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PT 1st Quarter (Fin Ratios)
PT 1st Quarter (Fin Ratios)
for
BUSINESS FINANCE
Financial Ratios
I. Warm-Up Exercise. Using the following accounts from the retail store, A-Mart Incorporated’s income
statement for the year ending in December 31, 2013, answer the questions below.
Depreciation 60,000
II. Using the following accounts from the A-Mart, Incorporated’s balance sheet for the year ending
December 31, 2013, answer the questions below. Use cash as a plug figure.
Gross Fixed Assets 900,000 II.d.) A-Mart’s total liabilities are Php_810,000___.
2.64
IV. Compute for the Current Ratio and Quick Ratio of the three companies below and compare which
company is performing well based on the computed Current and Quick Ratios.
ANSWERS:
JFC PETRON GLOBE
Current Ratio 1.26 1.08 0.77
Quick Ratio 0.80 0.54 0.67
Explanation:
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V. Using the Balance Sheet provided, compute for the Return on Equity, Return on Assets, Gross
Profit Margin, Operating Profit Margin and Net Profit Margin.
ANSWERS
Using the same informations in Test V, assume that the beginning inventory is Php 247,000, solve for
the following:
V.f.) Accounts Receivable Turnover- 44.4x
V.g.) Average Collection Period- 8.2 days
V.h.) Inventory Turnover- 10x
V.i.) Accounts Payable Turnover- 18.57x
V.j.) Total Assets Turnover- 0.41x
CASE ANALYSIS
Chloe’s Closet
Chloe Mendez owns a clothing company, Chloe’s Closet. She has a team of tailors who work for 8 hours
every day from Monday to Saturday. Demand for her business is strong but there seems to be something
preventing her from meeting the demands of her customers. Chloe sells to both big department stores
and small boutique stores under the brand Chloe’s Closet. Some brands also ask her to manufacture their
own designs. Business for Chloe has been good since it started last 2014. In fact, despite the tough
competition from cheaper manufacturers abroad, she still manages to grow her customer base.
On December 4, 2015 Chloe received a billing statement from a raw material supplier for an amount of
PHP400,000 which will be due in 5 days. She is also scheduled to pay her employees’ monthly salary of
PHP70,000 the following day. Upon checking her bank account, she only has a PHP67,000 balance. She
knew she had exceeded her sales target last October and November so she is wondering why she only
has this amount of cash in her bank account.
Was her money stolen? Being a CPA, she checked the bank statement and her financial records
and found no mistakes.
Here is the latest financial statement of Chloe’s Closet as of November 30, 2015: