Extracts from the 2013 financial statements of Classic Food Ltd (a hypothetical company) are presented below, and Domino’s 2013 financial statements are in the appendix.

 

Required

(a) For each entity calculate the return on assets and profit margin.

(b) Which entity appears to have stronger profitability?

(c) For each entity calculate working capital and the current ratio.

(d) Which entity appears to have stronger liquidity?

(e) What additional information would you require to make a better decision about the future profitability and liquidity of the two companies? 

Transcribed Image Text:

CLASSIC FOOD LTD Statement of profit or loss (extract) for the year ended 30 June 2013 (in thousands) Revenue Borrowing costs expense Profit from ordinary activities before income tax expense Income tax expense Profit from ordinary activities after income tax expense 2013 $650738 (4463) 37 265 (13713) $ 23 552 2012 $237735 (574) 19 330 (7078) $ 12252