Manila * Cavite * Laguna * Cebu * Cagayan De Oro * Davao
Since 1977
MANAGEMENT SERVICES
MS 3609 – FINANCIAL STATEMENTS ANALYSIS
LECTURE NOTES
Financial analysis is designed to determine the relative
strengths and weaknesses of a company. Financial
analysis concentrates on financial statement analysis,
which highlights the key aspects of a firm’s
operations.
Financial statement analysis involves a study of the
relationships between income statement and balance
sheet accounts, how these relationships change over
time (trend analysis or horizontal analysis), and how a
particular firm compares with other firms in its
industry (bench-marking or vertical analysis).
Financial statements are used to help predict the
firm’s future earnings and dividends. From an
investor’s standpoint, predicting the future is what
financial statement analysis is all about. From
management’s standpoint, financial statement analysis
is useful both to help anticipate future conditions and,
more important, as a starting point for planning
actions that will influence the future course of events.
Three basic tools in financial statements analysis.
1. Horizontal Analysis or Trend Analysis. A capital is magnified, or “leveraged.”
technique for evaluating a series of financial
statement data over a period of time. Its purpose is
to determine the increase or decrease that has taken
place, expressed either an amount or a percentage.
2. Vertical Analysis or Common Size Analysis. It is
a technique for evaluating financial statement data
that expresses each item in a financial statement as
a percent of a base amount.
3. Ratio Analysis. This technique establishes
relationships among financial statement accounts
at given date or period of time. These ratios
analyze firm’s liquidity, the use of leverage, asset
management, cost control, profitability, growth,
and valuation.
A. Liquidity ratios are used to measure a firm’s
ability to meet its current obligations as they
come due. The current ratio measures the
extent to which current liabilities are covered
by current assets. It is the most commonly
used measure of short-term solvency. Acid-
test ratio is a more stringent measurement of
an entity’s liquidity.
B. Asset management ratios measure how
effectively a firm is managing its assets and
whether the level of those assets is properly
related to the level of operations as measured
by sales.
1. Inventory turnover ratio is used to
measure the velocity of inventory.
2. Days sales outstanding (DSO), also called
the “average collection period” (ACP), is
used to appraise accounts receivable. The
DSO represents the average length of time
that the firm must wait after making a sale
before receiving cash.
3. The fixed assets turnover ratio measures
how effectively the firm uses its plant and
equipment. A potential problem can exist
when interpreting the fixed assets turnover
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TRINIDAD
MAY 2024
ratio of a firm with older, lower-cost fixed
assets compared to one with recently
acquired, higher-cost fixed assets.
4. The total assets turnover ratio measures
the utilization, or turnover, of all the firm’s
assets.
C. Debt management ratios measure the extent
to which a firm is using debt financing, or
financial leverage, and the degree of safety
afforded to creditors. Financial leverage has
three important implications: (1) By raising
funds through debt, stockholders can maintain
control of a firm while limiting their
investment. (2) Creditors look to the equity,
or owner-supplied funds, to provide a margin
of safety, so if the stockholders have provided
only a small proportion of the total financing,
the firm’s risks are borne mainly by its
creditors. (3) If the firm earns more on
investments financed with borrowed funds than
it pays in interest, the return on the owners’
1. The debt ratio measures the percentage of
funds provided by creditors. Total debt
includes both current liabilities and long-
term debt. The lower the ratio, the greater
the protection afforded creditors in the
event of liquidation. Stockholders, on the
other hand, may want more leverage
because it magnifies expected earnings.
2. The times-interest-earned (TIE) ratio
measures the extent to which operating
income can decline before the firm is
unable to meet its annual interest costs.
This ratio has two shortcomings: (1)
Interest is not the only fixed financial
charge.
(2) EBIT does not represent all the cash
flow available to service debt, especially if
a firm has high depreciation and/or
amortization charges.
D. Profitability ratios show the combined effects
of liquidity, asset management, and debt on
operating results.
1. The profit margin on sales gives the profit
per peso of sales.
2. The basic earning power (BEP) ratio is
calculated by dividing earnings before
interest and taxes (EBIT) by total assets.
It shows the raw earning power of the
firm’s assets, before the influence of taxes
and leverage. It is useful for comparing
firms with different tax situations and
different degrees of financial leverage.
3. The return on total assets (ROA) measures
the return on all the firm’s assets after
interest and taxes.
