Performing ratio analysis

Class Group Exercise (students to work in groups of 3)

The following financial statements were prepared for the management of
MNM Ltd. The statements contain some information that will be
disclosed in note form in the general purpose financial statements to be
issued.

Additional information
1. The balances of certain accounts at the beginning of the year are:

2. Total assets and total equity at the beginning of the year were $387 500
and $190 500 respectively.
3. Income tax expense for the year was $31 500. Net finance expenses
were $3150.
Required
Identify and calculate the ratios that a financial analyst might calculate to
give some indication of the following:
a. the entitys earning ability (ROE ROA Profit Margin Gross Profit Margin)
b. the extent to which internal sources have been used to finance asset
acquisitions (Debt Ratio)
c. the rapidity (how fast) with which accounts receivable are collected
(Days Debtors)
d. the ability of the entity to meet unexpected demands for working
capital (Quick asset ratio)
e. the ability of the entitys earning to cover its interest commitments
(Interest coverage ratio)
f. the length of time taken by the entity to sell its inventories (Days
Inventory).