FINANCIAL RATIOS – QUESTIONS

1. Calculate the following ratios based on Balance Sheet as at December 2019 for Company
Cannon.

Balance Sheet as at Dec 2019

   
Assets Liabilities  
   
Current Assets $ Current Liabilities $
  Cash 32,800 Account payables 49,000
  Account Receivables 300 Accrued expenses 1450
  Temporary Investment 1,000 Total Current Liabilities 50,450
  Inventory 39,800 Long Term Liabilities 99,500
Total Current Assets 73,900 Total Liabilities 149,950
   
Fixed Assets Owner's Equity  
  Property 98,000 Retained earnings 11,950
Total Fixed Assets 98,000 Common Stock 10,000
  Total Owner's Equity 21,950
   
Total Assets 171,900   Total Liabilities and Owner's Equity 171,900

i) Current ratio
ii) Debt-to-equity ratio.
iii) Working Capital
iv) Quick ratio
v) Debt ratio
2. Calculate the following ratios based on Example Corporation for the year ended
December 31, 2019.

i) Gross profit margin

ii) Net profit margin
iii) Operating profit margin
3. For its most recent year a company had Sales (all on credit) of $830,000 and Cost of
Goods Sold (COGS)of $525,000. At the beginning of the year its Accounts Receivable
were $80,000 and its Inventory was $100,000. At the end of the year its Accounts
Receivable were $86,000 and its Inventory was $110,000.

Required:
Using the above information, estimate the followings:

i) Average accounts receivable for the year.

Formula : Average = (beginning xxx + ending xxx) /2

ii) Average inventory for the year.

Formula : Average = (beginning xxx + ending xxx) / 2

iii) Accounts receivable turnover ratio for the year.

Formula = Sales/average account receivable

iv) Inventory turnover ratio for the year.

v) Average days of sales for Accounts Receivable during the year.

Formula = (average account receivable / sales) * 365

4. At December 31st, a company's records show the following information:

Required:
Using the above information, estimate the followings:
i) Company’s current asset
ii) Company’s net working capital
iii) Company’s current ratio
iv) Company’s quick ratio
5. Refer financial statement below:
Required:
Using the above information, estimate the followings:

i) Current ratio
ii) Inventory turnover ratio
iii) Average collection periods
iv) Average payment periods
v) Total asset turnover ratio
vi) Time Interest Earned
vii) Return on Assets