You have the following financial statements for two building companies and have been asked to compare them:Income statements for the year to 31st December 2019 Rachel LtdRonald Ltd £`000£`000Sales25003600Cost of Sales(450)(600)Gross Profit2050 3000 Operating expenses(150)(350)Operating Profit1900 2650 Interest Payable(40)(56)Profit Before Taxation1860 2594 Taxation(68)(75)Profit After Taxation1792 2519 Dividends(30)(43)Retained Profits1762 2476 Statements of financial position as at 31st December 2019 Rachel LtdRonald Ltd £`000£`000Non-current assets30563868 Current assets Inventories7035Trade receivables200260Cash at bank5620 Less: Current liabilities Trade payables(70)(65)Taxation(50)(42) Non-current liabilities Long-term loan(700)(1000) Net assets2562 3076 Shareholders' funds £1 ordinary shares800600Retained earnings17622476 2562 3076 Additional information:All purchases and sales were on credit” Required:a) “Calculate the following ratios for each company.”:Pre-tax Return on Equity (use total shareholders’ funds as your denominator)Operating profit marginNet profit (before tax) marginTrade receivable (debtor) period in daysCurrent ratioAcid test ratio (Quick ratio)Gearing ratio (use debt + equity as your denominator)Interest coverDividend coverDividend per share (in pence)

Name: You have the following financial statements for two building companies
Uploaded: 2024-03-04T10:43:15.000Z
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Description: You have the following financial statements for two building companies and have been asked to compare them:Income statements for the year to 31st December 2019 Rachel LtdRonald Ltd £`000£`000Sales25003600Cost of Sales(450)(600)Gross Profit2050 3000 O

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Answered: Required: a) “Calculate the following…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 19BEA

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You have the following financial statements for two building companies and have been asked to compare them:

Income statements for the year to 31st December 2019

	Rachel Ltd	Ronald Ltd
	£`000	£`000
Sales	2500	3600
Cost of Sales	(450)	(600)
Gross Profit	2050	3000
Operating expenses	(150)	(350)
Operating Profit	1900	2650
Interest Payable	(40)	(56)
Profit Before Taxation	1860	2594
Taxation	(68)	(75)
Profit After Taxation	1792	2519
Dividends	(30)	(43)
Retained Profits	1762	2476

Statements of financial position as at 31st December 2019

	Rachel Ltd	Ronald Ltd
	£`000	£`000
Non-current assets	3056	3868

Current assets
Inventories	70	35
Trade receivables	200	260
Cash at bank	56	20

Less: Current liabilities
Trade payables	(70)	(65)
Taxation	(50)	(42)

Non-current liabilities
Long-term loan	(700)	(1000)

Net assets	2562	3076

Shareholders' funds
£1 ordinary shares	800	600
Retained earnings	1762	2476
	2562	3076

Additional information:

All purchases and sales were on credit”

Required:

a) “Calculate the following ratios for each company.”:

Pre-tax Return on Equity (use total shareholders’ funds as your denominator)
Operating profit margin
Net profit (before tax) margin
Trade receivable (debtor) period in days
Current ratio
Acid test ratio (Quick ratio)
Gearing ratio (use debt + equity as your denominator)
Interest cover
Dividend cover
Dividend per share (in pence)

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