B4 The following is a summary of some of the accounting ratios of two companies in the same industry and of comparable size for the year ended 30 June 20X1. Adam plc Ben plc Return on capital employed (ROCE) 18.5% 19% Profit margin 12% 14% Asset turnover ratio 3 3.33 Inventory turnover ratio 3.40 4.1 Trade receivable ratios 61 days 43.8 days Trade payables ratios 64 days 69 days Working capital/Current ratio 1.64 2.31 Quick ratio (acid test ratio) 0.65 1.01 Gearing ratio 30% 25% Required 1 Comment on the financial performance of both companies. Required 2 Who are the primary users of financial statements? List some limitations of financial statements.
B4 The following is a summary of some of the accounting ratios of two companies in the same industry and of comparable size for the year ended 30 June 20X1. Adam plc Ben plc Return on capital employed (ROCE) 18.5% 19% Profit margin 12% 14% Asset turnover ratio 3 3.33 Inventory turnover ratio 3.40 4.1 Trade receivable ratios 61 days 43.8 days Trade payables ratios 64 days 69 days Working capital/Current ratio 1.64 2.31 Quick ratio (acid test ratio) 0.65 1.01 Gearing ratio 30% 25% Required 1 Comment on the financial performance of both companies. Required 2 Who are the primary users of financial statements? List some limitations of financial statements.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
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B4 The following is a summary of some of the accounting ratios of two companies in the same industry and of comparable size for the year ended 30 June 20X1. Adam plc Ben plc Return on capital employed (ROCE) 18.5% 19% Profit margin 12% 14% Asset turnover ratio 3 3.33 Inventory turnover ratio 3.40 4.1 Trade receivable ratios 61 days 43.8 days Trade payables ratios 64 days 69 days
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