4. The return on common equity (ROE)
measures the rate of return on the
stockholders’ investment. Stockholders
invest to get a return on their money, and this
MS.3609
EXCEL PROFESSIONAL SERVICES, INC.
ratio tells how well they are doing in an
accounting sense.
E. Market value ratios relate the firm’s stock price
to its earnings, cash flow, and book value per
share, and thus give management an
indication of what investors think of the
company’s past performance and future
prospects. If the liquidity, asset management,
debt management, and profitability ratios all
look good, then the market value ratios will be
high, and the stock price will probably be as
high as can be expected.
1. The price/earnings (P/E) ratio shows how
much investors are willing to pay per peso
of reported profits. P/E ratios are higher
for firms with strong growth prospects,
other things held constant, but they are
lower for riskier firms.
2. The price/cash flow ratio is the ratio of
price per share divided by cash flow per
share. It shows the peso amount investors
will pay for P1 of cash flow.
3. The market/book (M/B) ratio, calculated as
market price per share divided by book
value per share, gives another indication of
how investors regard the company.
The Extended Du Pont Equation shows how return on
equity is affected by assets turnover, profit margin,
and leverage. The profit margin times the total assets
turnover is called the Du Pont Equation. This equation
gives the rate of return on assets (ROA):
The ROA times the equity multiplier (total assets
divided by common equity) yields the return on equity
(ROE). This equation is referred to as the Extended
Du Pont Equation:
Benchmarking is the process of comparing the ratios
of a particular company with those of a smaller group
of “benchmark” companies, rather than with the entire
industry.
Benchmarking makes it easy for a firm to see exactly
where the company stands relative to its competition.
Inherent problems and limitations
1. Ratios are often not useful for analyzing the
operations of large firms that operate in many
different industries because comparative ratios are
not meaningful.
2. Inflation affects depreciation charges, inventory
costs, and therefore, the value of both balance
sheet items and net income. For this reason, the
analysis of a firm over time, or a comparative
analysis of firms of different ages, can be mis-
leading.
3. Ratios may be distorted by seasonal factors, or
manipulated by management to give the
impression of a sound financial condition (window
dressing techniques).
4. Different operating policies and accounting
practices, such as the decision to lease rather than
to buy equipment, can distort comparisons.
SUMMARY OF FINANCIAL RATIOS
Liquidity
1. Current ratio = Total Current Assets/ Total
Current Liabilities
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Significance: Tests the ability of a firm to meet its
currently maturing obligations through the use of
current assets
2. Acid-test ratio = Total Liquid Assets/ Total Current
Liabilities
Significance: A stringent test of a firm’s ability to
pay current liabilities
3. (Cash ratio: Cash + Marketable
securities)/Current liabilities
Significance: Test the ability of a firm to meet its
current obligation in the strictest manner
4. Accounts Receivable Turnover = Net Credit Sales/
Ave. Accts Receivable
Significance: Tests the efficiency of credit and
collection policies. Evaluates the quality of
accounts receivable
5. Average Collection Period = Accounts
Receivable/Average Daily Credit Sales
6. Inventory Turnover = Cost of goods sold/ Ave.
Inventory
Significance: Measures the efficiency in managing
inventory
7. Working Capital Turnover = Net Sales/ Ave.
Working Capital
Significance: Evaluates adequacy and effectiveness
in the use of working capital
8. Asset Turnover = Net Sales/Ave Total Assets
Significance: Measures the efficiency of managing
assets
Debt Management (Solvency) Ratios
8. Debt Ratio = Total Liabilities/Total Assets
Significance: Shows proportion of all assets that
are financed with debt
9. Equity Ratio = Total Owners’ Equity/Total Assets
Significance: Shows proportion of assets provided
by owners
10. Debt to Equity Ratio = Total Liabilities/Total
Owners’ Equity
Significance: Measures the debt relative to
amount of owners’ equity
11. Book Value per Share = Total Common
Equity/Number of Common Shares Outstanding
Significance: Measures recoverable amount in
case of liquidation assuming assets are realized
at their book values
12. Times Interest Earned = EBIT/Annual Interest
Expense
Significance: Measures how many times interest
expense is covered by operating profit
Profitability
13. Gross Margin ratio = Gross Profit/Net Sales
Significance: Measures profitability after covering
cost of product sold
14. Operating Profit Margin = Operating Profit/Net
Sales
Significance: Measures profit generated after
covering operating expense
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EXCEL PROFESSIONAL SERVICES, INC.

