QUESTION 2

The following is a summary of the comparative income statements for the years ended 31 March 2014 and 2015 and the comparative balance sheets as at 31 March 2014 and 2015 for Home Crystal Company:

Home Crystal Company

Comparative Income Statement For The Years Ended March 31, 2014 And 2015

	2014 (RM)	2015 (RM)
Net Sales	4900000	5978000
The Cost Of Goods Sold	3332000	4065040
Gross Profit	1568000	1912960
Sales Spending	539000	687470
Depreciation Spending	60000	80000
Interest Expense	126150	189902
Administration Expenses	514500	538020
Amount Of Spending	1239650	1495392
Income Before Tax	328350	417568
Income Tax Expenses	95222	129446
Net Income	233128	288122

	2014 (RM)	2015 (RM)
Current Asset:
Cash	155000	85250
account not yet received	465000	720750
Inventory	850000	1283500
Prepaid expenses	95000	109250
Total Current Asset	1565000	2198750
Non Current Asset
Land	1125000	1125000
Building	1250000	1500000
accumulated depreciation - building	(300000)	(350000)
Equipment	750000	1050000
accumulated depreciation Equipment	(100000)	(130000)
Total Non current asset	2725000	3195000
Total Asset	4290000	5393750
Current Liabilities
accounts payable	250000	382628
unpaid notes	600000	900000
unpaid wages and salaries	30000	40000
Unpaid tax	52000	75000
Total current liabilities	932000	1397628
Non Current Liabilities
Bank Loan	750000	1200000
Total Liabilities	1682000	2597628
Equities
Capital	100000	100000
Reserve	900000	900000
retained earnings	1608000	1796122
Total equity	2608000	2796122
Total Equity and liabilities	4290000	5393750

Additional Information

The following is the ratio analysis for 2014:

• Profitability Ratio = 4.8%
• return on owners equity = 9.2%
• Account Receivable turnover = 12.2 times
• Interest coverage ratio = 3.60 times

a) Provide a vertical analysis on the income statement data for Home Crystal Company for 2015

b) Calculate the following financial ratios for 2015:

• Profitability Ratio
• return on owners equity
• Account Receivable turnover
• Interest coverage ratio =

C ) Comment on the company's profitability based on the ratio of return on owner's equity and profit margin ratio by comparing the analysis for 2015 with the analysis of the previous year