identify a ratio and explain how one or more of the limiting factors can affect the 654901
(RATIO ANALYSIS)
The following information was obtained from the 2012 and 2011 financial statements of Kini, Kemas and Kelas Sdn Bhd:
|
Kini |
Kemas |
Kelas |
||
|
(RM million) |
(RM million) |
(RM million) |
||
|
Accounts receivable |
31 December 2012 |
33,000 |
22,000 |
41,500 |
|
31 December 2011 |
30,000 |
12,800 |
42,600 |
|
|
Inventory |
31 December 2012 |
22,600 |
12,600 |
54,200 |
|
31 December 2011 |
23,900 |
32,800 |
44,000 |
|
|
Net sales (Credit) |
2012 |
620,000 |
320,000 |
510,000 |
|
2011 |
610,000 |
310,000 |
760,000 |
|
|
Cost of goods sold |
2012 |
211,000 |
406,000 |
311,000 |
|
2011 |
156,000 |
200,000 |
310,000 |
Required:
a) Compare following:
i. Accounts receivable turnover ratio for each company for 2012.
ii. Number of days inventory is held before being sold for each company for 2012.
b) Comment on the performance of the companies in terms of the ratios calculated in (a) above.
c) The use of estimates and alternative accounting methods may limit the usefulness of financial statement analysis. Identify a ratio and explain how one or more of the limiting factors can affect the usefulness of that ratio.