[PDF] 2023 Past Paper and Solved Assignment

This assignment requires you to calculate mean, median, mode, range, variance, standard deviation, and coefficient of variation for a given dataset. You also need to analyze the data and provide appropriate conclusions based on the calculated statistics.

Ratio analysis

Table of Contents
INTRODUCTION...........................................................................................................................................3
CONCLUSION...............................................................................................................................................2
REFERENCES................................................................................................................................................3
Appendix......................................................................................................................................................4

INTRODUCTION
Ratio analysis is the method or process by which the relationship between two figures or
group of figures from the financial statements are computed and presented. It is the important
tool of financial analysis. It is used to interpret the financial statements so that the strengths and
the weaknesses of a firm can be determined (Dicle, and Meyer, 2018). It also facilitates the
current and the historical performance condition so that company could make comparison
between the actual and the standard performance. The present report is based on the ratio
analysis of two companies that are Minoan group plc and the Elegant group plc which is a luxury
hotel based companies listed on the exchange. It also includes the analysis of different ratios like
Profitability ratios, liquidity ratios, working capital management, shareholder return and the
overall financial performance.
Ratio analysis
Profitability ratio analysis
Particulars Formula
Minoan group plc
2015 2016 2015 2016
gross profit
ratio
gross profit
/sales*100 95.26% 96.28%
62.95% 64.79%
operating
profit ratio
operating
profit/sales*10
0 -8.8% -10.7%
14.71% 28.93%
net profit
margin
net
profit/sales*10
0 -23.8% -30.9%
8.05% 22.19%
Interpretation- Profitability ratio analysis enables the organisation in knowing the ability of its business
to generate the earnings in relation to its sales, operations and the expenses. From the above table it is
analysed that the gross profit of the Minoan group plc for both the years 2015 and 2016 is resulted as
95.26% and 96.28% that are greater than the Elegant group plc that is 62.95% and 64.79% which

indicates that the Minoan has huge money left after its cost of goods sold which leads to higher profits
(Pando, and et.al., 2019). The operating profits of the elegant group plc are 14.71% and 28.93% for
2015 and 2016 which are seen as higher than the Minoan group plc that is equated as -8.8% and -10.7%
which depicts that elegant has efficiently managed its cost and expenses regarding the operation of its
business. The net profit margin is the profitability ratio which states the net income of the company
after paying all the tax and interest expenses so as the net profit margin of the Minoan group plc is
negative i.e. -23.8% for 2015 and -30.9% for 2016 and the elegant group plc has positive net income
margins equals to 8.05% and 22.19% for both the years which clearly reflects that elegant is more
profitable and has effectively managed its payment of taxes and interest expenses.
Liquidity ratio analysis
particulars formula Minoan group plc Elegant group plc
2015 2016 2015 2016
Current ratio current
assets/current
liabilities
4.23 3.55 0.98 0.73
quick ratio =
quick
assets/current
liabilities
current assets-
(stock+prepaid
expenses)/curr
ent liabilities
0.22 0.21 0.75 0.52
cash ratio = cash & cash
equivalent/cur
rent liabilities
0.014 0.008 0.46 0.26
Interpretation- liquidity ratio are used for measuring the company's ability to meet the short
term requirement. Higher liquidity ratio means higher the capability of the organisation to meet
the short term obligation and can covert its asset into cash at a specific point of time (Sari, and
et.al., 2018). From the above analysis it is interpreted that Minoan group plc has reached its
current ratio beyond the ideal current ratio i.e. 4.23 and 3.55 which are greater than the ideal
ratio i.e. 2:1 means the current assets are 4 & 3 times the current liability for the year 2015 and

