Question Tag: Inventory Turnover

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CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Question

Ehis Marvel, a public company, is a high street retailer that sells clothing and food. The managing director is very disappointed with the current year’s result. The company expanded its operations and commissioned a famous designer to restyle its clothing products. This has led to increased sales in both retail lines, yet overall profits are down.

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Required:
Write a report analysing the financials of Ehis Marvel Plc, utilising the above ratios and the information in the statement of cash flows for the two years ended March 31, 2016. Your report should refer to the relative performance of the clothing and food sales and be supported by any further ratios you consider appropriate.

Answer

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Tags: Cash Flow Analysis, Gearing, Inventory Turnover, Liquidity, Profitability, ROCE
Level: Level 3

Topic: Introduction to Corporate Reporting

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

Question

Atiku Ltd operates in the same business sector as Obi Ltd. The directors of Atiku Ltd would like to understand the firm’s strengths and weaknesses relative to Obi Ltd from the latest financial statements of the two entities as set out below:

Summarised Statements of Profit or Loss for the year ended 30 June 2022:

Net profit figures were arrived at after considering the following items:

Depreciation and amortisation: Atiku Ltd (GH¢3,110), Obi Ltd (GH¢2,850)
Employee benefits: Atiku Ltd (GH¢7,200), Obi Ltd (GH¢6,050)
Finance cost: Atiku Ltd (GH¢1,050), Obi Ltd (GH¢880)
Provision for current tax: Atiku Ltd (GH¢1,004), Obi Ltd (GH¢925)
Deferred tax decrease in provision: Atiku Ltd (GH¢116), Obi Ltd (GH¢55)
Current tax under-provision (2021): Atiku Ltd (nil), Obi Ltd (GH¢32)

Additional information: The following ratios have been extracted from the Directors’ Report accompanying the financial statements:

Gross profit margin: Atiku Ltd (22%), Obi Ltd (25%)
Dividend coverage: Atiku Ltd (4), Obi Ltd (5)
Current share price: Atiku Ltd (GH¢2.10), Obi Ltd (GH¢1.55)

Required:
a) Compute the following ratios for both entities for the year ended 30 June 2022: i) Operating profit margin (1.5 marks)
ii) Return on capital employed (capital employed defined as all interest-bearing liabilities and equity) (1.5 marks)
iii) Inventory turnover period (1.5 marks)
iv) Current ratio (1.5 marks)
v) Capital (long-term) gearing (1.5 marks)
vi) Dividend yield (2.5 marks)

b) Write a report to the Chief Executive Officer analyzing Atiku Ltd’s financial performance and position relative to Obi Ltd, for the year ended 30 June 2022. For the report writing, use only the following ratios: operating profit margin, return on capital employed, capital gearing and dividend yield. (10 marks)

Answer

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Tags: Current Ratio, Dividend Yield, Financial Ratios, Gearing, Inventory Turnover, Profit margin, ROCE
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: MAR 2023

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

Question

a) Garu and Gushegu are two businesses that compete in the same market and have been trading for a number of years. The following information relates to their results for the year ended 31 December 2021:

Account	Garu (GHȼ’000)	Gushegu (GHȼ’000)
Sales	4,455	5,264
Cost of Sales	2,549	2,632
Net Profit	1,075	1,137
Inventory at 1 January	820	518
Inventory at 31 December	1,040	498
Capital Employed	2,428	1,953
Receivables	1,200	1,324
Bank	75	980
Payables	750	720

There are no other current assets or current liabilities.

Required:
Calculate the following ratios for each of the two businesses: i) Return on Capital Employed (ROCE)
ii) Gross Profit Margin
iii) Current Ratio
iv) Liquid (Acid Test) Ratio
v) Inventory Turnover
(10 marks)

b) Using the ratios calculated, discuss which of the two businesses appears to be performing better.
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Current Ratio, Gross Profit Margin, Inventory Turnover, Ratio Analysis, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – April 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of key financial ratios for two companies to assess profitability and liquidity.`

Question

The Statement of Profit or Loss and Statements of Financial Position of two manufacturing companies in the same sector are set out below:

Required:
a) Define and calculate the following ratios for each company:
i) Net profit percentage
ii) Return on capital employed
iii) Average receivables collection period
iv) Average payables period
v) Inventory turnover
(15 marks)

b) A not-for-profit organisation issues a different set of financial statements than the statements produced by a business organisation (profit making). When it comes to bookkeeping for a not-for-profit organisation, many processes remain the same as that of a business organisation. However, differences in terminology apply when managing the books of a not-for-profit organisation.

Required:
What terminology will be used for the following:
i) Profit for the period
ii) Loss for the period
iii) Equity reserve
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Inventory Turnover, Liquidity Ratios, Payables Period, Profitability Ratios, Receivables Collection Period, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: APR 2022

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

Question

The following summary information relates to two businesses, Danyi and Napo. Both businesses traded in the same market sector for the year ended 31 December 2020.

