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Finance Quantitative Worksheets - Profitability and Liquidity Ratios

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153 views3 pages

Finance Quantitative Worksheets - Profitability and Liquidity Ratios

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rebeccapegoraro06
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© © All Rights Reserved
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Worksheet 23

Liquidity & Profitability Ratios (1)

Chim, Loh & Partners Law Firm (CLPL)

Chim, Loh & Partners Law Firm (CLPL) is a regional law firm based in Hong Kong with a wide scope of legal
services, ranging from litigation, dispute resolution, capital markets, tax laws and intellectual property. Their
expertise is in Chinese Law, which is considered a niche product in the current legal industry. The two lead
partners, Jenkin Chim and James Loh are assessing the feasibility in opening a new office in London, UK. They
see market potential to grow their business as more European companies want to work with Chinese companies
but do not have the expertise in Chinese law.

Before approaching their bank, the partners would like to conduct a ratio analysis of their current profitability
position. Selected financial information from CLPL loss account and balance sheet for 2019 and
2020 are shown below (all figures in $ millions):

2019 2020
Fees & billings 1,380 1,040
Cost of client service rendered 720 810
Expenses 345 Y
Net profit before interest and tax X 150
Cash 245 200
Debtors 500 470
Creditors 350 330
Short-term loans 40 20

(a) Calculate the total current assets for CLPL in 2020. [1 mark]

(b) alculate the total current liabilities for CLPL in 2019. [1 mark]

(c) Using the information from the table, calculate the missing figures X and Y (no working
required). [2 marks]

(d) Calculate the change in the gross profit margin from 2019 and 2020 (no working required). [2 marks]

(e) Calculate the change in the net profit margin from 2019 and 2020 (no working required). [2 marks]

(f) Using the quantitative information in the table and your answers in part (d) and (e) above,
comment on CLPL in 2020. [2 marks]

© Level7 Education Limited | H-International School Vicenza | Redistribution is strictly prohibited | Page51
Worksheet 24
Liquidity & Profitability Ratios (2)

Tammer Kitchenware (TK)

Tammer Kitchenware (TK TK stocks the


products in its warehouse. With their strong relationship with the suppliers of KitchenForce, TK often receives
discounts on their bulk purchases, which allows TK to price the products competitively. Adrian, the finance
manager at TK, has provided the following information.

Table 1: Financial information, for TK in 2019 and 2020


2019 2020
Cash $30,000 W
Short-term loan (debt) $20,000 $24,650
Stock (inventory) $33,500 $28,700
Debtor $21,500 $25,000
Creditor $29,750 $31,000
Current ratio X 1.48
Acid test (quick) ratio Z Y
Table 2: Selected profit and loss information, for TK in 2019 and 2020
2019 Changes for 2020 (based on 2019 figures)
Sales revenue A Increased by 5%
Cost of goods sold (COGS) $75,000 Decreased by 10%
Gross profit $145,000
Depreciation $15,650 Increased by $5,100
Advertising $10,000 No change
Rent $80,000 No change

(a) Using the information in Table 1, calculate the current ratio for TK in 2019 (X) (show all
your working). [2 marks]

(b) Using the information in Table 1, calculate the acid-test (quick) ratio for TK in 2019 (Z). [1 mark]

(c) Using the information in Table 1, calculate the amount of cash (W) for TK in 2020 (show all
your working). [2 marks]

(d) Using the information in Table 1, calculate the acid-test (quick) ratio for TK in 2020 (Y). [1 mark]

(e) Calculate the sales revenue figure (A) for TK in 2019. [1 mark]

(f) Calculate the gross profit margin for TK in 2019. [1 mark]

(g) Calculate the net profit margin for TK in 2020 (show all your working). [2 marks]

© Level7 Education Limited | H-International School Vicenza | Redistribution is strictly prohibited | Page53
Worksheet 25
Liquidity & Profitability Ratios (3)

Kaneshige Properties (KP)

Shun Kaneshige is a real estate guru trading as Kaneshige Properties (KP). As the managing director of KP,
Shun manages a portfolio of properties across the city of Bangkok, Thailand. The stocks (inventory) that KP
hold are the real estate properties within real estate portfolio.

KP is planning to open its first overseas office in Singapore in light of the strong uptrends in the property market.
To support their expansion, the local bank in Singapore is asking KP to provide a ratio analysis of their liquidity
and profitability to complement with the final accounts that will be submitted for review. The finance director at
KP has provided the following information for 2019:

Current ratio 2.80


Acid-test (quick) ratio X
Total current liabilities $160m
Debtors Y
Expenses $500m
Total current asset $392m
Sales revenue $1,750m
Stock (inventory) $190m
Net profit before interest and tax $570m
Cash $100m
Capital employed $800m

The industry benchmark for the current ratio and acid-test ratio are between 1.5 to 2 and 1.0 respectively.

(a) Calculate the amount of debtors for KP in 2019 (Y). [1 mark]

(b) Calculate the acid-test (quick) ratio (X) for KP in 2019 (show all your working). [2 marks]

(c) omment on KP s current ratio in 2019. [2 marks]

(d) Calculate the gross profit margin (GPM) for KP in 2019 (show all your working). [2 marks]

(e) Calculate the net profit margin (NPM) for KP in 2019. [1 mark]

(f) Calculate the return on capital employed (ROCE) for KP in 2019. [1 mark]

(g) State one measure of the return on capital (ROCE) figure for KP. [1 mark]

© Level7 Education Limited | H-International School Vicenza | Redistribution is strictly prohibited | Page55

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