In: Finance
QUESTION 2 [25 MARKS] The following is a statement of Financial Position of a Company X as at 31 December: P ASSETS Non-Current Assets Land and Buildings 120,000 Plant And Machinery 250,000 Total Non-Current Assets 370,000 Current Assets Stock 170,000 Debtors 90,000 Cash At Bank 30,000 290,000 Total Assets 660,000 EQUITY & LIABILITIES Equity Share Capital 260,000 Retained Earnings 20,000 280,000 Long Term Liabilities 20% Debentures 300,000 Current Liabilities Sundry Creditors 80,000 Total Equity & Liabilities 660,000 Additional Information: Sales are P400,000 Cost of Sales is P300,000 Net Profit is P20,000 Each share is P1 Calculate: a. Gross Profit Margin. (3marks) b. Net Profit Margin. (4marks) c. Net Working Capital ratio. d. Earnings Per Share. (3marks) e. debt to equity ratio. (3marks) f. Total debt ratio. g. Accounts receivable turnover ratio. h. Accounts payable turnover ratio (3marks)?
BALANCE SHEET | |
Non Current Assets | |
Land and Building | 120,000 |
Plant and Machinery | 250,000 |
Current Assets | |
Stock | 170,000 |
Debtors | 90,000 |
Cash | 30,000 |
Total Assets | 660,000 |
EQUITY AND LIABILITIES | |
Equity Share Capital | 260,000 |
Retained Earnings | 20,000 |
Long Term Liab | |
20% Debentures | 300,000 |
Current Liab | |
Creditors | 80,000 |
Total Equity and Liab | 660,000 |
Additional Information:
Sales | 400,000 |
Cost of Sales | 300,000 |
Net profit | 20,000 |
Answer 1) Gross Profit Margin = Gross Profit / Sales
Gross Profit = Sales - Cost of Sales
Gross Profit = 400,000 -300,000 = 100,000
Gross Profit Margin = 100,000 / 400,000 = 25%
Answer 2) Net Profit Margin = Net Profit / Sales
Net Profit Margin =20,000 / 400,000
Net Profit Margin =5%
Answer 3) Net Working Capital Ratio = Current Assets - Current Liabilities
Current Assets = 290,000
Current Liab = 80,000
Net Working Capital Ratio = 210,000
Answer 4) Earnings Per Share = Net Profit / No. of shares outstanding
No. of shares outstanding= Equity Share Capital/ Share Price = 260,000/1 = 260,000
Net Profit = 20,000
EPS = 20,000 / 260,000 = 7.692%
Answer 5) Debt To Equity Ratio = Debt/Equity
Debt = 300,000
Equity = 260,000
Debt / Equity = 1.15
Answer 6) Total Debt Ratio = Debt /Total Assets
= 300,000/660,000 = .45 or 45%
Answer 7) Accounts Receivable Turnover ratio= Credit Sales / Debtors
= 400,000 / 90,000 = 4.44
Answer 8) Accounts Payable Turnover Ratio = Credit Purchases or Cost of Sales / Creditors
= 300,000 / 80,000 = 3.75