SEDE NORTE DEL CAUCA BUSINESS ENGLISH

ADMINISTRACIÓN III 204073M (Gr. 51)

DE EMPRESAS
Semestre IV LUIS EDUARDO DIAZ DAGUA
luis.e.diaz@correounivalle.edu.co
3845

INDICATORS

MIDWAY STORE has presented the following report as at 31 January 2021.

MIDWAY STORE
Balance Sheet as at 31 Jan 2021
Current Assets Current Liabilities
Stock 9 800 Creditors 11 300
Debtors 2 500 Mortgage 6 000
Cash 1 200 13 500 Loan 4 800 22 100

Non-Current Assets Non-Current Liabilities

Vehicles 85 000 Mortgage 54 000
Warehouse 160 000 245 000 Loan 9 600 63 600

Owner’s Equity
Capital 172 800

Total Assets $258 500 Total Equities $ 258 500

Required

a) Calculate the Working Capital Ratio for MIDWAY STORE as at 31

January 2021.

Current assets
Working Capital Ratio= =WCR
current liabilities

13500
WCR=
22100

WCR=0,6 1
b) Comment on the liquidity of MIDWAY STORE as at 31 January 2021.
According to the WCR MIDWAY STORE, for every $ 0.61 of current
 assets, one dollar is owed.
c) Calculate the Debt Ratio for MIDWAY STORE as at 31 January 2021.
Total liabilities
D ebt Ratio= ∗10 0
Total Assent
87500
Debt Ratio= ∗100=33,9 %
258500
d) Comment on the stability of MIDWAY STORE as at 31 January 2021.
The company has 33.9% indebtedness and has 66.1% of free capital.
e) State one action the owner could take to improve both the Working
Capital Ratio and the Debt Ratio.
We encourage MIDWAY STORE to use strategies that can be employed
including increased profitability, better inventory management, and debt
restructuring.

INDICATORS

Ana Rioja has a Printing Store and has reported the following report as at 31
TH
jan 2021 for THE 10 STORE.

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THE 10 STORE.
Balance Sheet as at 31 January
2021
Current Assets Current Liabilities
Bank 7 000 Creditors 4 000
Debtors 3 000 Loan 5 000 9 000
Stock 8 000 18 000
Non-Current Liabilities
Non-Current Assets Loan 29 000
Van 8 000
Equipment 30 000 Owner’s Equity
Premises 60 000 98 000 Capital 78 000

Total Assets $116 000 Total Equities $ 116 000

Required
TH
a) Calculate the Working Capital Ratio for THE 10 STORE as at 31
January 2021

Current assets
Working Capital Ratio= =WCR
current liabilities

1 8000
WCR=
9000

WCR=2

b) Referring to your answer to part ‘a’, explain whether this level of liquidity
is satisfactory.
If it is satisfactory because it gives us to understand the liquidity
indicator that for every 2 dollars of current assets, 1 dollar of current
liabilities is owed.
TH
c) Calculate the Debt Ratio for THE 10 STORE as at 31 January 2021.

Total liabilities
D ebt Ratio= ∗10 0
Total Assent

38000
Debt Ratio= ∗100=32,75 %
116000

d) Referring to your answer to part ‘c’, explain what about the financial
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risk for THE 10 STORE future investors.
The risk for investors is low since, it has a very good profitability, it
also has 67.75% of free capital to fun for future investors in this
company, the financial risk is low.
e) My name is Andres and I want to invest in a new business, which one do you
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recommend between THE 10 STORE Vs. MIDWAY STORE. Justify.

THE 10TH STORE: because it is the company with a more profitable

liquidity indicator and has a capital of more than 50% to invest, that is, if
you invest, the level of profit will be much higher and with less financial
risk.