Q1.

The following is data of two shops:

Brandy’s Candy Lyla’s Burger

($000) $(000)
Total Current Assets 2,500 1,800
Total Current Liabilities 1,000 1,200
Accounts Receivable 1,250 600
Inventory 1,100 550
Sales Revenue 8,000 6,000
Cost of Goods Sold 6,000 4,920
Net Profit 420 250

Perform the necessary ratio calculations that you as an analyst can use to discuss the
profitability and the liquidity of the two shops; which of the two shops will likely have better
profitability and liquidity in the long run?

Q2.

Tobesco Corporation
2020 and 2021 Balance sheets (in millions)

2020 2021 Change

Assets
Current assets
Cash 84 146 62
Accounts receivable 165 188 23
Inventory 393 422 29
Total current assets 642 756 114
Non-current assets
Net plant and equipment 2731 2880 149
Total assets 3373 3636 263
Liabilities and Owners' Equity
Current Liabilities
Accounts payable 312 344 32
Notes payable 231 196 -35
Total current liabilities 543 540 -3
Non-current Liabilities
Bank loan 531 457 -74
Total liabilities 1074 997 -77
Owners' equity
Common stock and paid-in surplus 500 550 50
Retained earnings 1799 2089 290
Total owners' equity 2299 2639 340
Total liabilities and owner's equity 3373 3636 263

Tobesco Corporation
2021 Income Statement (in millions)

Sales 2311
Cost of goods sold (1,344)
Gross profit 967
SG&A (40)
Other operating expenses (40)
EBITDA 887
D&A (276)
EBIT 611
Interest income 76
Interest expense (141)
Other income 10
Other expense (5)
Profit before tax 551
Tax expense (21%) (116)
Net profit after tax 435
Dividend 145
Retained eanrings 290

Note:
Net Operating Working Capital (NOWC) = OCA - OCL
NOWC excludes cash & marketable securities and interest bearing liabilities
Net Long Term Assets = LT Assets - LT Liabilities
Net Debt = interest bearing debt - cash
Net Interest Expense After Tax = (Interest Expense - Interest Income) x (1-tax)
NOPAT = Net operating income + net interest expense after tax

Using the income statement and balance sheet, and formulas provided you are required to;
a. prepare a condensed financial statement as part of evaluating the business of Tobesco
Corporation.
b. Evaluate Tobesco Corporation's level of working capital to support sales growth.

Q3.
JB Hi-Fi is a leading Australian retailer of consumer electronics and home entertainment
goods. Use the following data for 2018 and 2019 to forecast revenue, cost of sales, end-of-
year inventory for 2020. Assume that JB Hi-Fi’s revenue growth rate, gross profit margin and
inventory turnover will be the same as 2019.

Q4.
The following ratios have been calculated for Alex Stubbs Pty Ltd, an entity specialising in
imported exotic perfumes.

U 2012 2013
Current ratio 2.1:1 2.6:1
Acid test ratio 1:8 2.2:1
Days inventory on hand 122 127
Days debtors outstanding 30 46
Profit margin 10% 12.2%
(a) What do these ratios indicate about the entity’s liquidity, management efficiency and
profitability?
(b) What other information would be useful in analysing Alex’s business?

Q5.
Alexis Ltd
Income Statement
for the year ended 30 June … 2021 2022
$,000 $,000
Revenue 3,240 3,880
Interest income 10 20
Total income 3,250 3,900
Expenses:
Cost of sales -1,745 -2,270
Depreciation - PPE -50 -50
Interest expense -45 -50
Salaries -160 -180
Total expenses -2,000 -2,550
Earnings before tax 1,250 1,350
Tax -450 -480
Profit 800 870

Alexis Ltd
Balance Sheet
as at 30 June … 2021 2022
$,000 $,000
Cash 140 135
Accounts Receivable 240 275
Inventory 300 410
Total Current asset 680 820
Property Plant and Equipment 800 880
Total Asset 1,480 1,700
Accounts Payable 260 350
Notes payable 0 70
Total Current Liabilities 260 420
Long-term bank loan 600 400
Total Liabilities 860 820
Net Asset 620 880
Share capital 500 500
Retained earnings 120 380
Total shareholders’ equity 620 880

a. Using ratio analysis, comment on the liquidity, management efficiency and

profitability of Alexis Ltd.

Note:
Net Operating Working Capital (NOWC) = OCA -
OCL
NOWC excludes cash & marketable securities and interest-bearing liabilities
Net Long Term Assets = LT Assets - LT Liabilities
Net Debt = interest bearing debt - cash
Net Interest Expense After Tax = (Interest Expense - Interest Income) x (1-
tax)
NOPAT = Net operating income + net interest expense after tax

b. Using the income statement and balance sheet of Alexis Ltd, and the formulas
provided you are required to;
i. prepare a condensed financial statement as part of evaluating the business of
Alexis Ltd.