1. As credit manager of Oman Oasis LLC, you have been asked by your financial director...

 

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1. As credit manager of Oman Oasis LLC, you have been asked by your financial director to assess the feasibility of increasing the credit facility of Oman Oasis LLC. You have been given the extracts from their most recent financial accounts below: Income Statement of Oman Oasis LLC for the year ended 31 December: 2012 (OMR) 2013 (OMR) Sales Less: cost of sales Gross profit 800 Less: expenses 560 240 Net profit Statement of Financial Position for Oman Oasis LLC as at 31 December: 2012 (OMR) 2013 (OMR) Non-current assets Current assets Inventory Receivables Cash Bank Total Current Assets Current liabilities Accounts Payable Bills Payable Bank Total Current Liabilities Working Capital Financed by Ordinary shares Reserves 480 520 100 300 2400 1600 100 300 0 1400 400 600 1000 1600 1000 600 1600 500 800 100 100 3600 2700 200 300 0 1500 700 i) Gross profit margin (2012: 33%) (2013: 25%). ii) Operating profit margin (2012: 10%) (2013: 4.4%). iii) Return on capital employed (2012: 15%) (2013: 8%). iv) Current ratio (2012: 3.5:1) (2013: 2.14:1). v) Quick ratio/Acid test (2012: 2.3:1) (2013: 1.43:1) vi) Inventory days (2012: 100 days) (2013: 66 days) vii) Receivables days (2012: 79 days) (2013: 81 days) viii) Payables days (2012: 91 days) (2013: 95 days) 900 740 160 1200 800 2000 1240 760 2000 2014 (OMR) 5400 4320 2014 (OMR) 800 1100 0 900 200 1900 1080 940 140 1100 1600 800 2400 1500 900 2400 Note: Opening inventory in 2012 = OMR 400 (a) Calculate the following ratios for 2014 (the relevant figures for 2012 and 2013 have been given in brackets): (b) Using the ratio calculations which have been supplied for 2012 & 2013 and your own calculations from part a) 2014, assess whether an increase in the credit facility would be appropriate, giving your reasons for your decision. 1. As credit manager of Oman Oasis LLC, you have been asked by your financial director to assess the feasibility of increasing the credit facility of Oman Oasis LLC. You have been given the extracts from their most recent financial accounts below: Income Statement of Oman Oasis LLC for the year ended 31 December: 2012 (OMR) 2013 (OMR) Sales Less: cost of sales Gross profit 800 Less: expenses 560 240 Net profit Statement of Financial Position for Oman Oasis LLC as at 31 December: 2012 (OMR) 2013 (OMR) Non-current assets Current assets Inventory Receivables Cash Bank Total Current Assets Current liabilities Accounts Payable Bills Payable Bank Total Current Liabilities Working Capital Financed by Ordinary shares Reserves 480 520 100 300 2400 1600 100 300 0 1400 400 600 1000 1600 1000 600 1600 500 800 100 100 3600 2700 200 300 0 1500 700 i) Gross profit margin (2012: 33%) (2013: 25%). ii) Operating profit margin (2012: 10%) (2013: 4.4%). iii) Return on capital employed (2012: 15%) (2013: 8%). iv) Current ratio (2012: 3.5:1) (2013: 2.14:1). v) Quick ratio/Acid test (2012: 2.3:1) (2013: 1.43:1) vi) Inventory days (2012: 100 days) (2013: 66 days) vii) Receivables days (2012: 79 days) (2013: 81 days) viii) Payables days (2012: 91 days) (2013: 95 days) 900 740 160 1200 800 2000 1240 760 2000 2014 (OMR) 5400 4320 2014 (OMR) 800 1100 0 900 200 1900 1080 940 140 1100 1600 800 2400 1500 900 2400 Note: Opening inventory in 2012 = OMR 400 (a) Calculate the following ratios for 2014 (the relevant figures for 2012 and 2013 have been given in brackets): (b) Using the ratio calculations which have been supplied for 2012 & 2013 and your own calculations from part a) 2014, assess whether an increase in the credit facility would be appropriate, giving your reasons for your decision.

Answer rating: 100% (QA)

i Gross profit margin 2012 33 2013 25 2014 20 ii Operating profit margin 2012 10 2013 44 2014 3 iii ... View the full answer