Enrichment Activities Republic of the Philippines

Department of Education
Zephaniah Co. Region III
Income Statements Schools Division Office of Bulacan
National High School
For the year ended December 31, 20X1
________________________
Sales P 2,000,000
Cost of Sales (1,200,000)
GROSS PROFIT 800,000 FUNDAMENTALS OF ACCOUNTANCY
Rent Income 300,000
Depreciation Expense (480,000) BUSINESS & MANAGEMENT 2
Insurance Expense (240,000)
Bad Depts Expense (60,000)
Loss on Sale of Equipment (80,000)
PROFIT FOR THE YEAR 240,000 Computations, Analysis and
Interpretation of Financial Ratios
Other comprehensive income
COMPREHENSIVE INCOME FOR THE YEAR. 240,000

Requirements: Compute for the Gross Profit Ratio Net profit ratio in 20X1 of QUARTER 1 WEEK 6
Zephaniah Co. and interpret the result thereof. Round-off your answer to
two decimal places. LEARNING ACTIVITY
References:
SHEET
Rodiel C. Ferrer & Zues Vernon B. Millan. Fundamentals of Accountancy, Business &
Management Part 2. Baguio City, Bandolin Enterprise, 2018 & 2019 Edition. NAME:
Joselito G. Florendo, Reymond Patrick P. Monfero, Carlserg S. Amdres, Dani Rose C. GRADE AND SECTION:
Salazar, Christopher B. Honorio, Brad Neiel T. dela Cruz, & Daniel Day V. Aguillon
Teachers Guide for SHS re: Fundamentals of Accountancy, Business and DATE OF SUBMISSION
Management. Quezon City. Commission on Higher Education, 2016

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I. OBJECTIVES Post test
A. Content Standards 5. Entity A has P20,000 inventories, P100,000 cash, P40,000 machineries, and P
The methods or tools of analysis of financial statements 20,000 current liabilities. How much is Entity A’s working capital?
to include horizontal & vertical analysis and ratios to a. P80.000 b. P140,000 c. P100,000 d. P160,000
test the level of liquidity, solvency, profitability and 6. Entity A has P40,000 inventories, P70,000 cash, P40,000 machineries, and P
stability of the business. 40,000 current liabilities. How much is current ratio?
a. 3.75 b. 2.75 c. 1.00 d. 1.75
B. Performance Standards:
7. Entity A has P60,000 account receivables, P50,000 cash, P20,000 allowance for
Solve exercises and problems that require computation
bad debts, and P 40,000 current liabilities. How much is Entity A’s quick ratio?
and interpretation using horizontal and vertical analysis
a. 2.75 b. 1.5 c. 2.25 d. 3.25
and various financial ratios 8. Entity A has P20,000 ending inventory, P40,000 beginning inventory, and P40,000
C. MELCs: cost of goods sold. What is Entity A’s inventory turnover?
Define the measurement levels namely: liquidity, a. 0.66 b. 2.00 c. 1.00 d. 1.33
solvency, profitability and stability. 9. Entity A has P70,000 ending inventory, P152,000 beginning inventory, and
Perform vertical and horizontal analysis of the financial P190,000 cost of goods sold. What is Entity A’s average sales period (days of
statements of a single proprietorship. inventory?
Compute and interpret different financial ratios a. 117.34 b. 220.86 c. 211.71 d. 213.32
D. Specific Objectives: 10. Entity A has P80,000 credit sales, P50,000 beginning accounts receivable, and
1. Learn how to compute different ratios. P73,000 ending accounts receivable. What is Entity A’s accounts receivable
2. Analyze and Interpret the results of computed turnover?
a. 1.30 b. 1.60 c. 0.65 d. 1.10
ratios of the financial statements
11. Entity A has P100,000 credit sales, P67,000 beginning accounts receivable, and
P89,000 ending accounts receivable. What is Entity A’s average collection period?
II. CONTENT
a. 325 b. 252 c. 285 d. 276
12. Entity A assets consist of P60,000 account receivable, P50,000 cash and P20,000
inventory. The liabilities are P20,000 notes payable and 10,000 accounts payable.
What is Entity A’s debt ratio?
a. 0.60 b. 0.27 c. 0.33 d. 0.23
Lesson 7 13. Entity A assets consist of P40,000 account receivable, P80,000 cash and P20,000
Analysis and Interpretation of Financial
inventory. Entity A has total equity of P40,000. What is Entity A’s equity ratio?
Ratios a. 0.60 c. 0.27
b. 0.33 d. 0.23

