Case Study Question

Total Marks:2+2+2+2+2+10+10=30
Sadman-AQA-07

XYZ Retailers, a leading retail chain, is currently undergoing a financial review to assess
its performance and make informed decisions for the upcoming fiscal year. As a
financial consultant, you have been tasked with evaluating the company's financial
performance using specific ratios: current ratio, Return on Capital Employed (ROCE),
inventory turnover, accounts receivable days, and accounts payable days. Analyze the
financial data for the last two fiscal years (Year 1 and Year 2) to provide valuable
insights and recommendations.

Year 1:

Current Assets for Year 1: $800,000

Current Liabilities for Year 1: $600,000
Total Assets for Year 1: $2,000,000
Total Capital Employed for Year 1: $1,200,000
Net Profit for Year 1: $150,000
Inventory for Year 1: $200,000
Cost of Goods Sold for Year 1: $600,000
Accounts Receivable for Year 1: $120,000
Accounts Payable for Year 1: $80,000
Total Sales Year 1 : $600,000
Year 2:

Current Assets for Year 2: $900,000

Current Liabilities for Year 2: $700,000
Total Assets for Year 2: $2,200,000
Total Capital Employed for Year 2: $1,300,000
Net Profit for Year 2: $180,000
Inventory for Year 2: $250,000
Cost of Goods Sold for Year 2: $650,000
Accounts Receivable for Year 2: $130,000
Accounts Payable for Year 2: $90,000
Total Sales Year 2 : $600,000

Part I

Calculate and analyze the current ratio for Year 1 and Year 2. Discuss the implications
of the current ratio on XYZ Retailers' short-term liquidity and ability to meet its current
liabilities.

Compute and assess the ROCE for Year 1 and Year 2. Evaluate the efficiency with which
XYZ Retailers utilizes its capital and the profitability of its investments.

Calculate and analyze the inventory turnover ratio for both Year 1 and Year 2. Examine
XYZ Retailers' ability to manage and sell its inventory efficiently.

Determine the accounts receivable days for Year 1 and Year 2. Assess the company's
effectiveness in collecting outstanding receivables and managing credit.

Calculate the accounts payable days for Year 1 and Year 2. Analyze how quickly XYZ
Retailers pays its suppliers and the impact on working capital.

Based on your analysis of these specific ratios, provide recommendations to XYZ

Retailers' management on areas for improvement and financial strategies to enhance
the company's financial health and performance. Additionally, consider industry
benchmarks and external factors that might influence your recommendations.
 Part II

Perform a SWOT analysis for ABC Electronics based on the financial data and ratios
provided for Year 1 and Year 2.

Conduct a comprehensive SWOT (Strengths, Weaknesses, Opportunities, Threats)

analysis of ABC Electronics' financial performance. Identify and discuss the company's
financial strengths and weaknesses as revealed by the ratios and financial data.
Additionally, examine any potential opportunities and threats that can be inferred from
the financial information. How can the company leverage its strengths and address its
weaknesses to seize opportunities and mitigate threats?

Use the financial data and ratio analysis results to inform your SWOT analysis. This will
provide a holistic view of the company's financial situation and the external factors that
may impact its performance
 HELP!
Current Ratio for Year 1 and Year 2:
Year 1: Current Ratio = Current Assets / Current Liabilities
Year 2: Current Ratio = Current Assets / Current Liabilities

ROCE for Year 1 and Year 2:

Year 1: ROCE = (Net Profit for Year 1 / Total Capital Employed for Year 1) * 100
Year 2: ROCE = (Net Profit for Year 2 / Total Capital Employed for Year 2) * 100

Inventory Turnover for Year 1 and Year 2:

Year 1: Inventory Turnover = Cost of Goods Sold for Year 1 / Average Inventory for Year
1
Year 2: Inventory Turnover = Cost of Goods Sold for Year 2 / Average Inventory for Year
2

Accounts Receivable Days for Year 1 and Year 2:

Year 1: Accounts Receivable Days = (Accounts Receivable for Year 1 / Total Sales for
Year 1) * 365
Year 2: Accounts Receivable Days = (Accounts Receivable for Year 2 / Total Sales for
Year 2) * 365

Accounts Payable Days for Year 1 and Year 2:

Year 1: Accounts Payable Days = (Accounts Payable for Year 1 / Cost of Goods Sold for
Year 1) * 365
Year 2: Accounts Payable Days = (Accounts Payable for Year 2 / Cost of Goods Sold for
Year 2) * 365