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

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 31^stDec 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 31^st 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
Working capital cycle/operating cycle
Gearing
Interest cover

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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