15. Net Margin = Net Profit/Net Sales year’s working capital, the current ratio, and the acid-
Significance: Measures profit after covering all test ratio. Give the effect in terms of increase (+),
expenses decrease(-), or no effect (0).

16. Return on Assets = Net Operating Profit/Average PROBLEM NO. 1.

Total Assets Gray Corporation's financial statements for the last
Significance: Measures overall efficiency in year are shown below. All figures are in thousands
generating profits through the use of assets (P000). The firm paid a P1,000 dividend to its
stockholders during the year. Two million shares of
17. Return on Equity = Net Income/Stockholders’ stock are outstanding. The stock is currently trading
Equity at a price of P50. There were no sales of new stock.
Significance: Measures rate of return on resources Lease payments totaling P400 are included in cost and
provided by owner/stockholders expense.
BALANCE SHEET
18. Price/Earnings Ratio = Market price per ASSETS
Share/Earnings per Share Cash P 2,000
Measures relationship between the price of Accounts receivable 12,000
common shares in the open market and profit Inventory 14,000
earned on a per share basis Current Assets P28,000
Gross Fixed assets P27,000
19. Dividend Yield = Dividend per Share/ Market Value Accumulated depreciation (16,000)
per Share Net fixed assets 11,000
Significance: Shows the rate earned by Total assets P39,000
stockholders from dividends based on current price LIABILITIES
of the stock Accounts payable P 3,000
Accruals 1,000
20. Payout Ratio = Dividend per Share/Earnings per Current Liabilities P 4,000
Share Long term Debt 10,000
Significance: Shows percentage of earnings paid Equity 25,000
to stockholders Total liabilities & equity P39,000

STRAIGHT PROBLEMS INCOME STATEMENT

Sales P100,000
PROBLEM NO. 1. COGS 80,000
Debit Company’s working capital accounts at the Gross Margin P 20,000
beginning of the year are given below: Cash Expenses 8,000
Cash P 50,000 Depreciation 1,600
Marketable securities 30,000 9,600
Accounts receivable, net 200,000 EBIT P 10,400
Inventory 210,000 Interest 800
Prepaid expenses 10,000 EBT P 9,600
Accounts payable 250,000 Tax 2,600
Notes Due within one year 30,000 Net Income P 7,000
Accrued liabilities 20,000
Requirements: Compute the following for Gray
During the year, Debit completed the following Corporation:
transactions: 1. Current Ratio
1. Issued additional shares of capital stock for 2. Quick Ratio
cash, P100,000. 3. Average Collection Period (ACP)
2. Sold inventory costing P50,000 for P80,000, on 4. Inventory Turnover
account. 5. Fixed Asset Turnover
3. Wrote off uncollectible accounts in the amount of 6. Total Asset Turnover
P10,000. The company uses the allowance 7. Debt Ratio
method of accounting for doubtful accounts. 8. Debt to Equity ratio
4. Declared a cash dividend, P15,000. 9. Times Interest Earned (TIE)
5. Paid accounts payable. 10. Cash Coverage
6. Borrowed cash on a short-term note with the 11. Return on Sales (ROS)
bank, P35,000. 12. Return on Assets (ROA)
7. Sold inventory costing P15,000 for P10,000 cash. 13. Return on Equity (ROE)
8. Purchased inventory on account. 14. Price Earnings Ratio (P/E)
9. Paid off all short-term notes due. 15. Market to Book Value Ratio
10. Purchased equipment for cash.
11. Sold marketable securities costing P18,000 for PROBLEM NO. 2.
cash. The following data are from Sharon Stone, Inc., financial
12. Collected cash on accounts receivable. statements. The firm manufactures home decorative
13. Sold slow-moving inventory at a substantial loss. material. Sales (all credit) were P60 million.
14. Sold a fully-depreciated machine. Sales to total assets 3.0 times
15. Increased the amount of petty cash fund from Total debt to total assets 40 percent
P5,000 to P15,000. Current ratio 2.0 times
Inventory turnover 10.0 times
Requirement: Indicate the separate effect of each of Average collection period 18.0 days
the transactions given above on the beginning of the Fixed asset turnover 7.5 times

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 EXCEL PROFESSIONAL SERVICES, INC.

Requirements: Compute the balance or amount for the 6. Camper Company has 40,000 shares of common
following: stock outstanding. The following data pertain to
1. Cash these shares for the most recent year:
2. Accounts receivable Price originally issued P25 per share
3. Inventory Book value, December 31 P40 per share
4. Fixed assets Market value, January 1 P50 per share
5. Current liabilities Market value, December 31 P60 per share
6. Long-term debt The total dividend on common stock was
7. Equity P480,000. What is the Camper Company's
dividend yield ratio for the year?