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E. REFLECTION: III. PROCEDURES:
A. Preliminary Activities
Fill out the blank line below; 1. Pre-Test
What have you learned in about this lesson? MULTIPLE CHOICE. Read the following items carefully. Encircle the letter of
the correct answer.
Liquidity ratios are used to determine_______________________________.
_______________________________________________________________ 1. Current asset minus current liabilities is
Activity ratios are used to determine a. Current Ratio c. Debt Ratio
b. Working Capital d. Quick Ratio
_______________________________________________________________
Leverage ratios are used to determine
2. Current asset divided by current liabilities is
___________________________________________ a. Current Ratio c. Debt Ratio
_______________________________________________________________ b. Working Capital d. Quick Ratio
Profitability ratios are used to determine
______________________________________________________________ 3. In its stricter version of the current ratio wherein the numerator
V. ASSESSMENT (Post Test) includes only cash, accounts receivable and marketable securities.
a. Current Ratio c. Debt Ratio
1. Gross profit over net sales is
b. Working Capital d. Quick Ratio
a. Return on Assets c. Gross Profit ratio
b. Net Profit Ratio d. Debt-to Equity Ratio
4. Cost of sales divided by average inventory
2. Total Equity over Total Assets is
a. Return on Assets c. Debt-to Assets Ratio a. Debt Ratio c. Days of Inventory
b. Net Profit Ratio d. Equity Ratio b. Average Inventory d. Inventory Turnover
3. Total liabilities divided by total equity.
a. Return on Assets c. Equity Ratio 5. Credit sales divided by average accounts receivable is
b. Return on Equity d. Debt-to Equity Ratio a. Account receivable turnover c. Dept Ratio
4. Three hundred sixty-five days in a year divided by accounts receivable b. Days of receivable d. Equity Ratio
turnover.
a. Average Accounts Receivable c. Return on Assets 6. Profit or Loss divided by total assets is
b. Net Profit Ratio d. Days of receivable
a. Return on Assets c. Gross Profit ratio
b. Net Profit Ratio d. Debt-to Equity Ratio
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Pre test 1.Current Ratio 6.Account Receivable Turnover
7. Current ratio is the most commonly used ratio un measuring 2.Quick Ratio 7.Days of Receivable
an entities liquidity. Current ratio is computed as current assets 3.Working Capital 8.Debt Ratio
less current liabilities. 4.Inventory turnover 9.Equity Ratio
5.Days of Inventory 10.Debt-to-Equity Ratio
a. True b. False 4. ACTIVITY D
8. The quick ratio (Acid test ratio has a similar purpose to that of current Jubilance Co.
ratio. Income Statements
a. True b. False For the year ended December 31, 20X1 & 20X0
20X1
Use the following information for the next three questions: You Sales (Credit Sales Amount to ₱ 5,000,000
bought 10 apples for P10 each and were able to sell all them for P50 ₱3,800,000) (2,400,000)
each. The only other expense you incurred is the salary of your helper Cost of Sales
amounting to P150. GROSS PROFIT 2,600,000
9. Your gross profit rate is 0.80. Salaries Expense (780,000)
a. True b. False Utilities Expense (120,000)
10. Your net profit rate is 0.60. Rent Expense (156,000)
a. True b. False Depreciation Expense (240,000)
Bad Debts Expense (72,000)
11. When measuring return on investment though financial ratios, profit Interest Expense (36,000)
or loss is normally used as numerator. PROFIT FOR THE YEAR ₱1,196,000
a. True b. False Requirements: Compute for the following financial ratio in 20X1
of Jubilance Co. and interpret the result thereof. Consider data
12. Short-term solvency or liquidity refers to an entity’s ability to pay from Activity C or Jubilance Co. Balance Sheets required for
short-term obligation computation of ratio’s below:
a. True b. False
1.Gross Profit Ratio 3.Return on assets
2.Net profit ratio 4. Return of equity/net assets

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C. INDEPENDENT ACTIVITIES: PRETEST
3. ACTIVITY C
Jubilance Co. Use the following information for the next two questions: Entity A has
Balance Sheets total current assets of P200 and total liabilities is P50.
As of December 31, 20X1 & 20X0 13. Entity A’s current ratio is 4.
Assets 20X1
a. True b. False
Cash and cash equivalents ₱30,000
Account receivable-net 1,672,000 14. Entity A’s working capital is P125.
Inventory 500,000
a. True b. False
Prepaid assets 48,000
Total current assets 2,250,000
15. Activity ratios provide a measure of how efficient a business in utilizing
Property Plant & Equipment 780,000
its resources.
Total noncurrent assets 780,000
a. True b. False
TOTAL ASSETS ₱3,030,000
LIABILITIES
Accounts payable-net P980,000
Notes payable(current portion) 180,000
Total current liabilities 1,160,000
2. Reviewing Previous Lesson:
Notes payable(noncurrent portion) 180,000
Total noncurrent liabilities 180,000 Let us review past lesson.
TOTAL LIABILITIES 1,340,000
EQUITY Do you remember the two methods of Financial
Owner’s Capital 1,690,000 Statement Analysis?
TOTAL LIABILITIES & EQUITY ₱3,030,000
How to do the horizontal analysis? Will you give the
Requirements: Compute for the following financial ratio in 20X1 steps.
of Jubilance Co. and interpret the result thereof. Round-off your What about vertical analysis, how to do this kind of
answer to two decimal places. analysis?

