Page 261 - Microsoft Word - 00 IWB ACCA F7.docx

Interpretation of financial statements

Example 1

Profitability

Extracts from the financial statements of Eden are presented below.

20X6 20X5
Statement of profit or loss $000 $000
Revenue 27,000 24,000

Cost of sales (19,700) (17,100)
——— ———
Gross profit 7,300 6,900
Operating expenses (2,300) (1,900)
——— ———

Profit from operations 5,000 5,000
Finance costs (600) (480)
——— ———
Profit before tax 4,400 4,520

Income tax expense (900) (920)
——— ———
Profit for the year 3,500 3,600
——— ———
Statement of financial position

Equity
Ordinary share capital 10,000 10,000
Retained earnings 9,100 6,200
——— ———

19,100 16,200
——— ———
Non-current liabilities
6% loan notes 11,000 8,000

Required: Calculate profitability ratios for Eden for 20X5 and 20X6.

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