374 Accounting: Business Reporting for Decision Making
MNM Ltd
Statement of profit or loss for the year ended 30 June 2016Sales revenue
Cost of sales$ 462 500
307 500
Gross profit
Expenses (including tax and finance)155 000
80 000
Profit $ 75 000MNM Ltd
Balance sheet as at 30 June 2016
Current assets
Cash assets
Receivables (all trade)
Less: Allowance for doubtful debts$ 149 625
9 450$ 18 900140 175
Inventories 126 000
Total current assets 285 075
Non-current assets
Land
Building
Less: Accumulated depreciation113 000
18 90031 50094 100
Store equipment
Less: Accumulated depreciation23 625
13 625 10 000
Total non-current assets 135 600
Total assets 420 675
Current liabilities
Payables (all trade)
Income tax payable
Other135 450
14 490
6 300
Total current liabilities 156 240
Non-current liabilities
10% mortgage payable 31 500
Total liabilities 187 740
Equity
Contributed capital: 6% preference shares
Ordinary shares
Retained earnings25 000
126 000
81 935
Total equity 232 935
Liabilities and equity $ 420 675Additional information- The balances of certain accounts at the beginning of the year are as follows.
Accounts receivable (gross)
Allowance for doubtful debts
Inventories$157 500
(14 175
110 250)- Total assets and total equity at the beginning of the year were $387 500 and $190 500 respectively.
- Income tax expense for the year was $31 500. Net finance expenses were $3150.
Required
Identify and calculate the ratios that a financial analyst might calculate to give some indication of
the following:
a. the entity’s earning ability
b. the extent to which internal sources have been used to finance asset acquisitions