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Question 1 – Refer to the 2013 Woolworths financial statements in Appendix 1. 1.1 What were the two major liabilities as at 30 June 2013? 1.2 Calculate the following ratios for Woolworths (consolidated accounts): 2.1Current Ratio 2.2 Quick Ratio 2.3 Gross Profit Margin 2.4 Debt to Equity Question 2 – As an analyst, you have extracted the following information from the accounts of Romeo Construction Co. Ltd. Romeo Construction Co. Ltd Statement of Comprehensive income for the years ended 30 June. 20X4 20X5 20X6 Sales $60,000 $54,000 $75,000 Less Expenses Material $22,500 $21,000 $35,813 Labour $15,000 $13,500 $18,000 Production Expenses $7,500 $6,000 $6,750 Administrative Expenses $7,500 $7,500 $8,250 Finance Expenses $500 $1,500 $1,500 Profit for the year $6,000 $4,500 $4,687 Other Comprehensive Income $0 $0 $0 Total Comprehensive Income $6,000 $4,500 $4,687 Balance Sheet as at 30 June. 20X4 20X5 20X6 Work in progress $60,000 $52,500 $67,500 Non-current assets $30,000 $37,500 $37,500 $90,000 $90,000 $105,000 Bank Overdraft $15,000 $18,000 $12,000 Other current liabilities $15,000 $12,000 $18,000 Shareholder funds $60,000 $60,000 $75,000 $90,000 $90,000 $105,000 Other information All profits have been distributed as dividends each year. The company issued $15,000 of shares in 20X6. Required 2.1 Commence on the profitability of the business. 2.2 Comment on the financial situation of the business. 2.3 What action do you suggest for the coming year? Question 3 – The balance sheets and selected information given below for Katrina Ltd and Catherine Ltd for the year ended 30 June 20X2. KATRINA $ KATRINA $ CATHERINE $ CATHERINE $ Assets Current assets Cash at bank 80,000 220,000 Marketable securities 8,000 190,000 Accounts receivable (net) 100,000 130,000 Merchandise inventory 560,000 300,000 Total current asset 748,000 840,000 Non-current assets Property, plant & equipment 1,200,000 1,280,000 Intangibles 6,000 0 Total non-current asset 1,206,000 1,280,000 Total assets 1,954,000 2,120,000 Liabilities and shareholders’ equity Current Liabilities 180,000 310,000 Non-Current liabilities 340,000 330,000 Paid-up capital ($10 value) 1,300,000 1,300,000 Retained profits 134,000 180,000 Total liabilities and shareholders’ equity 1,954,000 2,120,000 Other information Accounts receivable 1.7.X1 130,000 110,000 Merchandise inventory 1.7.X1 520,000 420,000 X1 – X2 Sales Cash 852,000 400,000 Credit 1,100,000 1,500,.000 X1 – X2 Cost of goods sold 1,200,000 1,100,000 X1 – X2 Net profit 310,000 400,000 X1 – X2 Interest expense 60,000 40,000 Total shareholder’s equity 1.7.X1 1,334,000 1,380,000 Total assets, 1.7.X1 1,854,000 2,020,000 Tax rate: 30% Required: 3.1 Calculate the current ratio, quick ratio, inventory turnover, accounts receivable turnover and average days sales uncollected for each company. 3.2 Which company do you think as a better liquid position? Why? 3.3 Calculate, for each company, the rate of return on total assets (ROA), asset turnover and net profit margin before after – tax cost of interest. Which company has the higher ROA? Why? 3.4 Calculate, for each company, the rate of return on ordinary shareholders’ equity (ROA), asset turnover and net profit margin and financial leverage ratios. Which company has the higher ROE? Why? 3.5 Which company is using leverage more effectively to increase the rate of return to ordinary shareholders? Explain.