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Interpretation of financial statements

Example 2

Liquidity

Extracts from the financial statements of Eden are presented below.

20X6 20X5
$000 $000
Statement of profit or loss

Revenue 27,000 24,000
Cost of sales (19,700) (17,100)

——— ———
Gross profit 7,300 6,900
——— ———

Statement of financial position
Current assets
Inventory 5,100 4,600

Trade receivables 3,300 2,700
Bank 200 900
——— ———

8,600 8,200
——— ———
Current liabilities

Trade payables 3,200 2,400
Taxation 900 920

——— ———
4,100 3,320
——— ———

Required:

Calculate liquidity and working capital ratios for Eden for 20X5 and
20X6.

Show your workings.

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