a) Calculate on the following ratios for AZ Trading for 2020 and 2021:i. Debt-to-equity ratio ii. Net profit margin iii. Current ratio iv. Inventory turnover ratio b) Provide comments in terms of liquidity, profitability, efficiency and solvency based on the computed ratios in (a) above. c) List THREE (3) objectives of ratio analysis. The following is the comparative financial statement for AZ Trading for the period ended 31December.AZ TradingComparative Statement of Financial PositionAs at 31 December 2020 and 202120212020RMRMAssetsNon-current assets:Motor Vehicle85,000(21,000)64,00065,000(18,000)47,000Less: Accumulated depreciationFurniture and FittingsLess: Accumulated depreciation58,000(12,000)46,00043,000(6,800)36,200Current assets:Cash & cash equivalentsAccount ReceivableShort-term investments30,00050,00070,00015,000275,00010,00020,00060,00035,000InventoriesTotal assets208,200Liabilities56,00061,000117,00050,00060,000110,000Current liabilitiesLong term liabilitiesTotal liabilitiesOwner's equity:CapitalNet profitLess: Drawings79,50083,000(4,500)158,000275,00042,70058,000(2,500)98,200208,200Total liabilities and equityAZ TradingComparative Statements of Profit or Loss and Other Comprehensive IncomeFor the year ended 31 December 2020 and 20212021RM2020RMSalesCost of goods soldLess: Opening inventoryAdd: PurchaseLess: Closing inventory240,000160,00035,00075,000(15,000)25,00065,000(35,000)Gross profitLess: Expenses145,000105,0006/7ACB10103/FPP/SEMESTER I SESSION 2021/2022Office administrationOther expensesNet Profit27,00035,00083,00019,00028,00058,000

Answered: a) Calculate on the following ratios…

a) Calculate on the following ratios for AZ Trading for 2020 and 2021: i. Debt-to-equity ratio ii. Net profit margin iii. Current ratio

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 24CE

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