- 6 Marks
FM – NOV 2015 – L2 – Q1b – Business valuations
Compute and comment on common size ratios for Suncity Limited for the years 2013 and 2014.
Question
The Board of Directors of Suncity Limited are reviewing the performance of their business for the year 2014 and are considering using ratio analysis for this purpose. You have been presented with the following statement of comprehensive income for the years 2013 and 2014:
| 2014 (GH₵’000) | 2013 (GH₵’000) | |
|---|---|---|
| Sales | 42,000 | 30,000 |
| Less: cost of sales | 33,200 | 21,500 |
| Gross profit | 8,800 | 8,500 |
| Operating expenses | 2,750 | 2,120 |
| Profit before finance charges | 6,050 | 6,380 |
| Finance charges | 500 | 700 |
| Profit before tax | 5,550 | 5,680 |
| Taxation | 1,110 | 1,136 |
| Profit after tax transferred to income surplus | 4,440 | 4,544 |
Required:
i. Compute common size ratios for Suncity Limited for 2013 and 2014 (4 marks)
ii. Comment on any four of the ratios computed (2 marks)
Find Related Questions by Tags, levels, etc.
- Tags: Common Size Ratios, Financial Performance, Ratio Analysis, Vertical Analysis
- Level: Level 2
- Topic: Business valuations
- Series: NOV 2015
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