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Accounting Assignment - Sondiak Ltd

   

Added on  2020-10-04

6 Pages1360 Words58 Views
Accounting1
Accounting Assignment - Sondiak Ltd_1
TABLE OF CONTENTS1. Calculating ratios of Sondiak Ltd for the year ended on 2017................................................1QUESTION 2..................................................................................................................................2a. Stating whether employees are considered as assets for the firm and need to be include inbalance sheet................................................................................................................................2b. Stating the manner in which accounting information aid in economic decision.....................2c. Indicating the effect of business transactions on financial statements....................................22
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1. Calculating ratios of Sondiak Ltd for the year ended on 2017ParticularsSondiak LtdIndustry averageRate of return on total assets27%22%Rate of return on ordinaryequity33.04%20%Operating profit margin14.2%4%Earnings per share$0.74$0.45Price-earnings ratio15.512.0Dividend yieldEquity: 5.8%Preference: 5.2%5%Dividend payout62.7%70%Current ratio2.20:12.5:1Quick ratio (acid ratio).99:11.3:1Average Settlement period forAccounts Receivable25.80days or 14 times28.1days or 13 timesAverage inventory turnoverperiod72.42 days or 5 times60.83 days or 6 timesDebt ratio52.5%40%Times interest earned5 times6 timesAssets turnover1.91.8Interpretation: In comparison to the industry benchmark, profitability aspect or conditionof Sondiak Ltd was good in the year ended on 30th June 2017. However, ROA results present thatSondiak Ltd failed to generate high return from assets. Further, it has assessed that in comparisonto the industry less percentage of profit such as 63.1% distributed among the shareholders. Alongwith this, current and quick ratio of Sondiak Ltd was also lower in 2017 as compared to theindustry average. However, but it was highly near to the standard current and quick ratio. Thus, itcan be presented that liquidity position of Sondiak Ltd was average but not good because it fallsbelow the industry average. Further, outcome of ratio analysis shows that business unit wasreceiving money from debtors within the less time frames which in turn places positive impacton working capital aspects. On the other side, stock turnover ratio of the firm presents that it hadtaken more time for selling and replacing stock as compared to standards. Efficiency ratioevaluation also entails that in against to the leading business units, Sondiak Ltd made optimumuse of assets while carry out business activities and functions. By applying the tool of ratioanalysis, company was highly able to meet its interest expenses from operating profit generated1
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