The following is the profit and loss account and balance sheet of Sach International Ltd. You may redraft these for the purpose of ratio analysis.

The management of the company has approached a bank to obtain short-term working capital loan as well as long-term loan. Mean time management has also invited its internal auditors to carry out decomposition test for having an improvement in ROIC, ROCE and ROE.

Discussion Question

1. Assist bank in evaluate financial performance from the perspective of short-term loan as well as long-term loan.

2. Carry out decomposition analysis. Suggest how ROIC, ROCE and ROE can be improve.

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Particulars To Opening Stock Finished Goods Raw Material To Purchase of Raw Material To Direct Wages To Manufacturing Expenses To Administrative Expenses To Depreciation To Preliminary expenses Written off To Selling and Distribution Expenses To Loss on Sale of Plant To Interest on Debentures To Interest on Short-term loan To Net Profit To Provision for tax To General Reserve To Preference Dividend To Interim Dividend To Balance c/f Profit and Loss Account For the year ending March 31, 2009 Amount (3) 1,00,000 50,000 5,00,000 2,00,000 1,00,000 30,000 20,000 10,000 40,000 47,000 10,000 8,000 1,85,000 13,00,000 50,000 80,000 10,000 40,000 10,000 1,90,000 Particulars By Sales By Closing Stock Finished Goods Raw Material By Profit on non-operating investment By Balance b/f By Net Profit for the Year Amount (³) 10,00,000 1,50,000 1,00,000 50,000 13,00,000 5,000 1,85,000 1,90,000