Accounting Business Reporting for Decision Making

(Ron) #1
CHAPTER 8 Analysis and interpretation of financial statements 367

Compre Ltd
Balance sheet

2017 2016

Property, plant and equipment
Agricultural assets
Intangible assets
Deferred tax assets
Other non-current assets

3 232
20 612
0
20
40

9 200
59 910
1 563
47
0

Total non-current assets 24 109 70 980

Total assets 27 944 78 516

Current liabilities
Payables
Interest-bearing liabilities
Current tax liabilities
Provisions

943
2 730
1 138
1 430

3 872
1 158
1 216
278

Total current liabilities 6 241 6 524

Non-current liabilities
Interest-bearing liabilities
Deferred tax liabilities
Provisions

7 541
409
1

26 657
757
1

Total non-current liabilities 7 951 27 415

Total liabilities 14 192 33 939

Net assets $ 13 752 $ 44 577

Shareholders’ interest
Contributed equity
Reserves
Retained earnings

10 144
1 104
2 504

35 655
1 745
7 177

Total equity $ 13 752 $ 44 577

8.28   LO5


Coconut Plantations Pty Ltd’s financial records reveal the following at 30 June 2018.


Net sales (all credit)
Cost of sales
Accounts receivable — beginning
Accounts receivable — ending
Inventory — beginning
Inventory — ending

$1 675 000
1 025 000
93 010
145 000
175 000
170 000

a. Assuming a 365-day year, calculate the days inventory ratio. Interpret and explain this ratio.
b. Coconut Plantations Pty Ltd proposes to improve control of inventory and to further reduce
days inventory levels by five days. If this is achieved, calculate how many times inventory
would be turned over per annum. Estimate by how much the average inventory would need to
be reduced.
c. Assuming a 365-day year, calculate the days debtors ratio. Interpret and explain this ratio.
d. Advise Jo Geter, the sole shareholder of Coconut Plantations Pty Ltd, what actions can be taken
to improve collections from debtors.
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