Rafiki Hardware Tools Company Limited sells plumbing fixtures on terms of 2/10 net 30. Its financial statements for the last three years are as follows:
1998
Sh.’000’ 1999
Sh.’000’ 2000
Sh.’000’
Cash
Accounts receivable
Inventory
Net fixed assets
Accounts payable
Accruals
Bank loan, short term
Long term debt
Common stock
Retained earnings
Additional information:
Sales
Cost of goods sold
Net profit 30,000
200,000
400,000
800,000
1,430,000
230,000
200,000
100,000
300,000
100,000
500,000
1,430,000
4,000,000
3,200,000
300,000 20,000
260,000
480,000
800,000
1,560,000
300,000
210,000
100,000
300,000
100,000
550,000
1,560,000
4,300,000
3,600,000
200,000 5,000
290,000
600,000
800,000
1,695,000
380,000
225,000
140,000
300,000
100,000
550,000
1,695,000
3,800,000
3,300,000
100,000
Required:
(a) For each of the three years, calculate the following ratios:
Acid test ratio, Average collection period, inventory turnover, Total debt/equity, Net profit margin and return on assets. (12 marks)
(b) From the ratios calculated above, comment on the liquidity, profitability and gearing positions of the company. (8 marks)
(Total: 20 marks)
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