solution
solution.
- The following financial statements relate to Al-Husan Company, which operates a wholesale carpet business:
Balance sheet as at 31 March, 2019
|
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2018 OMR |
2019 OMR |
|
Non-current assets |
||
|
Land and building |
381,000 |
427,000 |
|
Fixtures and fittings |
129,000 |
160,000 |
|
510,000 |
587,000 |
|
|
Current assets |
||
|
Inventories |
300,000 |
406,000 |
|
Account receivables |
240,000 |
273,000 |
|
Cash at bank |
4,000 |
0 |
|
544,000 |
679,000 |
|
|
Total assets |
1,054,000 |
1,266,000 |
|
Equity and liabilities |
||
|
Equity |
||
|
OMR 0.50 ordinary shares |
300,000 |
300,000 |
|
General reserve |
263,000 |
234,000 |
|
563,000 |
534,000 |
|
|
Non-current liabilities |
||
|
Long-term bank loan |
200,000 |
300,000 |
|
Current liabilities |
||
|
Account payables |
261,000 |
354,000 |
|
Bank overdraft |
30,000 |
78,000 |
|
291,000 |
432,000 |
|
|
Total equity and liabilities |
1,054,000 |
1,266,000 |
Income statement for the year ended 31 March, 2019
|
2018 OMR |
2019 OMR |
|
|
Net sales |
2,240,000 |
2,681,000 |
|
Cost of goods sold |
(1,745,000) |
(2,272,000) |
|
Gross profit |
495,000 |
409,000 |
|
Operating expenses |
(252,000) |
(362,000) |
|
Operating profit |
243,000 |
47,000 |
|
Interest paid |
(18,000) |
(32,000) |
|
Profit before taxation |
225,000 |
15,000 |
|
Taxation |
(60,000) |
(4,000) |
|
Net Profit |
165,000 |
11,000 |
Notes:
- The market value of the shares of the business at the end of the reporting period was OMR 2.50 for 2018 and OMR 1.50 for 2019.
- All sales and purchases are made on credit.
- The cost of goods sold figure can be analyzed as follows:
|
2018 OMR |
2019 OMR |
|
|
Opening inventory |
241,000 |
300,000 |
|
Purchases |
1,804,000 |
2,378,000 |
|
2,045,000 |
2,678,000 |
|
|
Closing inventories |
(300,000) |
(406,000) |
|
Cost of goods sold |
1,745,000 |
2,272,000 |
- At 31 March 2017, the trade receivables stood at OMR 223,000 and the trade payables at OMR 183,000.
- A dividend of OMR 40,000 had been paid to the shareholders in respect of each of the years.
Required:
- Choose and calculate any four ratios that would be helpful in assessing the performance of Al-Husan Company. Use end-of-year values and calculate ratios for both 2018 and 2019.
- Compute the number of days in the cash conversion cycle for each year.
- Did the company manage cash more effectively in the current year? Explain.
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