Metro Co. is applying for a loan from the Astute Bank in order to invest in several projects. In order to evaluate the firm as a potential debtor, the bank would like to compare Metro Co. performance with the industry. The following are the financial statements given to the Astute Bank.
Statement of Financial Position as at 31 December 2019
RM
(‘000)
RM
(‘000)
Assets
Liabilities & Owner’s Equity
Cash
305
Accounts payable
150
Accounts receivable
275
Notes payable
125
Inventory
600
Current liabilities
275
Current assets
1,180
Bonds
500
Plant and equipment
1,700
Common stock
165
Less: Acc. depreciation
(500)
Net Plant and equipment
1,200
Paid in capital
775
Retained earnings
665
Total assets
2,380
Total Liabilities & Equity
2,380
Statement of Profit or Loss for the year ended 31 December 2008
RM
(‘000)
Sales (100% credit)
1,100
Less: Cost of goods sold
600
Gross profit
500
Operating expenses
20
Depreciation
160
Net operating income
320
Interest expenses
63
Net income before taxes
256
Taxes
87
Net income
169
Ratios
Industry
average
Ratios
Industry
average
Current ratio
5.0 times
Total assets turnover
0.75 times
Acid test ratio
3.0 times
Fixed assets turnover
1.0 times
Average collection period
90 days
Operating profit margin
20%
Debt ratio
33%
Return on total assets
9%
Times interest earned
7.0 times
Return on equity
10.43%
You are required to:
Calculate the current ratio, debt ratio, times interest earned, operating profit margin and average collection period.
Based on your answer in (a), summarize your findings in comparative analysis. (Note: Compare your answer with industry average ratio)
Do you think it is advisable for Astute Bank to offer the loan to the company? Justify.
Note: dear sir don't give hand writing , thank you