FIN623 Assignment 2 Fall 2024 – Assignments – Solution VU

SEMESTER FALL 2024

Financial Statement Analysis (FIN623) Assignment No. 2

Due Date: February 16, 2024                                           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, 2024

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, 2024

 

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]

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