FIN623 Assignment 2 Fall 2023 – Assignments – Solution VU
FIN623 Assignment 2 Fall 2023 – Assignments – Solution VU
SEMESTER FALL 2023
Financial Statement Analysis (FIN623) Assignment No. 2
Due Date: February 16, 2023 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, 2023
| 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, 2023
| 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:
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