FINANCIAL RATIOS (All Questions)
Q No. 1 Prepare a multiple-step income statement for ABC Company from the following data:
Cost of goods sold $450
Interest expense 30
Depreciation expense 120
Net sales 990
Interest income 80
Income tax expense 70
Advertising expense 100
General and administrative expenses 150
Q No.2 Use the following information to analyze the BJ Company. Calculate any profit
measures deemed necessary in order to discuss the profitability of the company .
BJ Company
Income Statements
For the Years Ended Dec. 31, 2014 and 2015
2014 2015
Net sales Rs.174,000 Rs.167,000
COGS 114,000 115,000
Gross profit 60,000 52,000
General and administrative expenses 54,000 46,000
Operating profit 6,000 6,000
Interest expense (1,000) (1,000)
Earnings before taxes 5,000 5,000
Income taxes 2,000 2,000
Net income 3,000 3,000
Q No.3 Use the following selected financial data for Happy Valley Co. to answer questions.
Net sales Rs.200,000
Cost of goods sold 90,000
Operating expenses 80,000
Net income 10,000
Total assets 180,000
Total liabilities 120,000
Calculate (1)debt ratio (2) operating profit margin (3) return on equity (4) net profit
margin (5) Gross Profit ratio (6) Operating expense ratio (7) Assets turnover
Q No.4
Use the following selected financial information for Cascabel Corporation to answer
questions
Cascabel Corporation
Balance Sheet
December 31, 2015
Assets Liabilities and stockholders' equity
Current assets Current liabilities
Cash 2 Accounts payable 36
Short-term investments 10 Accrued liabilities 25
Accounts receivable 52 Total current liabilities 61
Inventory 57
Other current assets 8 Long-term debt 102
Total current assets 129 Total liabilities 163
Long-term assets Stockholders' equity
Net Plant 195 Common stock (10) 110
Retained earnings 51
Total stockholders' equity 161
Total assets 324 Total liabilities and equity 324
Cascabel Corporation
Income Statement
For the Year Ended December 31, 2015
Net sales 345
Cost of goods sold 248
Gross profit 97
Operating expenses 74
Operating profit 23
Interest expense 8
Earnings before taxes 15
Income tax expense 4
Net profit 11
Additional information: Market price of stock is Rs.25. Firm declared and paid dividend 20% on
par value of stock.
Compute following ratios:
Current ratio (2) Quick ratio (3)Debt ratio (4)Equity ratio (5)Inventory turnover in
days(use 360 days) (6) Receivable turnover in days(use 360 days) (7) Earnings per share
(8)Book value per share (9)Interest coverage ratio (10) Gross Profit ratio
Q No.5
Belmont Industries
Balance Sheet
As at 31-Dec-01
Assets Liabilities & Equity
Cash $ 100,000 Current Liabilities
Receivables Long Term Debt
Inventory Total Debt
Plant Common Equity $ 600,000
Total Assets Total Claims
Current Ratio 2.5
Average Collection
Period 54 days
Total Debt to Total
Assets 40%
Total Asset Turnover 2
Inventory Turnover 5
Q No. 6
Illinois Paper Products
Balance Sheet
As at 31-Dec-01
Assets Liabilities & Equity
Cash Current Liabilities
Receivables Long Term Debt
Inventory Total Debt $ 700,000
Plant Common Equity
Total Assets Total Claims
Total debt to Net Worth 1.4
Total Asset Turnover 3
Inventory Turnover 9
Average Collection Period 20 days
Current Ratio 3.3
Quick Ratio 1.3
Q No.7
Smolira Golf Corp.
Balance Sheet
As at 31-Dec-15
Liabilities &
Assets Equity
Cash 100000 Current Liabilities
Receivables Long Term Debt
Inventory Total Debt 200000
Plant Common Equity
Total Assets Total Claims
Total Debt to Total Assets 0.25
Total Asset Turnover 1.5
Inventory Turnover 7
Average Collection Period 29 days
Current Ratio 2.25
Required: Complete balance sheet
Q No.8
SMOLIRA GOLF CORP.
Balance Sheet as of
December 31, 2015
LIABILITIES & OWNER'S
ASSETS EQUITY
Current Assets: Current Liabilities:
Cash Rs.710 Accounts Payable Rs.1,215
Accounts
Receivable 2106 Notes Payable 718
Inventory 4982 Other 230
Total Rs.7,798 Total C L Rs.2,163
Fixed Assets: Long-term debt Rs.4,190
Net plant and Rs.18,58
Equipment 4 Owner's Equity:
Common Stock and Rs.10,00
paid-in surplus 0
Rs.10,02
Retained Earnings 9
Rs.20,02
Total 9
Rs.26,38 Rs.26,38
Total Assets 2 Total 2
SMOLIRA GOLF CORP.
Income Statement as on
December 31, 2011
Sales Rs.28,000
Less: Cost of goods sold 11,600
Depreciation 2,140
Earnings before interest and
taxes Rs.14,260
Less: Interest
paid 980
Taxable Income Rs.13,280
Taxes (35%) 4,648
Net Income Rs.8,632
Dividend Rs.4000
Addition to
retained
earnings 4,632
Calculate following ratios:
Short-term solvency ratios
a. Current Ratio
b. Quick Ratio
c. Cash Ratio
Asset utilization ratios
d. Total asset turnover
e. Inventory turnover
f. Receivables turnover
Long-term solvency ratios
g. Total debt ratio
h. Debt-equity ratios
i. Equity
multiplier
j. Times interest earned ratio
Profitability Ratios:
k. Profit Margin
l. Return on Assets
m. Return on
equity