etisalat 91 1213 PM udmoodleudacae Question l Ratio Aaa Con

etisalat @ 91% 12:13 PM udmoodle.ud.ac.ae Question l: Ratio Aaa Confused Aussic Trading Limited, a compary listed on the Unintelligent Soock Exchange, is a trading and nvestment enity The company trades esclusively in running oquipment and imvests in properity and other You are comsidering inveting into Confosod Aunsic Trading Limitod. The compamy has peovidad yoa the financial statements ie, income statement and balance sheet) foe 2022, 2023 and 2003 84 972.000 752.000.0 Cost of Goods Sold Gross Profir 525,369,000.00 S21,050,000 00 54,891,000 72,325,000 00 $21,310000.00 $55,10800000 $2,453,000 Selling and Distribution Expemes $31,598,00000 S14,001,00000 S15,605,009.0 30,175.000.00 S15,089,000 10.578.000.00 nistative Expense Other Income Giain (Loss) on Sale ef Land Gain (Loss)Sale of Equipmene Impairment Loss Opaing Profit $15,489,8000000.coe.o Finance Income $2,453,000.00 14,89000000 $12.437,000 00 $12437,009.0 $4 505.000 514.890.000 Finance Costs (Net) $7.035,000.00 4287000 00 Share of Not Gain (Loss) from Associaos Share of Net Gain (Loss) from Joint Venurc 12 542000.00 -525,069,000.0055,8000.00 54,28700000 S49,106,000.00 430,483,000.00 $54 724.000.00 Income Tax Proft After Tax

Solution

Ratio analysis:

Inventory Turnover: Cost of Goods Sold / Average Inventory

2023: Average inventory = ($25200000 + $35480000) / 2 = $30340000

COGS =                 $84972000

IT = $84972000 / $30340000 = 2.80

2024: Average inventory = ($58463000 + $35480000) / 2 = $46971500

COGS = $89752000

IT = $89752000 / $46971500 = 1.91

Receivables Turnover: Credit Sales / Average Gross Accounts Receivable

2023: Average Gross A/R = ($15600000 + $19650000) / 2 = $17625000

Credit sales = $151765000

RT = $151765000 / $17625000 = 8.61

2024: Average Gross A/R = ($19650000 + $26189000) / 2 = $22919500

Credit sales = $181546000

RT = $181546000 / $22919500 = 7.92

Total Asset Turnover: Sales / Average Total Assets

2023: Average total assets = ($596407000 + $583348000) / 2 = $589877500

TAT: $151765000 / $589877500 = 0.26

2024: Average total assets = ($583348000 + $588115000) / 2 = $585731500

TAT: $181546000 / $585731500 = 0.31

Working Capital Turnover: Sales / Working Capital

Working Capital = Current Assets - Current Liabilities

2023: WC = $73564000 - $139378000 = ($65814000)

WCT = $151765000 / ($65814000) = (2.31)

2024: WC = $92715000 - $121068000 = ($28353000)

WCT = $181546000 / ($28353000) = (6.40)

Current Ratio: Current Assets / Current Liabilities

2023: $73564000 / $139378000 = 0.53

2024: $92715000 / $121068000 = 0.77

Quick Ratio: Quick assets / Current Liabilities

2023: Quick assets = $73564000 – ($35480000 + $1250000) = $36834000

QR = $36834000 / $139378000 = 0.26

2024: Quick assets = $92715000 – ($58463000 + $750000) = $33502000

QR = $33502000 / $121068000 = 0.28

Cash Ratio: Cash + Marketable securities / Current liabilities

2023: ($12684000 + $4500000) / $139378000 = 0.12

2024: ($5813000 + $1500000) / $121068000 = 0.06

Debt to Assets ratio: Total Debt / Total Assets

2023: $299801000 / $583348000 = 0.51

2024: $303775000 / $588115000 = 0.52

Long-term Debt to Asset Ratio: Total long term debt / Total Assets

2023: $160423000 / $583348000 = 0.28

2024: $182707000 / $588115000 = 0.31

Financial leverage: Assets / Equity

2023: $583348000 / $283547000 = 2.06

2024: $588115000 / $284340000 = 2.07

Gross profit margin: GP / Sales

2023: $66793000 / $151765000 = 44%

2024: $91794000 / $181546000 = 51%

Net profit margin: NP / Sales

2023: -$20483000 / $151765000 = -13.5%

2024: $41043000 / $181546000 = 22.60%

Return on Assets: Net Income / Average Total Assets

2023: Average total Assets = ($596407000 + $583348000) / 2 = $589877500

ROA = -$20483000 / $589877500 = -0.03 or -3%

2024: Average total Assets = ($583348000 + $588115000) / 2 = $585731500

ROA = $41043000 / $585731500 = 0.07 or 7%

Return on Total Capital: Net Income / (Shareholder’s equity + Non-current liabilities)

2023: -$20483000 / ($283547000 + $160423000) = -4.61%

2024: $41043000 / ($284340000 + $182707000) = 8.78%

Five factor DuPont Model for ROE:

ROE = Net Profit / Pretax profit X Pretax profit / EBIT X EBIT / Sales X Sales / Assets X Assets / Equity

2023: -$20483000 / -$20483000 X -$20483000 / $21310000 X $21310000 / $151765000 X $151765000 / $583348000 X $583348000 / $283547000 = -0.07 OR -7%

2024: $41043000 / $54724000 X $54724000 / $55108000 X $55108000 / $181546000 X $181546000 / $588115000 X $588115000 / $284340000 = 0.14 OR 14%

Activity/Efficiency ratio:

Inventory turnover ratio for the market and the industry are higher than that of the organization. It means that the company is not efficient at selling its product in due course of time or high inventory stacked up over time thereby inefficiency in making the sale.

Accounts receivables turnover ratio for the industry and the market are higher than the company but the company is very close to that standard. The company is able to collect its receivables in time thereby ensuring efficient handling and management of receivables.

Liquidity ratio:

Quick ratio, current ratio and cash ratio all these are comparatively higher in the industry and the market than for the company. The company fails to manage its liquidity and hence proven to be facing some serious cash crunch both in present and in future as well.