5. Babs Ltd. assembles computers in Ghana and faces a stiff competition from YES Computers. The statement of financial performance of Babs Ltd for the year 2017 is provided below.

Income Statement for the year ended 31 December, 2017

Sales Revenue

Cost of Sales

Gross profit

Other operating Expenses Profit before interest and tax Interest

Tax

Net Profit

GHC

15,000 (6,000) 9,000 (1,500)

7,500 (4,000) 3,500 (1,000)

2,000

1

Balance Sheet as at 31 December, 2017

Non-Current Assets

Current Assets:

Inventory

Trade Receivables

Bank 18,000

Equity & Liabilities;

Share Capital (100,000 shares) Retained Earnings

Non-Current Liabilities

22% Loan Note

Current liabilities

Trade Payables

The ratios of the competitor is summarized below;

GHC

50,000

23,000

73,000

40,000 13,000 53,000

20,000

73,000

2,000 3,000

18,000 2,000

Gross Profit Margin

30%

Net Profit Margin

25%

Return On Capital Employed (ROCE)

8%

Current Ratio

3 times (3:1)

Acid Test Ratio

2.8 times (2.8:1)

Debt to Equity

40%

Inventory Turnover Period

20 days

Trade Receivable Collection period

70 days

Account Payable Holding Period

100 days

Required

a. Calculate comparable ratios for Babs Ltd.