PROBLEM NO. 3.
The following ratios and other data pertain to the 7. Whitney Company has a times interest earned
financial statements of the Bulacan Company for the ratio of 3.0. The company's tax rate is 40% and its
year then ended. interest expense is P21,000. Compute the
Current ratio 1.75 to 1 company's after-tax net income.
Acid-test ratio 1.27 to 1
Working capital P33,000 8. Russell Securities has P100 million in total assets
Fixed assets to stockholders’ equity ratio 0.625 to 1 and its corporate tax rate is 40 percent. The
Inventory turnover (based on cost of company recently reported that its basic earning
closing inventory) 4X power (BEP) ratio was 15 percent and its return on
Gross profit percentage 40% assets (ROA) was 9 percent. What was the
Earnings per share P0.50 company’s interest expense?
Average age of outstanding accounts
receivable (based on calendar year of 365 9. Culver Inc. has earnings after interest but before
days) 73 days taxes of P300. The company’s times interest
Capital stock outstanding; 20,000 no par 20,000 no par earned ratio is 7.00. Calculate the company’s
Earnings for the year as a percentage of interest charges.
capital stock 25%
The company has no prepaid expenses, deferred, PROBLEM NO. 5.
intangible assets or long-term liabilities. Shaker Corporation experienced a fire on December 31,
20X2, in which its financial records were partially
Requirement: Reconstruct in as much detail as is destroyed. It has been able to salvage some of the
possible the company’s balance sheet and income records and has ascertained the following balances:
statement for the year. 12/31/20X2 12/31/20X1
Cash P 300,000 P100,000
PROBLEM NO. 4. Receivables (net) 720,500 1,260,000
Answer each of the following questions independently. Inventory 2,000,000 1,800,000
1. How much cash does Gray Computer Co. have if Accounts payable 500,000 900,000
the firm has a current ratio of 2.5, a quick ratio of Notes payable 300,000 600,000
1.2, and current liabilities of P12,000? Gray's Common stock, P100 par 4,000,000 4,000,000
credit sales are P98,000 and its average collection Retained earnings 1,135,000 1,010,000
period is 40 days. (Assume 365 days per year.) Additional information:
1. The inventory turnover is 3.6 times
2. Net sales for the year were P720,000, cost of 2. The return on common stockholders’ equity is
goods sold, operating expenses and income tax, 22%. The company had no additional paid in
P655,200. Asset turnover during the year was 1.8 capital.
times. Compute the return on assets. 3. The receivables turnover is 9.4 times
4. The return on assets is 20%
3. Return on assets, 15%; Asset turnover, 1.5 times; 5. Total assets as at December 31, 20X1, were
Net income, P600,000. How much were net sales P6,050,000.
and net profit margin?
Requirements: Compute the following:
4. Stern Company has 100,000 shares of common 1. Cost of goods sold for 20X2
stock and 20,000 shares of preferred stock 2. Net income for 20X2
outstanding. There was no change in the number 3. Total assets as at December 31, 20X2
of common or preferred shares outstanding during
the year. Preferred stockholders received PROBLEM NO. 6.
dividends totaling P140,000 during the year. The Pioneer Company’s partial income statements
Common stockholders received dividends totaling indicate the following data:
P210,000. If the dividend payout ratio was 70%, 20X2 20X1
how much is the net income? Net sales 1,680,000 1,500,000
Cost of goods sold 1,200,000 1,125,000
5. The market price per share of Fallen Co. stock at Gross profit P 480,000 P375,0000
the beginning of the year was P60.00 and at the Units sold 80,000 75,000
end of the year was P72.00. Net income for the
year was P48,000. Dividends to the preferred Requirement: Prepare an analysis of gross profit
stockholders for the year totaled P12,000, and variation for Pioneer Company.
dividends of P2.50 per share were paid on the
6,000 shares of common stock outstanding during PROBLEM NO. 7.
the year. What is the price-earnings ratio at year The gross profit statements for 20X2 and 20X1 of Mimi
end? Company follow:

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EXCEL PROFESSIONAL SERVICES, INC.
