Developed by O.
Chakabva
RATIOS
Debt ratio
Current ratio
Acid test ratio
Gross profit percentage
Fixed asset turnover
Interest cover
QUESTION 1
Statement of comprehensive income of Oskido Ltd for the year ended 31 December 2018
R
Sales 3 782 000
Cost of sales (2 571 760)
Gross profit 1 210 240
Operating expenses (644 648)
Operating profit 565 592
Other income 92 720
Profit before interest expense and taxation 658 312
Interest expense (91 500)
Profit before taxation 566 812
Taxation (150 792)
Profit after taxation 416 020
Statement of financial position of Oskido Ltd as at 31 December 2018
2018 2017
R R
Assets
Non-current assets
Property, plant and equipment 2 025 200 2 305 800
Other investments 305 000 244 000
Current assets
Inventory 976 000 1 525 000
Trade and other receivables 622 200 457 500
Cash and cash equivalent 97 600 0
Total assets 4 026 000 4 532 300
Equity and liabilities
Equity and reserves
Ordinary share capital 1 220 000 1 220 000
Retained profit 1 085 800 805 200
Non-current liabilities
Interest-bearing borrowings 610 000 488 000
Current liabilities
Trade and other payable 1 061 400 1 311 500
Current tax payable 48 800 36 600
Bank overdraft 0 671 000
Total equity and liabilities 4 026 000 4 532 300
Additional information
• Inventory and purchases are the only components of cost of sales for the year
ended 31 December 2018. Cash purchases were R509 960.
• Cash sales for 2018 were R793 000.
• No ordinary dividends were paid during the year ended 31 December 2018.
• Assume 365 working days per annum.
Required:
Calculate the following ratios for 2018:
4.1 Current ratio (2½)
4.2 Acid test ratio (2½)
4.3 Gross profit percentage (3½)
4.4 Fixed asset turnover (4½)
4.5 Interest cover (3½)
4.6 Debt ratio (3½)
Current ratio
Current assets
Current liabilities
= 1 695 800= 1.53:1
1 110 200
Acid test ratio
Current assets – inventory
Current liabilities
= 1 695 800-976 000
1 110 200
719 800= 0.65:1
1 110 200
Gross profit percentage
Gross profit/sales*100
1 210 240/3 782 000*100= 32%
Fixed asset turnover
Sales/fixed assets
3 782 000/2 025 200 = 1.87times
Interest cover
Net profit before interest and tax
Interest expense
= 658 312=7.2 times
91 500
Debt ratio
Total debts/total assets*100
1 720 200/4 026 000*100=
42.73%
