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Name: Registration no:

Question 1: Report Writing

You have been hired as an analyst for Standard Chartered Bank and your team is working on an
independent assessment of ABC Food Inc. is a firm that specializes in the production of freshly
imported farm products from Punjab. Your assistant has provided you with the following data for
Flipper Inc and their industry.

2018-
Ratio 2016 2017 2018 Industry
Average
Long-term debt 0.45 0.40 0.35 0.35
Inventory Turnover 62.65 42.42 32.25 53.25
Depreciation/Total Assets 0.25 0.014 0.018 0.015
Days’ sales in receivables 113 98 94 130.25
Debt to Equity 0.75 0.85 0.90 0.88
Profit Margin 0.082 0.07 0.06 0.075
Total Asset Turnover 0.54 0.65 0.70 0.40
Quick Ratio 1.028 1.03 1.029 1.031
Current Ratio 1.33 1.21 1.15 1.25
Times Interest Earned 0.9 4.375 4.45 4.65
Equity Multiplier 1.75 1.85 1.90 1.88

a. In the annual report to the shareholders, the CEO of ABC Foods wrote, “1997 was a good
year for the firm with respect to our ability to meet our short-term obligations. We had
higher liquidity largely due to an increase in highly liquid current assets (cash, account
receivables and short-term marketable securities).” Is the CEO correct? Explain and use
only relevant information in your analysis.

b. What can you say about the firm's asset management? Be as complete as possible given the
above information, but do not use any irrelevant information.

c. You are asked to provide the shareholders with an assessment of the firm's solvency and
leverage. Be as complete as possible given the above information, but do not use any
irrelevant information.

d. ABC foods want to raise the funds for future projects, you are support to provide which
source of finance is more suitable for company.
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Question 2: Ratio Calculation

Financial information on XYZ Ltd.

1. Summary profit statements
$m $m $m
2016 2017 2018
Sales turnover 4.90 5.30 6.60

Operating costs 4.17 4.43 5.82

Operating profit before tax 0.73 0.87 0.78

Taxation 0.24 0.30 0.27

Profit after tax 0.49 0.57 0.51

Dividends 0.12 0.16 0.16

Retained profit 0.37 0.41 0.35

2. Summary balance sheets

$m $m $m
2016 2017 2018
Fixed assets 2.40 2.77 2.88

Current assets
Stocks:
Raw materials 0.09 0.12 0.15

Finished goods 0.40 0.43 0.45

Debtors 1.14 1.32 1.84

Bank 0.03 0.04 0.05

1.66 1.91 2.49

Less Current liabilities 1.35 1.56 1.90

Net current assets 0.31 0.35 0.59

2.71 3.12 3.47

Capital and reserves 0.5 0.91 1.26

Bank loans 2.21 2.21 2.21

2.71 3.12 3.47
In your role of assistant financial manager, you are to prepare an analysis of the company's figures
over the three-year period using the performance criteria listed in the inter-firm comparison table.
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1. Calculate all the ratios given in the average ratios for federation members for 2016, 2017 and
2018.
2. Prepare a detailed report on the company's performance in terms of profitability and liquidity
compared with the average of the sector over the period.

Formula required:

Return on capital employed: Net profit before tax and dividend / Capital employed x 100

Current ratio: Current assets / current liabilities

Asset turnover ratio: Turnover / Capital employed (total assets)

Net profit margin: Net profit before tax and dividend / turnover x 100

Gearing ratio: Loan capital / total capital employed x 100