Statement of Profit or Loss Accounts for the year ended 31 December 2020:

Required:
a) Calculate the following ratios for Danyi and Napo:
i) Gross profit margin
ii) Net profit margin
iii) Return on capital employed (ROCE)
iv) Current ratio
v) Liquid (acid test) ratio
vi) Inventory turnover
(6 marks)

b) Use the ratios calculated in a) to assess:
i) The liquidity of both businesses
ii) The profitability of both businesses
(8 marks)

c) Advise management of both Danyi and Napo on the actions they should now take to improve liquidity and profitability.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Ratio, Financial Statement Analysis, Gross Profit Margin, Inventory Turnover, Liquidity Ratio, Net Profit Margin, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: NOV 2021

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

Question

a) The accountant of Kwadaso Traders has prepared the Trading and Profit and Loss Account for the year ended 31 December 2020 and the forecast for the year ended 31 December 2021. These are reproduced below:

Required:
i) Calculate the following ratios for the year ended 31 December 2020 and for the year ended 31 December 2021.

Gross Profit Margin (1 mark)
Net Profit Margin (1 mark)
Inventory Turnover (1 mark)
Return on Capital Employed (ROCE) (1 mark)

ii) The manager of Kwadaso Traders has set the objective of improving the profitability of the business for the year ending 31 December 2021. Discuss the changes between the two years based on the ratios calculated and the additional information provided, and explain whether or not Kwadaso Traders will achieve its objective.
(8 marks)

iii) Explain the importance of the Return on Capital Employed (ROCE) percentage to a business.
(3 marks)

b) Financial statements prepared by clubs, societies, and associations are different from those prepared by sole traders, partnerships, and limited liability companies. The financial statements prepared by these not-for-profit organizations are the Trading Account, the Income and Expenditure Account, the Receipts and Payment Account, and the Statement of Financial Position.

Required:
Explain TWO (2) differences between an Income and Expenditure Account and a Receipts and Payments Account.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gross Profit Margin, Income and Expenditure Account, Inventory Turnover, Net Profit Margin, Receipts and Payments Account, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: MAY 2021

FA – Nov 2020 – L1 – Q5 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Analysis of financial performance using ratios and calculation of additional liquidity ratios and explanation of the importance of the statement of cash flows.

Question

The following financial information relates to Mawoekpor Ltd. for the year ended 31 December 2019 (with comparative figures for the year ended 31 December 2018):

Statement of Financial Position as at 31 December 2019

Required:
a) Select THREE (3) of the ratios listed above and briefly outline what information each ratio provides to users of financial information, commenting specifically on the financial results of Mawoekpor Ltd.
(9 marks)

b) Calculate TWO (2) additional ratios for both 2018 and 2019 that would provide further evidence of the liquidity of the company.
(5 marks)

c) Explain THREE (3) importance of preparing a statement of cash flows.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gross Profit Margin, Inventory Turnover, Liquidity Ratios, Payables Days, Receivables Days, Return on Capital Employed (ROCE), Statement of Cash Flows
Level: Level 1

Topic: IAS 7: Statement of cash flows, Interpretation of financial statements (Financial Ratios)
Series: NOV 2020

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

Question

Extract from the Income Statement for the two years to March 31, 2016, are shown:

Ehis Marvel Plc – Statement of cash flow for the year to March 31, 2016

(ii) The share price of Ehis Marvel Plc averaged N6.00 during the year to March 31, 2015, but was only N3.00 at March 31, 2016.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Cash Flow Analysis, Gearing, Inventory Turnover, Liquidity, Profitability, ROCE
Level: Level 3

Topic: Introduction to Corporate Reporting

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

Question

Summarised Statements of Profit or Loss for the year ended 30 June 2022:

Net profit figures were arrived at after considering the following items:

Depreciation and amortisation: Atiku Ltd (GH¢3,110), Obi Ltd (GH¢2,850)
Employee benefits: Atiku Ltd (GH¢7,200), Obi Ltd (GH¢6,050)
Finance cost: Atiku Ltd (GH¢1,050), Obi Ltd (GH¢880)
Provision for current tax: Atiku Ltd (GH¢1,004), Obi Ltd (GH¢925)
Deferred tax decrease in provision: Atiku Ltd (GH¢116), Obi Ltd (GH¢55)
Current tax under-provision (2021): Atiku Ltd (nil), Obi Ltd (GH¢32)

Additional information: The following ratios have been extracted from the Directors’ Report accompanying the financial statements:

Gross profit margin: Atiku Ltd (22%), Obi Ltd (25%)
Dividend coverage: Atiku Ltd (4), Obi Ltd (5)
Current share price: Atiku Ltd (GH¢2.10), Obi Ltd (GH¢1.55)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Ratio, Dividend Yield, Financial Ratios, Gearing, Inventory Turnover, Profit margin, ROCE
Level: Level 3

