Shiny Ltd manufactures nuts and bolts

1. The bank loan was taken up on 1 July 2011 and is repayable in six years from that date. It carries a fixed rate of interest of 12% per annum and is secured by a fixed and floating charge on the assets of the company.
(a) Calculate the following financial ratios for both 2012 and 2011, using end-of-year figures where appropriate: Marks-8

(i) Return on total assets
(ii) Net profit margin
(iii) Gross Profit margin
(iv) Current Ratio
(v) Liquid or Acid test ratio
(vi) Average settlement period for debtors
(vii) Average settlement period for creditors
(viii) Average inventory turnover period
(b) Comment on the performance of Shiny ltd from the viewpoint of a company considering supplying them with a substantial amount of goods on usual credit terms. Word limits – 400. Marks-10
What action could a supplier take to lessen the risk of not being paid if Shiny ltd gets into financial difficulty? Word limit- 200.

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