ACCA PM · Guided practice (Show me how)
Chapter 15: Financial Performance Measurement
Financial performance ratios - calculate on stated definitions, then explain
Statements of financial position as at 31 December ($)
| 2007 | 2006 | |||
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets: tangible assets | 1,341 | 826 | ||
| Inventory | 1,006 | 871 | ||
| Trade receivables | 948 | 708 | ||
| Cash | 360 | 100 | ||
| Current assets | 2,314 | 1,679 | ||
| TOTAL ASSETS | 3,655 | 2,505 | ||
| LIABILITIES AND CAPITAL | ||||
| $1 ordinary shares | 1,200 | 720 | ||
| Retained profit | 990 | 681 | ||
| Capital and reserves | 2,190 | 1,401 | ||
| Non-current liabilities: 10% loan 2015 | 500 | 400 | ||
| Trade payables | 653 | 516 | ||
| Tax payable | 228 | 140 | ||
| Dividends payable | 84 | 48 | ||
| Current liabilities | 965 | 704 | ||
| TOTAL LIABILITIES AND CAPITAL | 3,655 | 2,505 |
Statements of profit or loss for the year ended 31 December ($)
| 2007 | 2006 | |
|---|---|---|
| Revenue | 7,180 | 5,435 |
| Cost of sales | 5,385 | 4,212 |
| Gross profit | 1,795 | 1,223 |
| Distribution costs | 335 | 254 |
| Administrative expenses | 670 | 507 |
| Profit from operations | 790 | 462 |
| Finance costs | 50 | 52 |
| Profit before taxation | 740 | 410 |
| Company tax expense | 262 | 144 |
| Profit after taxation | 478 | 266 |
| Dividends | 169 | 95 |
| Retained profit for the period | 309 | 171 |
Calculate the profitability, liquidity and gearing ratios for both years, on the definitions in the notes: net profit margin and ROCE on profit before interest and tax (profit from operations); capital employed = total long-term capital (capital and reserves + long-term liabilities); asset turnover = revenue / total long-term capital; inventory days and payables days on cost of sales (purchases are not given); receivables days on revenue; gearing = long-term liabilities / shareholders' funds.
(a) Profitability, 2007
Calculate the company's profitability ratios for 2007.
(b) Profitability, 2006
Calculate the company's profitability ratios for 2006.
(c) Liquidity, 2007
Calculate the company's liquidity and working capital ratios for 2007.
(d) Liquidity, 2006
Calculate the company's liquidity and working capital ratios for 2006.
(e) Gearing
Calculate the company's debt to equity gearing ratios for 2007 and 2006.
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