A P P E N D I X - A N S W E R S T O E X A M P L E S A N D E N D - O F - C H A P T E R QU E S T IO N S

CHAPTER 17: INTERPRETATION

Answers to chapter 17 examples
Example 1
Profitability
Gross profit margin
2011
60
250

x 100 = 24%

2010
50
150

x 100 = 33%

Operating profit margin

2011
30
250

x 100 = 12%

2010
25
150

x 100 = 17%

x 100 = 4%

2010
15
150

x 100 = 10%

Net profit margin

2011
9
250
Asset turnover
2011
250
(337 + 100)

= 0.57 times

2011
30
(337 + 100)

x 100 = 7%

2010
150
(331 + 50)

= 0.39 times

ROCE
2010
25
(331 + 50)

x 100 = 7%

Liquidity
Current ratio
2011
330
143

= 2.3:1

2010
230
39

= 5.9:1

Quick ratio
2011
(330 - 180)
143

32 6

= 1.05:1

2010
(230 - 100)
39

= 3.3:1

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A P P E N D I X - A N S W E R S T O E X A M P L E S A N D E N D - O F - C H A P T E R QU E S T IO N S

Efficiency
Inventory days
2011
180
190

x 365 = 346 days

2010
100
100

x 365 = 365 days

Receivables days
2011
140
250

x 365 = 204 days

2011
143
190

x 365 = 275 days

2010
80
150

x 365 = 195 days

Payables days
2010
39
100

x 365 = 142 days

Position
Gearing
2011
100
(100 + 337)

x 100 = 23%

2010
50
(50 + 331)

x 100 = 13%

Interest cover
2011
30
15

32 7

= 2 times

2010
25
5

= 5 times

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A P P E N D I X - A N S W E R S T O E X A M P L E S A N D E N D - O F - C H A P T E R QU E S T IO N S

Answers to end-of-chapter 17 questions

Question 1
Gross profit margin
2011
125
500

2010
78
390

x 100 = 25%

x 100 = 20%

Operating profit margin

2011
75
500

2010
40
390

x 100 = 15%

x 100 = 10%

Net profit margin

2011
35
500

2010
15
390

x 100 = 7%

x 100 = 4%

Question 2
ROCE
2011
114
(602 + 284)

x 100 = 13%

2010
92
(552 + 280)

x 100 = 11%

2011
284
(284 + 602)

x 100 = 32%

2010
280
(280 + 552)

x 100 = 34%

= 5.7 times

2010
92
20

Gearing

Interest cover
2011
114
20

32 8

= 4.6 times

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A P P E N D I X - A N S W E R S T O E X A M P L E S A N D E N D - O F - C H A P T E R QU E S T IO N S

Question 3
Current ratio
2011
210
634

0.33:1

2010
142
618

0.23:1

Quick ratio
2011
(210 - 94)
634

0.18:1

2010
(142 - 92)
618

0.08:1

Receivables days
2011
24
2,510

x 365 = 3 days

2010
26
2,440

x 365 = 4 days

Inventory days
2011
94
2,354

2010
x 365 = 15 days

92
2,290

x 365 = 15 days

Payables days
2011
594
2,354

32 9

x 365 = 92 days

2010
546
2,290

x 365 = 87 days

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