Ratio Finla

Task 4(c): Calculate and interpret with writing the financial statements at Appendix I using appropriate ratios. Comparison Comparison should be made with prior year result and externally with Grayline. You should show clearly your working for the computation of ratios. Citiylink Bus Company 2010: Profitability ratios:

(i)Gross profit margin = (Gross profit / Sales x 100) % = (76819 / 172482 x 100) % = 44.54 % (ii)Net profit margin = (Net profit / Sales x 100) % = (464526 / 172482 x 100) % = 269.32 % Liquidity ratios:

(i)Current ratio = Current asset / Current liability = 1963366 / 91767 = 21.4 : 1 (ii)Acid test ratio = (Current asset  –  Inventory) / Current liability = (1963366  –  1318991) / 91767 = 644375 / 91767 = 7.02 : 1

Efficiency ratios:

(i)Debtors collection period = (Total debtors / Credit sales) x 365 Days = (2211 / 172482) x 365 Days = 4.68 Days or 5 Days (ii)Creditors payment period = (Total creditors/Credit purchase)x 365 Days = (88056 / 95663) x 365 Days = 335.98 Days or 336 Days Gearing ratios:

(i)Debt to asset = (Total liabilities / Total assets x 100) % = {(3129233+1963366) / (91767+622078) x 100} % = (5092599 / 713845 x 100) % = 713.4 % (ii)Debt to equity = (Total debt / Total equity x 100) % = {(3129233+1963366) / 4378754 x 100} % = (5092599 / 412590 x 100) % = 1234.3 % Investment ratios:

(i)Return on equity = (Net income / Equity x 100) % = (464526 / 4378754 x 100) % = 10.61 %

(ii)Return on investment = {Net income / (Equity + Long term liabilit y) x 100} % = {464526 / (4378754+622078) x 100} % = (464526 / 5000832 x 100) % = 9.29 %

Citiylink Bus Company 2011: Profitability ratios:

(i)Gross profit margin = (Gross profit / Sales x 100) % = (83225 / 191597 x 100) % = 43.44 % (ii)Net profit margin = (Net profit / Sales x 100) % = (332473 / 191597 x 100) % = 173.53 % Liquidity ratios:

(i)Current ratio = Current asset / Current liability = 2337585 / 415847 = 5.62 : 1 (ii)Acid test ratio = (Current asset  –  Inventory) / Current liability = (2337585  –  1524230) / 415847 = 813355 / 415847 = 1.96 : 1

Efficiency ratios:

(i)Debtors collection period = (Total debtors / Credit sales) x 365 Days = (34479 / 191597) x 365 Days = 65.68 Days or 66 Days (ii)Creditors payment period= (Total creditors/Credit purchase) x 365 Days = (411224 / 108372) x 365Days = 1385.01 Days or 1385 Days Gearing ratios:

(i)Debt to asset = (Total liabilities / Total assets x 100) % = {(415847+608305) / (3297486+2337585) x 100} % = (1024152 / 5635071 x 100) % = 18.17 % (ii)Debt to equity = (Total debt / Total equity x 100) % = {(415847+608305) / 4610919 x 100} % = (1024152 / 4610919 x 100) % = 22.21 % Investment ratios:

(i)Return on equity = (Net income / Equity x 100) % = (332473 / 4610919 x 100)% = 7.21 %

(ii)Return on investment = {Net income / (Equity + Long term liabilt y) x 100} % = {332473 / (4610919+608305) x 100} % = (332473 / 5219224 x 100) % = 6.37 %

Grayline 2011: Profitability ratios:

(i)Gross profit margin = (Gross profit / Sales x 100) % = (626479 / 1483762 x 100) % = 42.22 % (ii)Net profit margin = (Net profit / Sales x 100) % = (274261 / 1483762 x 100) % = 18.48 % Liquidity ratios:

(i)Current ratio = Current asset / Current liability = 2946353 / 585732 = 5.03 : 1 (ii)Acid test ratio = (Current asset  –  Inventory) / Current liability = (2946353  –  2024153) / 585732 = 922200 / 585732 = 1.57 : 1

Efficiency ratios:

(i)Debtors collection period = (Total debtors / Credit sales) x 365 Days = (558874 / 1483762) x 365 Days = 137.48 Days or 137 Days (ii)Creditors collection period = (Total creditors / Credit purchase) x 365 Days = (516948 / 857283) x 365 Days = 220.10 Days or 220 Days Gearing ratios:

(i)Debt to asset = (Total liabilities / Total assets x 100) % = {(585732+575848) / (2818804+2946353) x 100) % = (1161580 / 5765157 x 100) % = 20.15 % (ii)Debt to equity = (Total debt / Total equity x 100) % = {(585732+575848) / 4603577 x 100} % = (1161580 / 4603577 x 100) % = 25.23 % Investment ratios:

(i)Return on equity = (Net income / Equity x 100) % = (274261 / 4603577 x 100) % = 5.96 %

(ii)Return on investment = {Net income / (Equity + Long term liabilit y) x 100} % = {274261 / (4603577+575848) x 100} % = (274261 / 5179425 x 100) % = 5.30 %