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  • Arendain Tp4 Finance

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    Mgrace arendakn
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    The document contains a balance sheet and income statement for a company in 20Xb. The balance sheet shows the company has total assets of $2,000,000 consisting of current assets of $1,000,000 and net plant and equipment of $1,000,000. Total liabilities are $1,060,000 consisting of current liabilities of $310,000 and long-term bonds of $750,000. Common equity is $940,000. The income statement shows net sales of $3,000,000 and net income of $117,500. A number of financial ratios are also calculated and compared to industry averages.

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    The document contains a balance sheet and income statement for a company in 20Xb. The balance sheet shows the company has total assets of $2,000,000 consisting of current assets of $1,000,000 and net plant and equipment of $1,000,000. Total liabilities are $1,060,000 consisting of current liabilities of $310,000 and long-term bonds of $750,000. Common equity is $940,000. The income statement shows net sales of $3,000,000 and net income of $117,500. A number of financial ratios are also calculated and compared to industry averages.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    10 views4 pages

    Arendain Tp4 Finance

    Uploaded by

    Mgrace arendakn
    The document contains a balance sheet and income statement for a company in 20Xb. The balance sheet shows the company has total assets of $2,000,000 consisting of current assets of $1,000,000 and net plant and equipment of $1,000,000. Total liabilities are $1,060,000 consisting of current liabilities of $310,000 and long-term bonds of $750,000. Common equity is $940,000. The income statement shows net sales of $3,000,000 and net income of $117,500. A number of financial ratios are also calculated and compared to industry averages.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as xlsx, pdf, or txt
    of 4

    Marygrace D.

    Arendain

    Given:

    Balance Sheet 20Xb

    Assets
    Current Assets:
    Cash and Equivalents ₱ 10,000
    Accounts Receivable ₱ 375,000
    Inventories ₱ 615,000
    Total Current Assets ₱ 1,000,000

    Net Plant and Equipment (cost minus


    depreciation) ₱ 1,000,000
    TOTAL ASSETS ₱ 2,000,000

    Liabilities and Equity


    Current Liabilities:
    Accounts Payable ₱ 60,000
    Accruals ₱ 140,000
    Notes Payable ₱ 110,000

    Total Current Liabilities ₱ 310,000


    Long-term Bonds ₱ 750,000
    Total Liabilities ₱ 1,060,000

    Common Equity:

    Common Stock (50,000 shares) ₱ 130,000

    Retained Earnings ₱ 810,000

    Total Common Equity ₱ 940,000

    Total Liabilities and Equity ₱ 2,000,000


    Income Statement for Year ending December 31, 20Xb

    Net Sales ₱ 3,000,000

    Operating Costs Except ₱ 2,616,200


    Depreciation and
    Amortization

    Depreciation and ₱ 100,000


    Amortization

    Total Operating Costs ₱ 2,716,200

    Operating Income, or ₱ 283,800


    Earning Before Interest and
    Taxes (EBIT)
    Less: Interest ₱ 88,000

    ₱ 195,800
    Earnings Before Taxes (EBT)
    Taxes ₱ 78,300

    Net Income ₱ 117,500

    EBIT (1-T) ₱ 198,660


    Ratio Formula

    Current Ratio = (𝐶𝑢𝑟𝑟𝑒𝑛𝑡


    𝐴𝑠𝑠𝑒𝑡𝑠)/(𝐶𝑢𝑟𝑟𝑒𝑛𝑡
    𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠)
    (𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
    Quick Ratio = −𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠)/(𝐶𝑢𝑟𝑟𝑒𝑛𝑡
    𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠)

    Inventory Turnover Ratio = 𝑆𝑎𝑙𝑒𝑠/𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠

    Days sales Outstanding Ration= 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒𝑠/


    (𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑎𝑙𝑒𝑠 𝑝𝑒𝑟
    𝑑𝑎𝑦)
    𝑆𝑎𝑙𝑒𝑠/(𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠)
    Fixed assets Turnover =

    𝑆𝑎𝑙𝑒𝑠/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)
    Total Assets turnover =

    (𝑇𝑜𝑡𝑎𝑙
    Total debt to total capital = 𝐷𝑒𝑏𝑡)/(𝑇𝑜𝑡𝑎𝑙
    𝐷𝑒𝑏𝑡+𝐸𝑞𝑢𝑖𝑡𝑦)

    Times-interest-earned = 𝐸𝐵𝐼𝑇/(𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
    𝐶ℎ𝑎𝑟𝑔𝑒𝑠)

    Operating Margin = 𝐸𝐵𝐼𝑇/𝑆𝑎𝑙𝑒𝑠

    (𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒)/𝑆𝑎𝑙𝑒𝑠
    Profit Margin =

    (𝑁𝑒𝑡
    Return on total assets = 𝐼𝑛𝑐𝑜𝑚𝑒)/(𝑇𝑜𝑡𝑎𝑙
    𝐴𝑠𝑠𝑒𝑡𝑠)

    Return on common equity = (𝑁𝑒𝑡


    𝐼𝑛𝑐𝑜𝑚𝑒)/(𝐶𝑜𝑚𝑚𝑜𝑛
    𝐸𝑞𝑢𝑖𝑡𝑦)
    (𝐸𝐵𝐼𝑇 (1−𝑇))/(𝑇𝑜𝑡𝑎𝑙
    Return on invested capital = 𝐼𝑛𝑣𝑒𝑠𝑡𝑒𝑑 𝐶𝑎𝑝𝑖𝑡𝑎𝑙)

    𝐸𝐵𝐼𝑇/(𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠)
    Basic earning power =
    Calculation Industry Average Comment

    3.23𝑇𝑖𝑚𝑒𝑠 4.2 Low

    1.24𝑇𝑖𝑚𝑒𝑠 2.2 Low

    4.88𝑇𝑖𝑚𝑒𝑠 10.9 Low

    46𝐷𝑎𝑦𝑠 36 days High

    3𝑇𝑖𝑚𝑒𝑠 2.8 Ok

    𝑇𝑖𝑚𝑒𝑠
    1.5 2.8 Ok

    53% 36.40% High

    3.23𝑇𝑖𝑚𝑒𝑠 6.0 Low

    9% 10.0% Ok

    4% 5.0% Ok

    6% 9.0% Low

    13% 15.0% Ok

    10% 10.8% Ok

    14% 18.0% Low

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