Helena Beauty – Financial Analysis

The following details concern the business of Helena Beauty, who is worried about the profitability and financial situation of her business at 30 June 2018, especially since the bank is requiring repayment of its overdraft.

30 June 2017  30 June 2018

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Sales (credit)   $60,000  $90,000

Cost of sales   39,000  63,000

All other expenses   12,000  21,000

Cash at Bank   12,000  (18,000)

Inventory   18,000  33,000

Accounts Receivable (net)   12,000  30,000

Non-current assets (net)   24,000  48,000

Accounts Payable   6,000  9,000

Non-current liabilities   nil  12,000

Helena Beauty, Capital   60,000  72,000

Inventory at 1 July 2016 was $15,000

Accounts receivable at 1 July 2016 were $10,000

Helena Beauty, Capital as at 30 June 2016, $56,000

a) Calculate the following ratios for 2017 and 2018 (1.5 marks each)

  • Net profit margin
  • Rate of return on owners’ equity
  • Current ratio
  • Acid test ratio
  • Gearing
  • Inventory turnover period

b) Write a short report about profitability, short-term liquidity and long-term solvency of the business. (3 marks)