Special Task on Financial Statement Analysis

S.L Financial Ratios: Formula In ICAEW Manual Formula used in Bd Text Remarks
Performance Ratio:
Gross Profit Ratio/GP
Margin
Net Profit Ratio/Net Margin

Return on Capital
Employed
Return on Shareholders
Fund/
Return on Equity
Return on Assets or
Return on Investment Often Return on Total
Assets used as Return on
or
Investment and Profit
before tax used
Net Asset Turnover /Asset
Turnover Ratio
Short Term Liquidity:
Current Ratio

Quick/Acid Test/Liquidity
Ratio
Inventory Turnover Ratio

Accounts Receivable
Turnover Ratio
Accounts Payable Turnover
or A/P Velocity

Long Term Liquidity:

Gearing Ratio
or
Interest Coverage Ratio

Debt Equity Ratio/Long

(Its Mean Gearing Ratio) or
Term Debt to Net Worth
Proprietors fund to total
Liabilities
Efficiency Ratio:
Net Asset Turnover/Capital
Turnover Ratio
Inventory Turnover Ratio

Trade Receivable Collection

×365
Period/DSO
Trade Payable Payment
×365
Period/DPO
Non-Current Asset Analysis Capital Expenditure to Depreciation & Ageing
of NC Assets

Investors’ Ratio
Dividend Yield

Dividend coverage Ratio

Dividend Pay-out Ratio

(Its Cover by Dividend Coverage)
Price/Earnings (P/E) Ratio
Net Asset Value per
share/Value per share
Earnings per Share/ EPS

Dividend per Share/ DPS

Advanced Problem:

Farin Ltd
Income Statement
For the year ended 31st Dec 2013

Particualars Amount Amount

Sales:
On Cash 270,000
On Credit 400,000
Total Sales 670,000
Less: Discount for Cash Sales (20,000)
Net Sales 650,000
Less: Cost of Goods Sold (300,000)
Gross Profit 350,000
Less: Operating Expenses (60,000)
Operating Income 290,000
Add: Investment Income 15,000
Less: Interest on Debt (35,000)
Net Profit before Tax 270,000
Less: Provision for Tax (10,000)
Net Profit after tax 260,000
 Farin Ltd
Balance Sheet
As on 31st Dec 2013

Liabilities Tk Assets Tk
Share capital: Goodwill at cost 110,000
10% of preference shares 60,000 Land & building 200,000
10% of preference shares-Redeemable 100,000 Plant & Machinery 190,000
Ordinary shares @100 tk each 300,000 Furniture & Equipments 125,000
Debentures @12% interest 435,000 Motor cars 100,000
Bank Loan @8% interest 65,000 Investment: 150,000
Reserves 180,000 Inventory 160,000
Sundry creditors 120,000 Book debts 180,000
Notes Payable 20,000 Cash in hand & at bank 400,000
Other Accrued 70,000 Discount on Debentures 10,000
Provision for Taxes 20,000 Preliminary expenses 5,000
Profit & loss account: 260,000
1,630,000 1,630,000

Market Price of ordinary share 220 tk per and Dividend declared and paid for the year 2013 is 20% cash.

Calculate:
1. Gross Profit Ratio/GP Margin, 9. Quick/Acid Test/Liquidity Ratio,
2. Net Profit Ratio/Net Margin, 10. Inventory Turnover Ratio,
3. Return on Capital Employed (ROCE) 11. Accounts Receivable Turnover Ratio,
4. Return on Equity, 12. Accounts Payable Turnover or A/P Velocity
5. Return on Assets, 13. Gearing Ratio,
6. Return on Investment, 14. Interest Coverage Ratio,
7. Net Asset Turnover /Asset Turnover Ratio, 15. Debt Equity Ratio/Long Term Debt to Net Worth,
8. Current Ratio, 16. Proprietors fund to total Liabilities,
17. Trade Receivable Collection Period/DSO, 21. Dividend coverage Ratio,
18. Trade Payable Payment Period/DPO, 22. Dividend Pay-out Ratio,
19. Earnings per Share/ EPS, DPS , 23. Price/Earnings (P/E) Ratio,
20. Dividend Yield , 24. Net Asset Value per share/Value per share,