2016 while the current ratio of Elegant group plc is below the ideal ratio resulted as 0.98 and
0.73 that means the liquidity position of the company is not good. The ideal quick ratio is 1:1
that means higher the quick ratio, higher the business capacity to meet its financial obligations
while lower the quick ratio means the company is too much dependant on its stock and other
current assets for cash in hand so as both Minoan and elegant has lower quick ratio that resulted
as 0.22 & 0.21 for Minoan and 0.75 &0.52 for elegant that reflects both are highly dependant on
its inventory and other short term assets (Nissim, and Penman, 2019). Cash ratio of Minoan is
equals to 0.014 for the year 2015 & 0.008 for the year 2016 and for elegant it is ascertained as
0.46 & 0.26 that are less than 1(ideal cash ratio) which means the companies can not rely on its
cash for paying off its current liabilities.
Working capital management
Particulars Formula Minoan group plc Elegant group plc
2015 2016 2015 2016
Working
capital ratio
current assets-
current
liabilities
46374413.1 36188338.34 -210286.98 -3446666.98
working
capital
turnover ratio
sales/net
working
capital
0.204770774 0.225557672 -259.48 -16.08
Interpretation- Working capital management means managing the current assets and current
liabilities of the firm so that the day-to-day operations of the enterprise can run smoothly
(Horrigan, 2015). The above table includes the analysis of working capital ratio which indicated
that higher the ratio, higher the favourable condition for the companies for paying of their current
liabilities through the sale of its current assets so as Minoan has higher working capital ratio as
compared to elegant group plc which is evaluated as 46374413.1 for 2015 & 3618838.34 for
2016 which are greater from the other company resulted as -210286.98 & -3446666.98 for the
year 2015-16 which means that Minoan has optimum current assets to meet its liabilities than the
other company. The working capital turnover ratio is calculated as sales to net working capital
where net working capital is equals to current assets minus current liabilities. This ratio depicts

the company's efficiency in maintaining and using its working capital in relation to the net
annual sales (Johnson, 2015). As the analysis shows that the elegant group plc has negative ratio
so it reflects that it is inefficient in using its working capital but has used the necessary measures
which leads to a huge favourable change that is from -259.48 in 2015 to 16.08 in 2016. on the
other hand Minoan has its working capital turnover ratio in 2015 as 0.204 and in 2016 as 0.225
which means it is efficiently making use of its current assets and current liabilities regarding the
revenue.
Solvency&risk
Particulars Formula Minoan group plc Elegant group plc
2015 2016 2015 2016
Solvency ratio net income +
depreciation/to
tal liabilities
-0.024183417 -0.03255939 0.05 0.09
Debt-equity
ratio
long term
debt/sharehold
ers equity
0 0 0.42 0.54
interest
coverage ratio
Earning before
interest and
tax/interest
charge
-0.585127202 -0.530997305 2.88 8.16
Proprietary
ratio
shareholders
funds/total
assets
0.809784215 0.771761542 0.65 0.60
Interpretation- Solvency ratio helps the business in measuring its ability to pay-off its long term
debts. Elegant company has higher solvency ratio that is equals to 0.05 & 0.09 from the Minoan
company resulted as -0.024183417 & -0.03255939 which means that elegant has a strong
solvency position than the Minoan that leads to financial strength (Thanassoulis, and et.al.,
2015). Debt-equity ratio of the Minoan for the year 2015-16 is resulted as nil which is considered

