Brad's Engineering Pty Ltd NET ASSETS (Assets - Lizbilities) $\quad$ $\quad$

Brad's Engineering Pty Ltd
$\begin{array}{lll}&2018&2017\\\text { Statement of financial positions as at 30 June } & \$ & \$ \\\text { Total Current Assets } & 11080 & 10280 \\\text { Total Fixed Assets } & 75000 & 42000\\\text { TOTAL ASSETS } & \$ 86,080 &\$ 52,280 \\\text { Total Current Liabilities } & 3400 & 1960 \\\text { Long-term Liabilities } & 20000 & 8500\\\text { TOTAL LIABILITIES }&\$23,400&\$10,460\end{array}$ NET ASSETS (Assets - Lizbilities) $\quad$$\quad$ $62,680 $\quad$ $41,820 SHAREHOLDERS' EQUITY
$\begin{array}{ll}\text { Share capital }&40,000 & 30,000 \\\text { Reserves and retained profits }&22,680 & 11,820 \\&\$62,680&\$41,820\end{array}$ Additional Information:
$\begin{array}{lll}&2018&2017\\\text { Net profit after interest \& tax } & \$ 10,860 & \$ 6,000 \\\text { Interest expense } & 2000 & 900 \\\text { Taxation expense } & 3000 & 1500\end{array}$ REQUIRED:
a)From the information provided above, calculate each of the following ratios for each of the years ending 30 June 2017 and 2018.
Gearing ratio. Use formula $\quad$$\quad$$\frac{\text {Long - term liabilities }}{\text {Share cropital and reserves + long - term lizbilities }}$ Interest cover ratio. Use formula $\quad$$\quad$$\frac{\text {Profit before interest and tax }}{\text {Interest }}$ b)Comment on the movements in the ratios over the two years and the adequacy of the level of gearing and interest cover.
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