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Homework answers / question archive / Selected financial data of two intense competitors in a recent year are presented here (in millions) ABC LTD XYZ LTD   STATEMENT OF PROFIT OR LOSS DATA   Net sales ABC $40 000 XYZ $82 000   Cost of sales ABC (32 000) XYZ (65 000)   Selling and administrative expenses ABC (7 200) XYZ (13 000)   Finance expense ABC -600 XYZ (1 000)   Gain on sale of equipment 800 200   Income tax expense   (300)   (1 200)   Profit $700 $2 000     STATEMENT OF FINANCIAL POSITION DATA (END-OF-YEAR)   Current assets $11 000 $11 000   Property, plant and equipment (net) 9 000 17 481   Total assets $20 000 $28 481   Current liabilities $5 500 $9 000   Non-current liabilities 8 200 11 000   Total equity   6 300   8 481   Total liabilities and equity $20 000 $28 481     BEGINNING-OF-YEAR BALANCES   Total assets $17 504 $26 441   Current liabilities 5 698 9 981   Total equity 6 093 10 753     OTHER DATA   Average net receivables $5 500 $2 200   Average inventory 5 000 8 000   Net cash provided by operating activities 1 000 2 500         Required:   a

Selected financial data of two intense competitors in a recent year are presented here (in millions) ABC LTD XYZ LTD   STATEMENT OF PROFIT OR LOSS DATA   Net sales ABC $40 000 XYZ $82 000   Cost of sales ABC (32 000) XYZ (65 000)   Selling and administrative expenses ABC (7 200) XYZ (13 000)   Finance expense ABC -600 XYZ (1 000)   Gain on sale of equipment 800 200   Income tax expense   (300)   (1 200)   Profit $700 $2 000     STATEMENT OF FINANCIAL POSITION DATA (END-OF-YEAR)   Current assets $11 000 $11 000   Property, plant and equipment (net) 9 000 17 481   Total assets $20 000 $28 481   Current liabilities $5 500 $9 000   Non-current liabilities 8 200 11 000   Total equity   6 300   8 481   Total liabilities and equity $20 000 $28 481     BEGINNING-OF-YEAR BALANCES   Total assets $17 504 $26 441   Current liabilities 5 698 9 981   Total equity 6 093 10 753     OTHER DATA   Average net receivables $5 500 $2 200   Average inventory 5 000 8 000   Net cash provided by operating activities 1 000 2 500         Required:   a

Accounting

Selected financial data of two intense competitors in a recent year are presented here (in millions)

ABC LTD

XYZ LTD

 

STATEMENT OF PROFIT OR LOSS DATA

 

Net sales

ABC $40 000

XYZ $82 000

 

Cost of sales

ABC (32 000)

XYZ (65 000)

 

Selling and administrative expenses

ABC (7 200)

XYZ (13 000)

 

Finance expense

ABC -600

XYZ (1 000)

 

Gain on sale of equipment

800

200

 

Income tax expense

  (300)

  (1 200)

 

Profit

$700

$2 000

 

 

STATEMENT OF FINANCIAL POSITION DATA (END-OF-YEAR)

 

Current assets

$11 000

$11 000

 

Property, plant and equipment (net)

9 000

17 481

 

Total assets

$20 000

$28 481

 

Current liabilities

$5 500

$9 000

 

Non-current liabilities

8 200

11 000

 

Total equity

  6 300

  8 481

 

Total liabilities and equity

$20 000

$28 481

 

 

BEGINNING-OF-YEAR BALANCES

 

Total assets

$17 504

$26 441

 

Current liabilities

5 698

9 981

 

Total equity

6 093

10 753

 

 

OTHER DATA

 

Average net receivables

$5 500

$2 200

 

Average inventory

5 000

8 000

 

Net cash provided by operating activities

1 000

2 500

 

 

 

 

Required:

 

a.   For each entity, calculate the following: (6 marks)

 

  1. Current ratio.
  2. Receivables turnover.
  3. Average collection period.
  4. Profit margin.
  5. Return on assets.
  6. Debt to total assets ratio.

 

(Hint: Use beginning of year information provided to calculate beginning of year balance for total liabilities.)

 

b.   Use the ratios that you calculated in (a) to compare the two entities. What is you finding from the comparison 

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A.) Please find Attached.

B.) 

Current ratio and turnover ratios are liquidity ratio. XYZ has better liquidity if collection period is considered whereas current ratio of ABC is very ideal.

The debt equity structure is quite similar.

Profit margin is of XYZ is better than ABC ltd.