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B. Presenting the new lesson
2. ACTIVITY B: (Written Work / Task)
ACTIVITY Put your answer on column 2 which indicates what kind of financial
ratio is in column 1.
Motivation:
a. Liquidity Ratio c. Leverage Ratio
Prudence Co. and Jubilance Co. produce & sell the same product. b. Activity ratio d. Profitability Ratio
Prudence Co. Sold the product at 150, with production 80 & marketing
ACTIVITY(Ratio) Kind of Financial Ratio
expenses of 20. While Jubilance sold at 320. Jubilance Co. production cost of
150 and marketing expenses of 25. 1. Debt Ratio
How much is the net income of Prudence Co. and Jubilance Co.? 2. Gross profit ratio
3. Inventory turnover
4. Current Ratio
5. Return on Equity
ANALYSIS:
Processing questions: 6. Debt-to-Equity Ratio
A. (Question) 7. Days of Receivable
8. Working capital
How much is the net income of Prudence Co. and Jubilance Co.?
9. Days of Inventory
Which company has a greater profit percentage ratio?
10. Equity Ratio

B. (Question) 11. Net Profit Ratio

12. Return on assets
Which company has efficient and effective strategy in
13. Account Receivable Turnover
generating income?
14. Quick Ratio

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C. INDEPENDENT ACTIVITIES (Formative) 3. ABSTRACTION (Discussion of the Topic)
1. ACTIVITY A: (Written Works / task) NOTE: Use available DepED Textbooks, READERS, Govt
sites, LR Portal …)
State the numerator on Column 2 and the denominator on column 3, for the
formula of the given item on column 1 or Activity Column and indicate the term The Financial Analysis Ratios
“none” for formula not using numerator and denominator.
Liquidity ratios provide a measure of the ability of the business to pay its
ACTIVITY (Ratio) Numerator Denominator liabilities.1
a. Current Ratio. This is the most commonly used ratio in measuring
1. Quick Ratio
the ability of the business to pay its short-term debts.
2. Debt Ratio Formula: Current Ratio = Current Assets
3. Gross profit ratio Current Liabilites
4. Inventory turnover b. Quick Ratio (Acid-Test Ratio). A stricter ratio used to measure the
ability of the business to pay its short-term debts.
5. Current Ratio
Formula: Quick Ratio = Quick Assets
6. Return on Equity Current Liabilities
7. Debt-to-Equity Ratio Quick Assets = Cash+ Marketable Securities+ Accounts Receivable
8. Days of Receivable
c. Working Capital. Similar to current ratio but measures the ability of
9. Working capital
the business to pay its short-term debts by the excess or deficiency
10. Days of Inventory of current assets over current liabilities.
11. Equity Ratio Formula: Working Capital= Current Assets – Current Liabilities
Activity ratios (Asset management ratio). This provides measures of how
12. Net Profit Ratio
efficient a business is utilizing it resources.1
13. Return on assets a. Inventory Turnover. A measure of a number of times inventory is
14. Account Receivable sold and replenished during the period. Generally, the higher ratio,
Turnover the better. However, an unusually high inventory turnover could
15. Quick Assets indicate inventory shortages due to shortage in raw materials,
production inefficiency, underinvestment, poor inventory planning,
and loss of sales.
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3. Discussion of the Topic: (ABSTRACTION)
Formula: Inventory Turnover = Cost of Goods Sold
Average Inventory
Where:
Average Inventory = Inventory, Beg. + Inventory, End
2
b. Days of Inventory (Average sale period). A measure of the number of
days inventory is held before it is sold.
Formula: Days of Inventory = 365 days in a year
Inventory Turnover
c. Account Receivable turnover. A measure of the number of times account
receivable have been collected during a period. It is an indication of
efficiency in collection.
Formula: Account Receivable Turnover = Credit Sales
Average Accounts Receivable
Where:
Average accounts receivable = Accts Rec. Beg. + Accts. Rec. End
2 Formula: Net Profit Ratio = Profit for the year
d. Days of receivable (Average collection period). A measure of the
average time to collect a receivable.
Formula: Days of Accts. Rec. = 365 days in a year
Accts. Rec. Turnover
Leverage ratios (Debt management ratio). Provide a measure of the extent a
business uses debt financing or “leverage”.1
a. Debt Ratio (Debt-to-asset ratio) Measured the proportion of assets
financed through debt.
Formula: Debt Ratio = Total Liabilities
Total Assets
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3. Discussion of the Topic: (ABSTRACTION)
b. Equity ratio. Measures the proportion of assets finance trough equity.
Formula: Equity Ratio = Total Equity
Total Assets
c. Debt-to-equity ratio. Indicates how much debt is used to finance the
assets relative to the amount pertaining to the owner(s).
Formula: Debt to equity Ratio = Total Liabilities
Total Equity
Profitability Ratios1 Provide a measure of the performance of a business in
terms of its ability to generate profit from its resources.
a. Gross profit ratio, shows the relationship between sales and cost of
goods sold.
Formula: Gross Profit Ratio = Gross Profit
Net Sales
b. Net profit ratio, measured profitability after considering all income and
expenses.
Net Sales
c. Return on assets, measures the profit generated in relation to the total
resources available to the business.
Formula: Return on assets = Profit for the year
Total Assets
d. Return on equity (Return on net assets), measures the profit generated
in relation to the resources invested by (or attributable to) the owner(s)
of the business.
Formula: Net Prof it Ratio = Profit for the year
Total Equity
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