Daffodil plc is a manufacturing company. The following are the draft Statement of Financial Position of the
Question:
Daffodil plc is a manufacturing company. The following are the draft Statement of Financial Position of the company for the years ended 31st December 2009 and 2010.
2009 2010
€'000 €'000
Non current assets
Property, Plant and equipment 42,000 104,000
Current assets
Inventory 12,480 38,120
Trade receivables 7,880 12,280
Bank 6,240 10,600
26,600 61,000
Current liabilities
Trade payables 20,920 34,360
Current assets less current liabilities 5,680 26,640
Total assets less current liabilities 47,680 130,640
Non current liabilities
10% debentures - 40,000
47,680 90,640
Equity and liabilities:
Ordinary share capital 40,000 80,000
Retained profits 7,680 10,640
47,680 90,640
The revenue for the years ended 31st December 2009 and 2010 was €81,160,000 and €196,280,000 respectively, the cost of sales was €50,320,000 and €125,600,000 respectively and the operating profit for both periods before interest and taxation were €8,600,000 and €17,800,000 respectively.
Requirement:
(a) Calculate the following ratios for both accounting periods:
i. Current ratio
ii. Acid test ratio
iii. Debtors' collection period in days
iv. Creditors payment period in days
v. Gross profit margin
vi. Operating profit margin
Required:
Draft a memorandum to the Finance Director commenting on the situation revealed by the ratios at in respect of Daffodil plc.
Expert Answer:
Memorandum To Finance Director From Assistant Date Current Date Subject Analysis of Financial Ratios for Daffodil plc Dear Finance Director I have conducted an analysis of the financial ratios for Daf... View the full answer
Financial Accounting for Decision Makers
ISBN: 978-0273763451
6th Edition
Authors: Peter Atrill, Eddie McLaney
