Answer indications: Cash flow statements and financial
ratios
Financial Accounting for Decision Makers, chapter 6
6.1.
See page 567 of AM.
6.3.
See page 568 of AM.
6.5.
Cash generated from operations: 397
Net cash from operating activities: 200
Cash flows from investing activities: -650
Cash flows from financing activities: 600.
6.7.
See page 570 of AM.
6.8.
See page 571 of AM.
Financial Accounting for Decision Makers, chapter 8
8.1.
See page 573 and 574 of AM.
8.4.
Return on capital employed
Operating profit margin
Gross profit margin
2020
0.03
0.02
0.40
Average inventories turnover period
Average settlement period for trade receivables
Sales revenue to capital employed
2021
0.03
0.02
0.42
2020
60.8
76.0
1.3
2021
73.0
91.3
1.3
8.6.
a)
Return on capital employed
Operating profit margin
Gross profit margin
Current ratio
Acid test ratio
Average settlement period for trade receivables
Average settlement for trade payables
Average inventories turnover period
2020
0.31
0.20
0.42
1.28
0.53
31.55
32.20
79.44
2021
0.20
0.14
0.38
1.66
0.67
47.45
36.98
114.85
b) Liquidity: improvement, but too low for manufacturer. Could make suppliers
concern. Efficiency: Credit period increases. If this was a policy result, that
was not very successful, because sales increase was too low. Otherwise it
would be a sign of poor credit control. Inventory turnover period has increased.
Seems that some products do not sell very good. Gross profit margin and
operating profit margin are lower. So there is a lower return on capital
employed.
8.7.
See page 575 of AM.