as favorable ratio as low debt-equity ratio means the company has enough profits to finance its
debts and does not need to take leverage or borrowings for paying its debt obligations while
elegant debt-equity ratio equates to 0.42 & 0.54 that is also considered as a good ratio. Interest
coverage ratio depicts the firm's capability to meet its interest expenses or any outstanding debt
and is ascertained as -0.58 & -0.53 for Minoan which states that it cannot finance its expenses
and debts and the ratio for elegant is resulted as 2.88 & 8.16 for 2015-16 which means beyond
the ideal ratio that is equals to 2 and sounded as good for the reputation of the company.
Proprietary ratio reflects the portion of shareholders funds to the total assets and the ideal
proprietary ratio is counted as 0.75:1 so as the both the company are near to the ideal ratio which
resulted as 0.80 & 0.77 for Minoan and 0.65 & 0.60 for Elegant which means both the
companies can achieve higher growth in the probable future.
Shareholder return
Particulars Formula Minoan group plc Elegant group plc
2015 2016 2015 2016
return on
capital
employed
net operating
profit/capital
employed
-1.364300055 -1.830642351 5.96 10.35
return on
equity
profit after
tax/net worth
-3.695929914 -5.278197235 3.26 7.94
return on
assets
net
profit/total
assets
-2.992905705 -4.073509637 3.02 7.34
Interpretation- Return on capital employed measures the efficiency of the company in
generating the profits from the use of its capital employed where capital employed is calculated
as reducing or subtracting current liability from the total assets. This ration is resulted as -1.36 &
-1.83 for the Minoan group plc which means low ratio that indicates low return from the capital
and for elegant group plc it is evaluated as 5.96 & 10.39 which means high ratio that is high

returns are generated from the capital employed by the company which leads successful growth
of the company. Return on equity depicts the income generated from the shareholders funds or
investment made by the shareholders and the results are ascertained as -3.69 & -5.27 for the year
2015-16 for Minoan which means a low ratio that reflects the inability of the company to pay its
dividends. On the other side the ratio for elegant is resulted as 3.26 & 7.94 which is counted as a
good ratio and the company could efficiently distribute its profits to the shareholders. Return on
asset depicts the income generated from the fixed and the current assets and as per the analysis
the ratio equates to -2.99 & -4.07 for Minoan and 3.02 & 7.34 for Elegant in the year 2015-16
which means that the total assets of elegant are inculcating more return than the Minoan that
leads to a positive sign for the external stakeholders.

Overall financial performance
Min
Minoan Group plc Elegant hotel Group plc
Particulars 2015 2016 2015 2016
gross profit ratio 95.26% 96.28% 62.95 64.79
operating profit ratio -8.80% -10.70% 14.71 28.93
net profit margin -23.80% -30.90% 8.05 22.19
current ratio 4.23 3.56 0.98 0.73
quick ratio 0.22 0.21 0.75 0.52
cash ratio 0.01 0.01 0.46 0.26
working capital ratio 46374413.10 36188338.34 -210286.98 -3446666.98
working capital turnover ratio 0.20 0.23 -259.48 -16.08
Debt-equity ratio 0 0 0.05 0.09
Interest coverage ratio -0.59 -0.53 0.42 0.54
proprietary ratio 0.81 0.77 2.88 8.16
Return on capital employed -1.36 -1.83 0.65 0.60
return on equity -3.70 -5.28 5.96 10.35
return on assets -2.99 -4.07 3.26 7.94
solvency ratio -0.02 -0.03 3.02 7.34
The above table helps us to evaluate financial performance of Minoan group plc with
reference to multiple parameters over past two years. On basis of profitability, its gross profit is
increasing but its net and operating profit ratio is in negative which indicates about loss to
organization. While measuring liquidity, the ideal current ratio is 2:1 and in above criteria,
1

Minoan group plc is capable to repay its current liabilities as it is exceeding which shows
inefficient use of its current assets (Chabotar, 2015). On the contrary, its cash and quick ratio is
not good in 2015 and in 2016 it is decreasing. Thus, on basis of profitability and liquidity
Minoan group plc is not performing well.
With context of management of working capital, it has positive which shows efficiency
and even organization has 0 debt which replicates that it is operating on equity which is bad
indicator. It must attain balance of 40:60 to mitigate risk due to high equity. Henceforth, its
solvency and return on shareholder is negative which is bad indicator to company's financial
performance.
The financial performance of Elegant hotel Group plc states that the company in the last two year
is growing with a negative working capital ratio. Also, the current ratio has decreased which
states that company is unable to pay its current liabilities.
CONCLUSION
From the above report it is concluded that through ratio analysis company can evaluate and
ascertain the financial stability and performance and could measure the soundness of the position
of the company. As per the analysis of the two companies that are Minoan and Elegant group plc
it is analysed that Elegant has sound position and performance in relation to its obligations and is
more efficient than the Minoan in terms of the solvency and overall financial performance
2

