1.6 Accounts receivable turnover 4 2 2.5 Profit margin. 4% 2% 5.2% Return on assets 1% 0.60% 1.1% Return on equity 1.5% 0.90% 2.6% Q3: Evaluate the performance of omega company overtime using financial ratios with reference to relevant benchmark above. Q4: make justifiable conclusions; critically evaluate financial statements to assess organisational performance using a range of measures and benchmarks. Q2- Answer table: Year to year comparison & Iinterpretations: Current ratio 2021 2020 Year to year comparison 2.5 1.1 Interpretation Acid ratio Interpretation Inventory turnover Interpretation 1.5 0.8 1.4 0.6 Accounts receivable turnover 4. Interpretation Profit margin Interpretation Return on assets Interpretation Return on equity Interpretation 2 4% 2% 1% 0.60% 1.5% 0.90% Q3-Answer table: current Year to Industry average comparison & linterpretations: 2021 Industry Average Comparison Greater than or less than Current ratio Interpretation Acid ratio 2.5 2 1.5 1.25 Interpretation Inventory turnover 1.4 1.6 Interpretation Accounts receivable turnover 4. 2.5 Interpretation Profit margin 4% 5.2% Interpretation Return on assets 1% 1.1% Interpretation Return on equity 1.5% 2.6% Interpretation