You are contacted by the business named Speedo Cycle seeking another accounting consultation. They would like to gain a better idea of which areas of the business are performing well and what the company can do to continue to grow. They would like a report on the aspect of liquidity, profitability and activity levels in the business as well as your professional recommendations on some pathways to improve their long-term success. They have provided you the following data from their accounting system for the year ended 30 June 2021. Income Statement for year ended 30 June 2021 S 485,000 $ 53,250 S 345,700 S 398,950 S 65,800 Sales (all credit) Less Cost of Goods Sold Inventory 1/7/20 Purchases Cost of Goods Available for Sale Less: Inventory 30/6/21 Total Cost of Goods Sold GROSS PROFIT Other Income Total Income Less: Operating expenses NET PROFIT $ 333, 150 151,850 S S 4,000 S 155,850 S 108,800 S 47,050 + Balance Sheet for year ended 30 June 2021 Current Assets S 81,000 S 4.000 S 77.000 Accounts Receivable Less Allowance for doubtful debts Inventory Prepaid expenses Accrued revenue S 65,800 $ 800 S 900 S 144,500 Non-Current Assets Land $ 80,000 S 75,000 S 65,000 Buildings Plant and equipment Motor Vehicles Office Furniture Total Assets S S 25,000 7,750 S S 252,750 397,250 Current Liabilities Bank Overdraft Accounts Payable GST Payable Accrued Expenses S $ S S 20,000 55,500 3,000 2,300 S 80,800 S 75,000 Non-Current Liabilities Mortgage Loan Total Liabilities NET ASSETS S S S 75,000 155,800 241,450 Owners' Equity Capital - Smith Add: Net Profit S S 232,400 47,050 S S 279,450 38,000 Less Drawings TOTAL OWNER'S EQUITY S 241, 450 Task 5 Based on the financial information provided, you are required to calculate the following ratios for the year ended 30 June 2021. Show all your workings in the table. Make sure you check the consistency and accuracy of your answers, ENSACC414_Cash Flow and Management Report & Analysis Assessment 1 of 2 version 1.1 Date last updated: 30/09/2021 Student product assessment task Content is subject to copyright, RMIT University FINAL APPROVED-STUDENT PRODUCT ASSESSMENT TASK TEMPLATE- June 2019 Version 2.0 Page 12 of 16 STUDENT RMIT Classification: Trusted RMIT UNIVERSITY Ratios 30/06/2021 (show your calculations) Gross profit rate Net profit rate Current ratio Quick ratio Inventory turnover rate Average collection periods + After you have calculated the 30/06/2021 ratios above, other additional information was given as well: Other Information 30/06/2020 Industry Averages Gross profit rate 39% 41% Net profit rate 12% 16% Current ratio 1.5: 1 1.6: 1 Quick ratio 1.3:1 1.5: 1 Inventory turnover rate 5.3 Times 5.1 times Average collection periods 51 days 42 days Task 6 For each of the rates that you have calculated in 30/06/2021 (see Task 5) compare them with both the 30/06/2020 data and the industry averages contained in the table above. Make sure you check consistency and accuracy of your work and the external data provided, then comment as to whether the rates have increased, decreased, or remained the same. Also advise Speedo Cycle of the possible causes of the rate changes and suggest what actions management may take to improve those rates Hint: please refer to textbook Chapter 4 on your understanding of application of ratio analysis to financial statements to answer this question Answer: (approx. 50 words each) Satisfactory Not Satisfactory Gross Profit rate UNIVERSITY A: Net Profit rate A: Quick ratio A: Inventory turnover (times per year) A: Accounts Receivable collection period (in days) Task 7 Satisfactory Not Satisfactory Explain the advantages and disadvantages of ratios and comparison techniques (approx. 150 words) Hint: please refer to module Management Reports & Analysis note in canvas