REFERENCES
Books and journals
Chabotar, K.J., 2015. Financial ratio analysis comes to nonprofits. The Journal of Higher
Education.60(2). pp.188-208.
Dicle, M. F. and Meyer, J., 2018. Financial Statement and Ratio Analysis: A Classroom
Perspective.
Horrigan, J .O., 2015. A short history of financial ratio analysis. The Accounting
Review.43(2).pp.284-294.
Johnson, C. G., 2015. Ratio analysis and the prediction of firm failure. The Journal of
Finance.25(5). pp.1166-1168.
Nissim, D. and Penman, S.H., 2019. Ratio analysis and equity valuation: From research to
practice. Review of accounting studies.6(1). pp.109-154.
Pando, V. and et.al., 2019. Profitability ratio maximization in an inventory model with stock-
dependent demand rate and non-linear holding cost. Applied Mathematical Modelling.66.
pp.643-661.
Sari, R. K. and et.al., 2018, August. The Effect of Liquidity Ratio, Profitability Ratio, Company
Size, and Leverage on Bond Rating in Construction and Real Estate Company.
In PROCEEDING ICTESS (Internasional Conference on Technology, Education and
Social Sciences).
Thanassoulis, E. and et.al., 2015. A comparison of data envelopment analysis and ratio analysis
as tools for performance assessment. Omega.24(3). pp.229-244.
3

Appendix
Minoan group plc
Particulars Formula 2015 2016
profitability
ratio
gross profit 9,046,117 7,859,005
sales 9,496,124 8,162,557
gross profit ratio gross profit /sales*100 95.26% 96.28%
2015 2016
operating profit -833,140 -876,188
sales 9,496,124 8,162,557
operating profit ratio
operating
profit/sales*100 -8.8% -10.7%
2015 2016
net profit -2,257,001 -2,526,268
sales 9,496,124 8,162,557
net profit margin net profit/sales*100 -23.8% -30.9%
liquidity
ratio
4

2015 2016
current assets 60,718,911 50,342,998
current liabilities 14,344,498 14,154,659
current ratio
current assets/current
liabilities
4.23290598
3
3.55663786
3
2015 2016
current assets 60,718,911 50,342,998
Stock + prepaid
expenses
57,492,235 47,325,264
quick assets
3226676.10
3 3017733.37
current liabilities 14,344,498 14,154,659
quick ratio = quick
assets/current
liabilities
current assets-
(stock+prepaid
expenses)/current
liabilities 0.22 0.21
2015 2016
cash& cash equivalent 202,016 115,639
current liabilities 14,344,498 14,154,659
cash ratio =
cash & cash
equivalent/current
liabilities
0.01408313
9
0.00816967
8
working
capital
managemen
t
5

2015 2016
current assets 60,718,911 50,342,998
current liabilities 14,344,498 14,154,659
working capital ratio
current assets-current
liabilities 46374413.1
36188338.3
4
2015 2016
sales 9,496,124 8,162,557
net working capital 46374413.1
36188338.3
4
working capital
turnover ratio
sales/net working
capital
0.20477077
4
0.22555767
2
Solvency &
risk
2015 2016
long term debt 0 0
shareholders funds 61,067,214 47,862,319
Debt-equity ratio
long term
debt/shareholders equity 0 0
2015 2016
EBIT -833,140 -876,188
interest charge 1,423,861 1,650,080
interest coverage ratio
Earning before interest
and tax/interest charge
-
0.58512720
2
-
0.53099730
5
6