20X2 20X1
Sales P189,000 P120,000
Cost of sales 135,000 100,000
Gross profit P 54,000 P 20,000
Requirements:
1. Assume the unit cost decreased by 20% at the start
of 20X2. What are the percentage changes in unit
selling price and units sold?
2. Assume that unit sales price increased by 25% at
the start of 20X2. What are the percentage changes
in unit cost and units sold?
3. Assume the quantity sold increased by 10% in 20X2
compared to 20X1. What are the percentage
changes in unit selling price and unit cost?
MULTIPLE CHOICE QUESTIONS
1. The receivable turnover and inventory turnover
ratios are used to analyze
a. leverage. c. profitability.
b. long-term solvency. d. liquidity.
2. Silica Company has a current ratio of 2 to 1. This
ratio would increase if
a. The company wrote off an uncollectible
account.
b. The company purchased inventory on open
account.
c. The company sold merchandise on open
account that earned a normal gross margin.
d. A previously declared stock dividend was
distributed.
3. A common-size statement is helpful:
a. for determining the next investment that the
company should make.
b. for considering whether to buy or sell assets.
c. in comparing companies of different sizes.
d. for figuring out how assets are allocated.
4. A company with a current ratio of 2.4 times will
see that ratio decrease when the company
a. pays a large current liability.
b. declares a 10 percent stock dividend on its
common stock.
c. borrows cash by issuing a short-term note
payable.
d. converts a short-term liability to a long-term
liability.
5. A high receivable turnover indicates that
a. many customers are defaulting on their debts.
b. a large proportion of the company's sales is on
credit.
c. the company's inventory is moving very
quickly.
d. customers are making payments very quickly.
6. Which of the following correctly defines the
relationship between profit margin and asset
turnover?
a. Return on asset using the DuPont model is
calculated by subtracting asset turnover from
profit margin.
b. Return on asset using the DuPont model is
calculated by multiplying profit margin times
asset turnover.
c. There is no relationship between profit margin
and asset turnover.
d. ROA using the DuPont model is calculated by
dividing profit margin by asset turnover.
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7. Liquidity is of most interest to
A. short-term creditors.
B. bondholders.
C. stockholders.
D. banks holding the company’s 10-year notes.
8. Which of the following ratios measures long-term
solvency?
A. Acid-test ratio
B. Receivables turnover
C. Debt to total assets
D. Current ratio
9. Your firm received a P1 million purchase order on
the last day of its fiscal year, which it
immediately filled with P600,000 of inventory.
The customer paid P250,000 in cash and your
firm invoiced the customer for the balance. Based
on this information, which of the following
statements is true?
a. The firm’s current ratio will remain unchanged.
b. The firm’s current ratio will increase.
c. The firm’s current ratio will decrease.
d. The firm’s quick (acid test) ratio will decrease.
10. An increase in a company’s current ratio
accompanied by a decrease in its acid-test (quick)
ratio could be a warning that the company is
a. depleting its inventories
b. having trouble collecting its receivables
c. tightening its credit policies
d. carrying excessive inventory
11. Which of the following statements is most
correct?
a. firms with relatively low debt ratios have
higher expected returns when the business is
good.
b. firms with relatively low debt ratios are
exposed to risk of loss when the business is
poor.
c. firms with relatively high debt ratios have
higher expected returns when the business is
bad.
d. firms with relatively high debt ratios have
higher expected returns when the business is
good.
12. The issuance of serial bonds in exchange for an
office building, with the first installment of the
bonds due end of the year:
a. Decreases net working capital.
b. Decreases the current ratio.
c. Decreases the quick ratio.
d. Affects all of the answers as indicated.
13. The board of directors of Contemporary Company
was unhappy with the current return on common
equity. Though the return on sales (profit
margin) was impressively good at 12.5 percent,
the asset turnover was only 0.75. The present
debt ratio is 0.40. Atty. Tristan, the vice-
president of corporate planning, presented a
proposal as follows:
• Profit margin should be raised to 15 percent.
• The new capital structure will be revised by
raising debt component.
• The asset turnover will be maintained at 0.75.
The proposed adjustment is estimated to raise
return on equity by 50 percent.
MS.3609
EXCEL PROFESSIONAL SERVICES, INC.

What debt ratio did Atty. Tristan propose in order notes payable on the balance sheet) to purchase
to raise the return on equity (ROE) to 150 percent the inventory. Assume that the value of the
of the present level? remaining current assets will not change. The
a. 0.52 c. 0.68 company’s bond covenants require it to maintain
b. 0.61 d. 0.72 a current ratio that is greater than or equal to
1.5. What is the maximum amount that the
14. A firm has a debt/equity ratio of 50 percent. company can increase its inventory before it is
Currently, it has interest expense of P500,000 on restricted by these covenants?
