ACC425 TUTORIAL SHEET

FINANCIAL STATEMENTS ANALYSIS

1. Janet and Ruth are sole proprietors carrying on business as wholesalers. Their financial
statements for the year ended 31 March 2024 were as follows:
Income statements for the year ended 31 March 2024:
JANET RUTH
"000"CFAF “000"CFAF
Sales 144,000 140,000
Cost of sales
Opening inventory 28,000 3,200
Purchases 124,000 121,600
152,000 124,800
Closing inventory (32,000) (4,800)
120,000 120,000
Gross profit 24,000 20,000
Distribution costs (7,200) (2,800)
Administrative expenses (8,160) (9,500)
Net Profit 8,640 7,700

Statement of financial position as at 31 March 2024:

JANET RUTH
"000"CFAF "000"CFAF
Assets 20,000 14,000
Non-current assets 21,750 13,840
Freehold property 12,000 6,000
Fixtures, fittings and equipment 53,750 33,840
Motor vehicles

Current assets 32,000 4,800

Inventories 28,800 11,200
Accounts receivable 8,950 11,360
Bank balances 69,750 27,360
Total assets 123,500 61,200
Capital and liabilities
Capital 108,000 30,800
Accounts payable 15,500 30,400
Total capital and liabilities 123,500 61,200
Additional information:
1. The amounts of accounts receivable and accounts payable have not changed significantly over the
year. All the sales are on credit.
2. All the non-current assets are at written down values.
3. Assume that inventories increased evenly over the year.

Required:

a) For each business, compute the following:

i) Three (3) profitability ratios.
ii) Current ratio.

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 iii) Acid test ratio.
iv) Inventory turnover ratio.
v) Total assets turnover ratio.
vi) Accounts receivable turnover ratio
b) Using the ratios computed in (a) above, comment on the performance of each business

2. Dougla Ltd and Tongla Ltd are two companies of a similar size and in the same industry. The
following ratios were calculated for Dougla Ltd for the year to 31, December, 2023:
Gross Profit 32.61%
Current ratio 2.84:1
Stock turnover 5.25 times
Debtors’ collection period 29 days
Return on capital employed 12.17 %

The summarised final accounts of Tongla Ltd are as follows:

Trading and profit and loss Account for 2023
Opening stock 4,480,000
Purchases 61,440,000
65,920,000
Less closing stock 5,120,000
Cost of Good Sold 60,800,000
Overhead costs 14,720,000
Net Profit 1,280,000
Sales (on Credit) 76,800,000

Balance sheet at 311, December 2023.

Liabilities CFAF Assets CFAF
Share Capital 12.800,000 Fixed Assets 14,080,000
P & L Account 6.400,000 Stocks 5,120,000
Long term creditors 3.200,000 Debtors 11,520,000
Other creditors 10.880,000 Bank 2,560,000
Total 33.280,000 Total 33.280,000
Required:
a) For Tongla Ltd calculate the same ratios as calculated for Dongla Ltd
b) Compare four of the ratios calculated in (a) above with those of Dongla Ltd

3.
a) You are presented with the following information in relation to Furaha Ltd. for the year ending 31
December 2024:

CFAF
Net sales 3,000,000
Current liabilities 1,500,000
Debt-assets ratio 0.6
Debts turnover based on net sales 2
Net profit margin 5%
Gross profit margin 25%
Inventory turnover 1.25
Return on total assets 2%

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 Fixed asset turnover 0.8
Corporation tax rates 50%
Required:

Compute the following:

i. Cost of sales.
ii. Receivables.
iii. Net profit.
iv. Closing inventory.
v. Total assets.
vi. Non-current assets.
vii. Long-term debt.
b) Prepare a forecasted statement of profit or loss and statement of financial position for the year
ending 31 December 2024 based on your results in (a) (i) to (a) (vii) above.

4. Sunny Side Ltd. began its operations on 1 July 2022 by raising 52 million CFAF ordinary share
capital and issuing 18% per annum debentures.
The following information was extracted from the books of the company for the year ended 30 June 2023:
a)
Items “000” CFAF
Cash and bank balance 2,500
Operating costs (excluding finance cost) 31,320
Total non-current assets at net book value 60,000
b) The total current assets as at 30 June 2023 consisted of:
i) Trade receivables.
ii) Inventory.
iii) Cash and bank balance.
c) The total current liabilities as at 30 June 2023 consisted of:
iv) Trade payables.
v) Taxation charge for the year.
d) Taxation is to be provided for at the rate of 30% per annum.
e) 20% of the total sales for the year were made in cash.
f) Credit purchases during the year amounted to 28,800,000 CFAF
g) The accountant provided the following ratios which were obtained from the financial statements
of the company:
vi) Inventory turnover 4.4 times
vii) Non-current asset turnover 1.8 times
viii) Gross profit margin 45%
ix) Average debt collection period 84 days
x) Interest covers 4 times
xi) Average credit repayment period 90 days
Required:
a) Income statement for the year ended 30 June 2023.
b) Statement of financial position as at 30 June 2023.
Note: Assume a year has 360 days.
5. Kanga Ltd. expects earnings before interest and tax (EBIT) of 7,500,000 CFAF in the current
financial year. The company pays interest of 8% per annum on a long-term loan of 25,000,000
CFAF.

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The company has 1,200,000 ordinary shares and the corporate tax rate is 30%. The finance manager is
currently examining two options:

Option I: A case where earnings before interest and tax (EBIT) is 20% more than expected.

Option II: A case where earnings before interest and tax (EBIT) is 20% less than expected.

Required:
i. Determine the earnings per share (EPS) under option I and option II and where there is no
change in the expected earnings before interest and tax (EBIT).
ii. Degree of financial gearing for option I and option II.

6. Some of the financial ratios of two companies in Douala are calculated for the year ended
31/12/2023 and are given as follows:
Ratios Company A Company B
Gross profit margin 45% 70%
Net profit margin 30.75% 53%
Current ratio 2.2119 1.30237
Acid-test ratio 1.68104 1.07929
Stock turnover ratio 10 times 8 times
Debtors’ collection period 91.25 days 54.75 days
Additional information:
• The following information was extracted from the books of company A:
- Net profit 61 500 FCFA
- Current asset consisted of stock 11 000 FCFA, Debtors 37 500FCFA and Bank 1
500FCFA
• The opening stock of both companies is equal to the closing stock
• The sales realised by company B is 3 ½ times that of company A
• The current assets of company B sum up to 153 250 FCFA and company B made all its sales on
credit.
Required: Calculate for each company:
(a) Turnover
(b) Gross profit
(c) Current liabilities
(d) Cost of sales

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