Masters of Business Administration
BUSS9003_Accounting and Finance for Executives
Tutorial - Financial Statements Analysis
In Class Exercise:
Clothy is an apparel retailer in Maldives and that offers a large range of fashion items
such as clothes, shoes and accessories. A couple of years ago the company made a
significant investment in its online presence that paid off and allowed to take over one
of its struggling competitors and enhance its portfolio of brands that serve a variety of
customers. Currently the company has a strong online and street presence making it
one of the most recognisable apparel retailers in the Maldives.
Income Statements for the years ended 31st March.
MVR’Mn
2023 2022
Sales Revenue 3,700 3,100
Costs of Goods Sold 2,020 1,800
Gross Profit 1,680 1,300
Staff Costs 560 460
Rent and Rates 350 300
Depreciation 200 170
Administrative Costs 400 300
Operating Profit (PBIT) 170 70
Finance Costs 20 15
Profit (loss) before Taxation 150 55
Taxation 30 11
Profit (loss) for the period 120 44
Statements of Financial Position as at 31st March.
MVR Mn.
2023 2022
Non-current Assets
Property, Plant & Equipment 815 605
Purchased Goodwill 440 315
Total Non-current Assets 1,255 920
Current Assets
Inventory 650 500
Trade Receivables 60 55
Cash at Bank 590 425
Total Current Assets 1,300 980
Total Assets 2,555 1,900
Equity
Share Capital (Rf. 2 Ordinary Shares) 600 600
Retained Earnings 400 356
Total Equity 1,000 956
Non-current Liabilities
Bank Loan 600 300
Total Non-current Liabilities 600 300
Current Liabilities
Trade Payables 930 640
Tax liability 25 4
Total Current Liabilities 955 644
Total Equity and Liabilities 2,555 1,900
Additional Information (in MVR Mn.)
End of year: 2021
Capital Employed 1,160
Inventories 400
Questions
Using the financial data, you are required to calculate the following ratios for 2022 and
2023. For each ratio you MUST show the calculations used to reach your solution.
a. Return on Capital Employed
b. Operating Profit Margin
c. Gearing Ratio
d. Acid Test Ratio
e. Inventories Turnover Period
f. Debtors Turnover Period
g. Creditors Turnover Period
Answer the following questions based on the ratio calculated above.
i. What does the Return on Capital Employed ratio measure? Comment on the
Return on Capital Employed ratios calculated above and explain what the
ratios tell us about the financial performance of the company. Explain the
reasons for the change in the ratio and use the information from the case
study to inform your answer.
ii. What does the Gearing Ratio measure? Explain why the ratio has changed
and comments on the numbers calculated above.
iii. What does the Average Inventories Turnover Period measure? Comment on
the ratios calculated above and explain what the ratios tell us about the
company financial performance. Explain the reasons for the change in the
ratio and use the information from the case study to inform your answer.
iv. What does the Debtors Inventories Turnover Period measure? Comment on
the ratios calculated above and explain what the ratios tell us about the
company financial performance. Explain the reasons for the change in the
ratio and use the information from the case study to inform your answer.
v. What does the Creditors Inventories Turnover Period measure? Comment on
the ratios calculated above and explain what the ratios tell us about the
company financial performance. Explain the reasons for the change in the
ratio and use the information from the case study to inform your answer.
vi. One of your friend Adil is doing an internship with a local consulting firm. He
has asked you to explain the rationale for the use of financial ratios, and state
any limitations of financial ratio analysis.
