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You have been asked by a friend to analyse the following set of financial statements for a small unlisted company that he is considering investing in. Balance Sheets as at 31 December 20X1 20X2 Shareholders' funds Issued capital Retained earnings Total shareholders' funds 100,000 50.000 150,000 150,000 57,500 207,500 Represented by: Current assets 149,000 133,000 Bank Accounts receivable* 54,000 45,000 50,000 80,000 53.000 Inventory** Less Current liabilities 35,000 118,500 Bank Accounts payable Taxes payable 37,000 32,000 3,000 81,000 500 Working capital 114,000 14,500 Non-current assets Land 65,000 Buildings Accum. depreciation Plant & equipment Accum. depreciation Motor vehicles Accum. depreciation Total non-current assets 185,000 _(4,000) 181,000 12,500 (4,500) 55,000 12,500 (3,500) 30,000 9,000 8,000 (3,000) 27,000 (11,000) 44,000 36,000 298,000 Non-current liabilities Mortgage (secured) (105,000) Net total assets 150,000 207,500 * Opening debtors for 20X1 was $31,000 * Opening inventory for 20X1 was $46,000

You have been asked by a friend to analyse the following set of financial statements for a small unlisted company that he is considering investing in. Balance Sheets as at 31 December 20X1 20X2 Shareholders' funds Issued capital Retained earnings Total shareholders' funds 100,000 50.000 150,000 150,000 57,500 207,500 Represented by: Current assets 149,000 133,000 Bank Accounts receivable* 54,000 45,000 50,000 80,000 53.000 Inventory** Less Current liabilities 35,000 118,500 Bank Accounts payable Taxes payable 37,000 32,000 3,000 81,000 500 Working capital 114,000 14,500 Non-current assets Land 65,000 Buildings Accum. depreciation Plant & equipment Accum. depreciation Motor vehicles Accum. depreciation Total non-current assets 185,000 _(4,000) 181,000 12,500 (4,500) 55,000 12,500 (3,500) 30,000 9,000 8,000 (3,000) 27,000 (11,000) 44,000 36,000 298,000 Non-current liabilities Mortgage (secured) (105,000) Net total assets 150,000 207,500 * Opening debtors for 20X1 was $31,000 * Opening inventory for 20X1 was $46,000

Financial Accounting
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 2CP
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a)

Calculate the following ratios

i)Gross profit

ii)Net profit before taxi

iii)Current ratio

iv)Accounts receivable turnover in days

v)Inventory turnover in days

vi)Accounts payable turnover

vii)Times interest covered

viii)Debt/equity.

b)Comment on the profitability and stability of the company using the ratios calculated in (a)(plus any others you think may be relevant) and make recommendations to your friend.

You have been asked by a friend to analyse the following set of financial statements for a small unlisted company that he is considering investing in. Balance Sheets as at 31 December 20X1 20X2 Shareholders' funds Issued capital Retained earmings Total shareholders' funds 100,000 150,000 50.000 150,000 57,500 207,500 Represented by: Current assets 149,000 133,000 Bank 54,000 Accounts receivable* 45,000 80,000 Inventory* 50.000 53,000 Less Current liabilities Bank 35,000 118,500 Accounts payable Taxes payable 32,000 3,000 37,000 81,000 500 Working capital 114,000 14,500 Non-current assets Land Buildings Accum. depreciation 65,000 185,000 (4,000) 181,000 Plant & equipment Accum. depreciation 12,500 12,500 9,000 (3,500) 30,000 (3,000) (4,500) 55,000 8,000 Motor vehicles Accum. depreciation Total non-current assets 27,000 (11.000) 44,000 36,000 298,000 Non-current liabilities Mortgage (secured) (105,000) Net total assets 150,000 207,500 * Opening debtors for 20X1 was $31,000 ** Opening inventory for 20X1 was $46,000
Transcribed Image Text:You have been asked by a friend to analyse the following set of financial statements for a small unlisted company that he is considering investing in. Balance Sheets as at 31 December 20X1 20X2 Shareholders' funds Issued capital Retained earmings Total shareholders' funds 100,000 150,000 50.000 150,000 57,500 207,500 Represented by: Current assets 149,000 133,000 Bank 54,000 Accounts receivable* 45,000 80,000 Inventory* 50.000 53,000 Less Current liabilities Bank 35,000 118,500 Accounts payable Taxes payable 32,000 3,000 37,000 81,000 500 Working capital 114,000 14,500 Non-current assets Land Buildings Accum. depreciation 65,000 185,000 (4,000) 181,000 Plant & equipment Accum. depreciation 12,500 12,500 9,000 (3,500) 30,000 (3,000) (4,500) 55,000 8,000 Motor vehicles Accum. depreciation Total non-current assets 27,000 (11.000) 44,000 36,000 298,000 Non-current liabilities Mortgage (secured) (105,000) Net total assets 150,000 207,500 * Opening debtors for 20X1 was $31,000 ** Opening inventory for 20X1 was $46,000
Income Statements for the years ending 31 December 20X1 20X2 Sales Cost of sales 544,000 440,000 104,000 740,000 612,500 Gross profit 127,500 less Expenses: Selling: Wages Advertising 36,500 56,000 31,500 47,000 5,000 9,000 Administration: 27,000 37,000 Rents & rates 8,500 4,000 Depreciation General Office 13,000 16,000 2,000 15,350 Gain on sale of assets (1,000) 5.000 Wages 1,150 Financial: Interest – mortgage Interest – bank 4,500 20,500 10,000 4,500 1,500 3,000 Bad debts 6,000 Total expenses 68,000 113,500 14,000 4,200 9,800 Net profit before tax Тах 36,000 10,800 Net profit after tax 25,200
Transcribed Image Text:Income Statements for the years ending 31 December 20X1 20X2 Sales Cost of sales 544,000 440,000 104,000 740,000 612,500 Gross profit 127,500 less Expenses: Selling: Wages Advertising 36,500 56,000 31,500 47,000 5,000 9,000 Administration: 27,000 37,000 Rents & rates 8,500 4,000 Depreciation General Office 13,000 16,000 2,000 15,350 Gain on sale of assets (1,000) 5.000 Wages 1,150 Financial: Interest – mortgage Interest – bank 4,500 20,500 10,000 4,500 1,500 3,000 Bad debts 6,000 Total expenses 68,000 113,500 14,000 4,200 9,800 Net profit before tax Тах 36,000 10,800 Net profit after tax 25,200
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