FIN621 Assignment 2 Fall 2021 – Assignments – Solution VU

FIN621 Assignment 2 Fall 2021 – Assignments – Solution VU

SEMESTER FALL 2021

Financial Statement Analysis (FIN621) Assignment No. 2

Due Date: February 16, 2021                                           Marks: 20

 

Learning Objective:

The objective of this question is to enable the students to understand the use of ratio analysis.

 

Assignment:

Consider the following financial statements of ABC Foods and calculate under  mentioned ratios.

 

ABC Foods

Balance Sheet as on December 31, 2021

 

Liabilities & Equity

Rs.

Assets

Rs.

Accounts payable

25,000

Cash & Equivalents

30,000

Tax payable

20,000

Marketable Securities

10,000

Other payables

5,000

Account Receivable

30,000

Total Current Liabilities

50,000

Inventory

5,000

 

Long Term debt

 

50,000

Total Current Assets

75,000

Other long term liabilities

30,000

 

Net Fixed Assets

 

385,000

Total Liabilities

130,000

 

 

 

Common Stock

 

100,000

 

 

10,000 shares of Rs. 10 each

 

 

 

Paid Up Capital in excess of Par

30,000

 

 

Retained earnings

200,000

 

 

Total Owner’s equity

330,000

 

 

 

 

 

 

Total Liabilities & Equity

460,000

Total Assets

460,000

 

 

 

 

 

 

ABC Foods


Income Statement

For the year ended December 31, 2021

 

Particulars

Rs.

Sales

300,000

Less: Cost of Goods Sold

115,000

Gross Profit

185,000

Less: Administrative expenses

20,000

Less: Marketing Expenses

10,000

Operating Profit

155,000

Less: Interest Expense

10,000

Earning before tax

145,000

Less: Tax @ 40%

58,000

Net Income

87,000

 

 

 

Industry Norms

 

Ratio

Norm

Current Ratio

1.5 times

Quick Ratio

1.2 times

Net Profit Margin

25%

Debt Ratio

33%

Time Interest Earned

12 times

 

 

Requirement:

Calculate the above mentioned ratios with respect to the company financials and provide a brief commentary about the performance of the company with respect to industry.             [20 Marks]

 

OTHER IMPORTANT INSTRUCTIONS:

DEADLINE:

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