Quiz 2 (2)
Quiz 2 (2)
Quiz 2 (2)
Kandid Kovert
$000 $000
Revenue 25,000 40,000
Cost of sales (19,000) (32,800)
Gross profit 6,000 7,200
Distribution and administrative expenses (1,250) (2,300)
Finance costs (250) (900)
Profit before tax 4,500 4,000
Income tax expense (900) (1,000)
Profit for the year 3,600 3,000
FR: FINANCIAL REPORTING
2,000 4,200
Notes
Carrying value of plant:
Kandid Kovert
$000 $000
Owned plant – cost 8,000 10,000
Less government grant (2,000)
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6,000
Accumulated depreciation (1,200) (8,000)
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4,800 2,000
Right-of-use asset – initial value nil 8,000
The following ratios have been calculated:
Kandid Kovert
Return on year-end capital employed (ROCE) 62.5%
Net asset (taken as same figure as capital 3.3times
Gross profitturnover
employed) margin 24.0%
Profit margin (before interest and tax) 19.0%
Current ratio 2.4:1
Closing inventory holding period 31 days
Trade receivables collection period 31 days
Trade payables payment period (using cost of 24 days
Gearing
sales) (debt/(debt + equity)) 65.8%
Required:
Calculate the missing ratios for Kovert. All lease liabilities are treated as debt,
and profit before interest and tax should be used for the calculation of return on
capital employed. (4 marks)
Using the above information, assess the relative performance and financial
position of Kandid and Kovert for the year ended 30 September 20X5 in order to
assist the directors of Xpand to make an acquisition decision. (6 marks)