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Business
Accounting
Income Statements for the Year Ended 31st Dec 2020                     KM Ltd   ROW Ltd     £'000     £'000 Sales revenue   8,320     11,250 Cost of sales   (6,020)     (9,030) Gross profit   2,300     2,220 Operating expenses   (1,048)     (1,535) Operating profit   1,252     685 Finance charges   (20)     (70) Profit before tax   1,232     615 Taxation   (62)     (30) Profit for the year   1,170     585   SOFP (Balance Sheet) as at 31st Dec 2020         KM Ltd   ROW Ltd   £'000 £'000   £'000 £'000 Non-current assets   502     198             Current assets            Inventory 1,290     2,437    Trade receivables     730     1,990       2,020     4,427 Total assets   2,522     4,625             Equity           Share capital   1,350          800   Reserves 580       1,145              1,930         1,945             Current liabilities            Trade payables 430          850    Taxation        62            30    Bank overdraft       35          350                527           1,230             Non-current liabilities           Loans              65     1,450 Total equity and liabilities    2,522           4,625 You are required to:   Use your Excel skills to calculate the following ratios for both companies.   Inventory days Trade receivable days Trade payable days

Income Statements for the Year Ended 31st Dec 2020                     KM Ltd   ROW Ltd     £'000     £'000 Sales revenue   8,320     11,250 Cost of sales   (6,020)     (9,030) Gross profit   2,300     2,220 Operating expenses   (1,048)     (1,535) Operating profit   1,252     685 Finance charges   (20)     (70) Profit before tax   1,232     615 Taxation   (62)     (30) Profit for the year   1,170     585   SOFP (Balance Sheet) as at 31st Dec 2020         KM Ltd   ROW Ltd   £'000 £'000   £'000 £'000 Non-current assets   502     198             Current assets            Inventory 1,290     2,437    Trade receivables     730     1,990       2,020     4,427 Total assets   2,522     4,625             Equity           Share capital   1,350          800   Reserves 580       1,145              1,930         1,945             Current liabilities            Trade payables 430          850    Taxation        62            30    Bank overdraft       35          350                527           1,230             Non-current liabilities           Loans              65     1,450 Total equity and liabilities    2,522           4,625 You are required to:   Use your Excel skills to calculate the following ratios for both companies.   Inventory days Trade receivable days Trade payable days

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Income Statements for the Year Ended 31st Dec 2020

      
           
 

KM Ltd

  

ROW Ltd
   

£'000

    

£'000

Sales revenue

  

8,320

    

11,250

Cost of sales

  

(6,020)

    

(9,030)

Gross profit

  

2,300

    

2,220

Operating expenses

  

(1,048)

    

(1,535)

Operating profit

  

1,252

    

685

Finance charges

  

(20)

    

(70)

Profit before tax

  

1,232

    

615

Taxation

  

(62)

    

(30)

Profit for the year

  

1,170

    

585

 

SOFP (Balance Sheet) as at 31st Dec 2020

      
 

KM Ltd

  

ROW Ltd
 

£'000

£'000

  

£'000

£'000

Non-current assets

  

502

    

198
           

Current assets

          

 Inventory

1,290

    

2,437

  

 Trade receivables

    730

    

1,990

  
   

2,020

    

4,427

Total assets

  

2,522

    

4,625
           

Equity

          

Share capital

  1,350

    

     800

  

Reserves

580

    

  1,145

  
   

       1,930

    

    1,945
           

Current liabilities

          

 Trade payables

430

    

     850

  

 Taxation

       62

    

       30

  

 Bank overdraft

      35

    

     350

  
   

         527

    

      1,230
           

Non-current liabilities

          

Loans

  

           65

    

1,450

Total equity and liabilities

  

 2,522

    

      4,625

You are required to:

 

  1. Use your Excel skills to calculate the following ratios for both companies.

 

  1. Inventory days
  2. Trade receivable days
  3. Trade payable days
  4. Working capital cycle/operating cycle
  5. Gearing
  6. Interest cover
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