You are a consultant for Glory Ltd, a quoted company operating in the manufacturing sector. Following are a Statement of Profit or Loss and Statement of Financial Position with comparatives for the year ended 31st December 2018.

Statement of Profit or Loss for the year ended 31st December, 2018

Sales revenue

Cost of sales

Gross profit

Interest receivable Administration expenses Operating profit

Interest

Profit before taxation Income tax expense Profit for the year

2018

GHS 3,095,576 2,402,609

692,967 744 333,466 360,245 18,115 342,130 74,200 267,930

2017

GHS 1,909,051 1,441,950

467,101 2,782 222,872 247,011 21,909 225,102 31,272 193,830

2

Statement of Financial Position as at 31 December 2018

Assets 2018 GHS

Non-current assets

Property, plant and equipment 802,180 Current assets

Inventory 64,422

2017 GHS

656,071

86,550 807,712 45,729 68,363 1,008,354

1,664,425

258,178 410,591 668,769

100,000

545,340 280,464 37,200 32,652 895,656

1,664,425

Trade receivables

Prepayment and accrued income Cash at bank and in hand

Total assets

Equity and liabilities

Equity

Ordinary shares

Income surplus

Non-current liabilities

10% loan stock

Current liabilities

Trade payables

Accruals and deferred income Corporate taxes

Other taxes

Total equity and liabilities

Required:

905,679 97,022 1,327 1,068,450

1,870,630

258,178 651,721 909,899

100,000

627,018 81,279 108,000 44,434 860,731

1,870,630

a. Calculate the following ratios:

i. Profitability ratios - Return on Capital Employed, Return on Equity, Gross profit margin and Net

profit margin

ii. Long term solvency and stability - Debt/Asset ratio, Gearing ratio and Interest cover

iii. Short-term solvency and liquidity Current ratio and Acid test ratio

iv. Efficiency (turnover ratios) Account receivable collection period, Account payable payment

period, Inventory turnover (times) (6 marks)

b. Prepare a report addressed to the Chief Executive Officer, assessing the relative performance and financial

position of Glory Ltd for the year ended 31st December, 2018