Topic: Analysis and Interpretation of Financial Statements
Series: MAR 2023

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

Question

Account	Garu (GHȼ’000)	Gushegu (GHȼ’000)
Sales	4,455	5,264
Cost of Sales	2,549	2,632
Net Profit	1,075	1,137
Inventory at 1 January	820	518
Inventory at 31 December	1,040	498
Capital Employed	2,428	1,953
Receivables	1,200	1,324
Bank	75	980
Payables	750	720

There are no other current assets or current liabilities.

b) Using the ratios calculated, discuss which of the two businesses appears to be performing better.
(10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Acid Test Ratio, Current Ratio, Gross Profit Margin, Inventory Turnover, Ratio Analysis, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: AUG 2022

FA – April 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of key financial ratios for two companies to assess profitability and liquidity.`

Question

The Statement of Profit or Loss and Statements of Financial Position of two manufacturing companies in the same sector are set out below:

Required:
What terminology will be used for the following:
i) Profit for the period
ii) Loss for the period
iii) Equity reserve
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Inventory Turnover, Liquidity Ratios, Payables Period, Profitability Ratios, Receivables Collection Period, Return on Capital Employed
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: APR 2022

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

Question

The following summary information relates to two businesses, Danyi and Napo. Both businesses traded in the same market sector for the year ended 31 December 2020.

Statement of Profit or Loss Accounts for the year ended 31 December 2020:

b) Use the ratios calculated in a) to assess:
i) The liquidity of both businesses
ii) The profitability of both businesses
(8 marks)

c) Advise management of both Danyi and Napo on the actions they should now take to improve liquidity and profitability.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Current Ratio, Financial Statement Analysis, Gross Profit Margin, Inventory Turnover, Liquidity Ratio, Net Profit Margin, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: NOV 2021

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

Question

Required:
i) Calculate the following ratios for the year ended 31 December 2020 and for the year ended 31 December 2021.

Gross Profit Margin (1 mark)
Net Profit Margin (1 mark)
Inventory Turnover (1 mark)
Return on Capital Employed (ROCE) (1 mark)

iii) Explain the importance of the Return on Capital Employed (ROCE) percentage to a business.
(3 marks)

Required:
Explain TWO (2) differences between an Income and Expenditure Account and a Receipts and Payments Account.
(5 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gross Profit Margin, Income and Expenditure Account, Inventory Turnover, Net Profit Margin, Receipts and Payments Account, ROCE
Level: Level 1

Topic: Interpretation of financial statements (Financial Ratios)
Series: MAY 2021

FA – Nov 2020 – L1 – Q5 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Analysis of financial performance using ratios and calculation of additional liquidity ratios and explanation of the importance of the statement of cash flows.

Question

The following financial information relates to Mawoekpor Ltd. for the year ended 31 December 2019 (with comparative figures for the year ended 31 December 2018):

Statement of Financial Position as at 31 December 2019

b) Calculate TWO (2) additional ratios for both 2018 and 2019 that would provide further evidence of the liquidity of the company.
(5 marks)

c) Explain THREE (3) importance of preparing a statement of cash flows.
(6 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Financial Ratios, Gross Profit Margin, Inventory Turnover, Liquidity Ratios, Payables Days, Receivables Days, Return on Capital Employed (ROCE), Statement of Cash Flows
Level: Level 1

Topic: IAS 7: Statement of cash flows, Interpretation of financial statements (Financial Ratios)
Series: NOV 2020

Question Tag: Inventory Turnover

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CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

FA – April 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of key financial ratios for two companies to assess profitability and liquidity.`

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

FA – Nov 2020 – L1 – Q5 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Analysis of financial performance using ratios and calculation of additional liquidity ratios and explanation of the importance of the statement of cash flows.

CR – May 2016 – L3 – Q2 – Introduction to Corporate Reporting

Analyze Ehis Marvel Plc's financial performance and assess clothing and food sales divisions' contributions.

CR – Mar 2023 – L3 – Q5 – Analysis and interpretation of financial statements Series

Compute financial ratios including operating profit margin, ROCE, inventory turnover, current ratio, capital gearing, and dividend yield for Atiku Ltd and Obi Ltd.

FA – Aug 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and comparison of financial ratios for two businesses to assess performance, followed by a discussion of which business is performing better.

FA – April 2022 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of key financial ratios for two companies to assess profitability and liquidity.`

FA – Nov 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, ROCE, and liquidity ratios, and assessment of liquidity and profitability.

FA – May 2021 – L1 – Q5 – Interpretation of financial statements (Financial Ratios)

Calculation and interpretation of financial ratios, including gross profit margin, net profit margin, inventory turnover, and ROCE, and explanation of differences between Income and Expenditure Account and Receipts and Payments Account.

FA – Nov 2020 – L1 – Q5 – IAS 7: Statement of cash flows | Interpretation of financial statements (Financial Ratios)

Analysis of financial performance using ratios and calculation of additional liquidity ratios and explanation of the importance of the statement of cash flows.

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