2015 2016
shareholders funds 61,067,214 47,862,319
total assets 75,411,712 62,016,978
proprietary ratio
shareholders funds/total
assets
0.80978421
5
0.77176154
2
shareholder
return
2015 2016
net operating profit -833,140 -876,188
capital employed 61,067,214 47,862,319
return on capital
employed
net operating
profit/capital employed
-
1.36430005
5
-
1.83064235
1
*100
2015 2016
profit after tax -2,257,001 -2,526,268
net worth 61,067,214 47,862,319
return on equity
profit after tax/net
worth
-
3.69592991
4
-
5.27819723
5
*100
2015 2016
net profit -2,257,001 -2,526,268
total assets 75,411,712 62,016,978
7

return on assets net profit/total assets
-
2.99290570
5
-
4.07350963
7
2015 2016
net income -2,257,001 -2,526,268
depreciation 433,289 507,033
net
income+depreciation
-
1823712.87
5
-
2019235.00
3
total liabilities 75,411,712 62,016,978
solvency ratio =
net income +
depreciation/total
liabilities
-
0.02418341
7 -0.03255939
Elegant group plc
Particulars Formula 2015 2016
Profitability
ratio
gross profit 34,348,682 35,897,362
sales 54,564,722 55,407,959
gross profit ratio gross profit/sales*100 62.95 64.79
8

2015 2016
operating profit 8,026,179 16,030,253
sales 54,564,722 55,407,959
operating profit
ratio
operating
profit/sales*100 14.71 28.93
2015 2016
net profit 4,390,249 12,296,751
sales 54,564,722 55,407,959
net profit ratio net profit/sales*100 8.05 22.19
liquidity ratio
2015 2016
current assets 10,822,318 9,226,337
current liabilities 11,032,605 12,673,004
current ratio
current assets/current
liabilities 0.98 0.73
2015 2016
current assets 10,822,318 9,226,337
9

stock+prepaid
expenses
2,508,520 2,632,613
quick assets
8313797.4278
5456
6593724.7751
0078
current liabilities 11,032,605 12,673,004
quick ratio
quick assets/current
liabilities 0.75 0.52
2015 2016
cash&cash
equivalents
5,026,537 3,304,991
current liabilities 11,032,605 12,673,004
cash ratio
cash & cash
equivalent/current
liabilities 0.46 0.26
working
capital
management
2015 2016
current assets 10,822,318 9,226,337
current liabilities 11,032,605 12,673,004
10

working capital ratio
current assets-current
liabilities -210286.98 -3446666.98
2015 2016
sales 54,564,722 55,407,959
net working capital
-
210286.97802
1776
-
3446666.9835
3278
working capital
turnover ratio sales/net working capital -259.48 -16.08
Solvency&risk
2015 2016
net income 4,390,249 12,296,751
depreciation 2,732,374 2,882,287
net income
+depreciation
7122623.4491
2474
15179037.783
6108
total liabilities 145,602,704 167,495,474
solvency ratio
net
income+depreciation/tota
l liabilities 0.05 0.09
11

2015 2016
long term debts 39,563,799 54,017,912
shareholders funds 95,006,300 100,804,558
Debt-equity ratio
long term
debts/shareholders funds 0.42 0.54
2015 2016
EBIT 8,026,179 16,030,253
interest charge 2,785,285 1,963,718
interest coverage ratio
earning before interest
and tax/interest charge 2.88 8.16
2015 2016
shareholders funds 95,006,300 100,804,558
total assets 145,602,704 167,494,312
proprietary ratio
shareholders funds/total
assets 0.65 0.60
shareholders
return
12

2015 2016
net operating profit 8,026,179 16,030,253
capital employed 134570099 154821308
return on capital
employed
net operating
profit/capital
employed*100 5.96 10.35
2015 2016
profit after tax 4,390,249 12,296,751
net worth 134570099 154821308
return on equity
profit after tax/net
worth*100 3.26 7.94
2015 2016
net profit 4,390,249 12,296,751
total assets 145,602,704 167,494,312
return on assets net profit/total assets 3.02 7.34
13

14

15