Question

Passion Garments Trading LLCis a garment company, located in Muscat, which consists primarily of much smaller garment makers. Passion Garments Trading LLC was started 8 years ago by Ahmed and Salim, who has over 16 years of experience with a major garment manufacturer. And the partnership initially blended very well. Ahmed is extremely creative with a real talent for merchandising. Mainly as a result of his knowledge, the Passion Garments Trading LLC is known for its quality and “in” fashions. Salim has contributed to merchandising and marketing ideas, but has mainly assumed the duties of the firm’s chief operating officer. Ahmed has had little interest in the financial aspects of the company as he preferred to work on fashion designing and development of marketing strategies. A few months ago, however, he decided that he had better become more involved with the company’s financials. Ahmed want to analyse the financial statement of the company to know the current financial performance and positions of the company. The following are the financial details of the Passion Garments Trading LLC Balance Sheet of Passion Garments Trading LLC– 2018 Liabilities OMR Assets OMR Equity share capital 51,040 Cash in hand 5,500 Loan from Bank 6,479 Account Receivables 2,200 Preference share capital 11,550 Inventory 4,730 Bank overdraft 935 Cash in bank 9,350 Long term borrowings 13,464 Prepaid expenses 1,650 Reserves and surplus 4,510 Income earned but not received 924 Accounts Payable 2,750 Marketable securities 1,650 Notes Payable 1,870 Bills receivables 6,050 Outstanding Salaries 990 Land 17,600 Tax outstanding 550 Building 14,300 0 Furniture 4,400 0 Cars & Trucks 7,150 0 Machinery 13,750 0 Equipment 4,884 Total 94,138 Total 94,138 Extracts of Income statement Passion Garments Trading LLC– 2018 Particulars OMR Sales 189,607 Cost of goods sold 100,346 Administration expenses 12,446 Selling & Distribution exp. 9,335 Interest received on debentures 2,236 Income from rent 603 Commission received 825 As a Finance Manager of the company you are required to: Requirement : 1 Calculate the following from the Balance Sheet: Marks A Total fixed assets 1.5 B Total long term liabilities 1.5 C Total current assets 1.5 D Total current liabilities 1.5 E Liquid assets & Liquid Liabilities 1.5 F Shareholders’ funds 1.5 G Capital employed 1.5 H Net Working capital 1.0 Requirement : 2 Calculate the following from the Income Statement: Marks I Gross profit 1.0 J Net profit 1.5 Requirement : 3 Calculate the following ratios: Marks K Return on capital employed 1.0 L Current ratio 1.0 M Liquid ratio 1.0 N Debt equity ratio 1.0 O Capital turnover ratio 1.0 P Fixed assets turnover ratio 1.0 Q Working capital turnover ratio 1.0 R Administration expenses ratio 1.0 S Selling and distribution expenses ratio 1.0 T Gross profit ratio 1.0 U Net profit ratio 1.0

Answer 1

Follow the below explanations,

1. Salim has contributed to merchandising and marketing ideas, but has mainly assumed the duties of the firm’s chief operating officer.
2. Ahmed has had little interest in the financial aspects of the company as he preferred to work on fashion designing and development of marketing strategies.
3. A few months ago, however, he decided that he had better become more involved with the company’s financials.
4. Ahmed want to analyse the financial statement of the company to know the current financial performance and positions of the company.
5. The following are the financial details of the Passion Garments Trading LLC Balance Sheet.