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QUESTION 2 [25 MARKS] The following is a statement of Financial Position of a Company X...

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)?

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Expert Solution

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


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