Practice Activity 10.4 Making comparisons across two or more accounting periods of the same busines
- Adaeze Nwobu
- Apr 12, 2023
- 1 min read
Good Business Limited has approached Mr. Liberal for a 10 per cent loan of ₦75 million to be repaid in five years. The interest on the loan should be payable annually.
Good Business Ltd. submitted a copy of her financial statements to Mr. Liberal. The financial year-end of Good Business Ltd. is 30 June every year.
Additional information:
Retained earnings for the year ended 31 December 2018 is ₦9.25 million, for the year ended 31 December 2017 is ₦8.25 million, and for the year ended 31 December 2016 is ₦7.25 million.
Sales of Property, Plant, and Equipment have been insignificant.
Good Business Ltd needs more capital to purchase an additional plant costing ₦80 million.
Sales will be increased by 35%. The anticipated gross profit margin is 20%.
The Directors of Good Business Ltd affirm that operating expenses will not increase significantly due to increased activity.
You are required to prepare relevant profitability, liquidity and gearing ratios and a report advising Mr. Liberal on the loan request proposal of Good Business Limited.
See the suggested answer to practice activity 10.4 here.
Suggested answer to practice activity 10.4
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