Statement of Financial Position as at 31st December, 2019
Olamide Ltd Kofi Ltd
Assets
Non current Assets (note 1) 9400 7500
Current Assets
Inventory 2000 2400
Trade Receivables 2400 3700
Bank 600 1200
5000 7300
Total Assets 14400 14800
Equity & Liabilities
Equity
Stated Capital ($1 each) 2000 2000
Retained Earnings 3500 800
5500 2800
Non Current Liability
7% Debenture 4800 6300
Current Liabilities
Bank Overdraft 400 1700
Trade Payables 3100 3800
Taxation
600
200
4100
5700
Total Equity & Liabilities 14400 14800
Statement of Comprehensive Income for the year ended 31st December, 2019
Olamide Ltd Kofi Ltd
$000 $000
Revenue 12000 20500
Cost of Sales 10500 17000
Gross Profit 1500 3500
Operating Expenses 240 500
Operating Profit 1260 3000
Finance Cost 210 600
Profit before tax 1050 2400
Tax Expense 150 400
Profit after tax 900 2000
Dividend paid for the year 250 700
Note that there were no disposals of plant during the year by either company.
With reference to the case study above. You are required to calculate for Kofi and Olamide Limited, two ratios of significance to:
(i) Management.
(ii) Creditors.
(iii) Shareholders.
(iv) Comment on the profitability ratios, liquidity ratios and efficiency ratios calculated between Kofi Limited and Olamide Limited for the period under review.
(v) Explain three (3) advantages for using ratio analysis.
(vi) Explain two (2) disadvantages associated with the use ratio analysis.