Super Green Limited is a New Zealand agriculture farming business. It produces natural farm products in...
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Super Green Limited is a New Zealand agriculture farming business. It produces natural farm products in world markets, including prime lamb and squash. In 2022, Super Green Limited implemented tighter inventory controls to prevent losses from giving discounts or writing downs for unsold goods to cope with increased inflation and other operating costs due to the pandemic. The following table summarises the key financial ratios for Super Green Ltd in 2021 and 2022. The company intends to borrow a short-term loan from a lender to enhance its financial status. You have been asked to assess the overall financial performance of Super Green Limited in terms of its profitability, efficiency and liquidity. You are also asked to discuss what these ratios reveal about the associated risks and identify causal factors for the observed trends of these ratios. Super Green Limited Ratios Formulae 2021 2022 a. Gross profit % = Gross profit/Sales 35% 39% b. Net profit % = NPAT/Sales 15% 14% c. Inventory Turnover period = (Closing inventory x 365)/Cost of goods sold 62 days 50 days d. Average settlement period for Accounts Receivable = (Closing Accounts Receivable x 365)/Credit sales e. Current ratio 35 days 40 days = Current assets/Current 2.2:1 1.2:1 e. Current ratio = Current assets/Current Liabilities 2.2:1 1.2:1 f. Quick asset ratio = Liquid assets/Current liabilities 1.1:1 0.8:1 Required: Evaluate and discuss the overall performance of Super Green Limited during 2021 and 2022 in terms of its profitability, liquidity, and efficiency. Your answer must include trend analysis, at least one potential causal factor for the observed trends and discuss associated risks for the related ratios. You also need to make a conclusion about whether the company should borrow a short-term loan based on your analysis. (12 marks) Part B The market performance ratios for Best Coconut Ltd are presented below during the past five years. You are asked to analyse the following information and suggest why a potential investor would be interested in the dividend payout ratios of this company. 2022 2021 2020 2019 2018 EPS 15.9c 17.3c 17.1c 22.1c 20.1c DPS 9.5c 16.5c 16.5c 16.5c 15c 2 Dividend payout ratio Dividend per share 100 x Earnings per share 1 Required: Calculate the company's dividend payout ratios during 2018 and 2022, interpret the ratios by evaluating on the company's EPS and DPS and explain why an investor would be interested in these ratios. (12 marks) Super Green Limited is a New Zealand agriculture farming business. It produces natural farm products in world markets, including prime lamb and squash. In 2022, Super Green Limited implemented tighter inventory controls to prevent losses from giving discounts or writing downs for unsold goods to cope with increased inflation and other operating costs due to the pandemic. The following table summarises the key financial ratios for Super Green Ltd in 2021 and 2022. The company intends to borrow a short-term loan from a lender to enhance its financial status. You have been asked to assess the overall financial performance of Super Green Limited in terms of its profitability, efficiency and liquidity. You are also asked to discuss what these ratios reveal about the associated risks and identify causal factors for the observed trends of these ratios. Super Green Limited Ratios Formulae 2021 2022 a. Gross profit % = Gross profit/Sales 35% 39% b. Net profit % = NPAT/Sales 15% 14% c. Inventory Turnover period = (Closing inventory x 365)/Cost of goods sold 62 days 50 days d. Average settlement period for Accounts Receivable = (Closing Accounts Receivable x 365)/Credit sales e. Current ratio 35 days 40 days = Current assets/Current 2.2:1 1.2:1 e. Current ratio = Current assets/Current Liabilities 2.2:1 1.2:1 f. Quick asset ratio = Liquid assets/Current liabilities 1.1:1 0.8:1 Required: Evaluate and discuss the overall performance of Super Green Limited during 2021 and 2022 in terms of its profitability, liquidity, and efficiency. Your answer must include trend analysis, at least one potential causal factor for the observed trends and discuss associated risks for the related ratios. You also need to make a conclusion about whether the company should borrow a short-term loan based on your analysis. (12 marks) Part B The market performance ratios for Best Coconut Ltd are presented below during the past five years. You are asked to analyse the following information and suggest why a potential investor would be interested in the dividend payout ratios of this company. 2022 2021 2020 2019 2018 EPS 15.9c 17.3c 17.1c 22.1c 20.1c DPS 9.5c 16.5c 16.5c 16.5c 15c 2 Dividend payout ratio Dividend per share 100 x Earnings per share 1 Required: Calculate the company's dividend payout ratios during 2018 and 2022, interpret the ratios by evaluating on the company's EPS and DPS and explain why an investor would be interested in these ratios. (12 marks)
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