Scenario: Solaris Grid PLC operates in the renewable energy sector. Extracts from the financial statements for the year ended 31 December 20X5 (with 20X4 comparatives) are as follows:
Revenue: 20X5 $2,500,000; 20X4 $2,000,000.
Cost of Sales: 20X5 $1,600,000; 20X4 $1,200,000.
Operating Profit: 20X5 $450,000; 20X4 $400,000.
Finance Costs: 20X5 $50,000; 20X4 $40,000.
Equity: 20X5 $1,800,000; 20X4 $1,500,000.
Non-current Liabilities (10% Loan Notes): 20X5 $500,000; 20X4 $400,000.
Inventory: 20X5 $250,000; 20X4 $180,000.
Trade Receivables: 20X5 $300,000; 20X4 $220,000.
Trade Payables: 20X5 $210,000; 20X4 $150,000.
Assume a 365-day year.
Question: What is the Gross Profit for 20X5? (Enter numbers only)
ACCA · Question 65 · Interpretation of Financial Statements
Scenario: Solaris Grid PLC operates in the renewable energy sector. Extracts from the financial statements for the year ended 31 December 20X5 (with 20X4 comparatives) are as follows:
Revenue: 20X5 $2,500,000; 20X4 $2,000,000.
Cost of Sales: 20X5 $1,600,000; 20X4 $1,200,000.
Operating Profit: 20X5 $450,000; 20X4 $400,000.
Finance Costs: 20X5 $50,000; 20X4 $40,000.
Equity: 20X5 $1,800,000; 20X4 $1,500,000.
Non-current Liabilities (10% Loan Notes): 20X5 $500,000; 20X4 $400,000.
Inventory: 20X5 $250,000; 20X4 $180,000.
Trade Receivables: 20X5 $300,000; 20X4 $220,000.
Trade Payables: 20X5 $210,000; 20X4 $150,000.
Assume a 365-day year.
Question: Which of the following is a fundamental limitation of using ratio analysis to assess Solaris Grid PLC's performance?
Answer options:
Ratios provide a perfect prediction of future bankruptcy.
Ratios are based on historical cost data and may not reflect current market values or inflation.
Ratios eliminate the need to read the notes to the financial statements.
Ratios are only useful for companies in the manufacturing sector.
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