Our net profit remained the same as in FY17, the main reason being the contribution we made to our co-worker loyalty program, Give ($100 million), as well as the growing number of co-workers taking part in our bonus program ($49 million). However, adjusting for these expenses, our cost percentage decreased. The gross margin decreased by 0.4% to 42.9%. This was expected and is due to larger price reductions compared to FY17. But the negative effect on margins was partly balanced by lower purchase prices and lower transport costs.

(a) Decore’s 2018 financial year end shows Decore’s revenue at $14 646 million in 2018 and $14253 million in 2017. Further, its cost of sales increased from $7898 million in 2017 to $8186 million in 2018. Calculate and evaluate Decore’s 2017 and 2018 gross profit margin. 4 mark

(b) In 2018, Decore’s profit was $1665 million compared to $1659 in 2017. Calculate and evaluate the net profit margin. 5 marks
(c) Decore’s most recent statement of financial position is presented below. Calculating the appropriate ratios, evaluate Decore’s liquidity and solvency. 6 marks.

Transcribed Image Text:

Cash and securities Receivables Inventory Total current assets Property, plant and equipment Other fixed assets Total non-current assets Short-term liabilities Other payables Total current liabilities Long-term liabilities Other non-current liabilities Total non-current liabilities Equity DECORE Statement of financial position as at 31 December 2018 $ million 8 443 1274 2 464 12 181 8 661 1 492 10 153 2 198 2 627 4 826 775 929 1 704 15 804 2017 $ million 8 000 1 097 2 129 11 226 8 518 1 267 9 785 2 382 2 260 4 642 999 946 1 845 14 524