P5,000,000 of total debt outstanding. Its tax rate a. P0.50 million c. P1.33 million
is 40 percent. If the firm’s ROA is 6 percent, by b. P1.00 million d. P1.66 million
how many percentage points is the firm’s ROE
greater than its ROA? 21. A fire has destroyed a large percentage of the
a. 3.0% c. 7.4% financial records of the Carter Company. You
b. 5.2% d. 9.0% have the task of piecing together information in
order to release a financial report. You have
15. A firm has sales of P1,640, net income of P135, found the return on equity to be 18 percent. If
net fixed assets of P1,200, and current assets of sales were P4 million, the debt ratio was 0.40,
P530. The firm has P280 in inventory. What is the and total liabilities were P2 million, what would be
common-size statement value of inventory? the return on assets (ROA)?
a. 15.01 percent c. 16.18 percent a. 10.80%
b. 15.68 percent d. 30.42 percent b. 0.80%
c. 1.25%
16. Given the following data for total sales (P’000): d. 12.60%
Year Peso sales
2021 P50,000 Use the following information for the next two questions.
2022 55,000 The current assets of Mayon Enterprise consists of
2023 56,000 cash, accounts receivable, and inventory. The
2024 53,000 following information is available:
A table showing trend percentages for 2021 – Credit sales 75% of total sales
2024, respectively, using 2021 as the base year Inventory turnover 5 times
would reveal: Working capital P1,120,000
a. 100%; 110%; 102%; and 95% Current ratio 2 to 1
b. 100%; 10%; 2%; and (5%) Quick ratio 1.25 to 1
c. 100%; 110%; 112%; and 106% Average Collection period 42 days
d. 94%; 104%; 106%; and 100% Working days 360
22. The estimated inventory amount is:
17. Nelson Company's current liabilities are P50,000, a. 840,000 c. 720,000
its long-term liabilities are P150,000, and its b. 600,000 d. 550,000
working capital is P80,000. If Nelson Company's
debt-to-equity ratio is 0.32, its total long-term 23. The estimated costs of goods sold is:
assets must equal: a. 840,000 c. 6,000,000
a. P625,000 c. P825,000 b. 720,000 d. 4,200,000
b. P745,000 d. P695,000
Use the following information for the next two questions.
18. Info Technics Inc. has an equity multiplier of 20X2 20X1
2.75. The company’s assets are financed with Net sales P5,520,000 P4,000,000
some combination of long-term debt and common Cost of goods sold 3,795,000 3,000,000
equity. What is the company’s debt ratio? Gross profit P1,725,000 P1,000,000
a. 25.00% c. 36.36% 24. Assume that the selling price increased by 20
b. 52.48% d. 63.64% percent effective January 1, 20X2. What is the
amount of increase in sales due to change in
19. Adventure Corporation was organized on January selling price and units sold, respectively?
1 with the following capital structure: a. P920,000 and P600,000
10% cumulative preferred stock, par and b. P1,104,000 and P416,000
liquidation value of P100; authorized, c. P720,000 and P800,000
issued and outstanding 2,000 shares P200,000 d. P(1,380,000) and P2,900,000
Common stock, par value, P5; authorized
40,000 shares; Issued and outstanding 25. Independent of the preceding question, assuming
20,000 shares 100,000 that the cost price per unit decreased by 4
Adventure’s net income for the first year ended percent effective January 1, 20X2. How much
December 31 was P1,880,000, but no dividends were the change in sales due to change in
were declared. How much was Adventure’s book quantity sold and change in cost of goods sold
value per common share at December 31? due to change in unit cost?
a. P90 c. P98 Change in Sales Due Change in Cost of
b. P99 d. P120 to Change in Goods Sold Due to
Quantity Change in Unit Cost
20. Iken Berry Farms has P5 million in current assets, a. P1,270,800 increase P158,125 decrease
P3 million in current liabilities, and its initial b. P249,200 increase P953,125 decrease
inventory level is P1 million. The company plans c. P1,262,400 increase P151,800 decrease
to increase its inventory, and it will raise d. P1,262,400 increase P953,125 decrease
additional short-term debt (that will show up as
“I’m not telling you it is going to be easy — I’m telling you it’s going to be worth it” Art Williams – end -

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