RATIO ANALYSIS
BALANCE SHEET FORMAT (SAMPLE)
Company Name
Balance Sheet
December 31
Current Assets
Fixed Assets
Cash 20,000 30,000
Account Receivables 65,000 60,000
Inventories 60,000 50,000
Plant assets 20,000 2,000
Land 10,000 10,000
Building 50,000 50,000
(Accumulated Depreciation) 15,000 15,000
Current Liabilities Accounts Payable/Sundy
Long Term Liabilities Mortgage Payable (15%) 50,000 60,000
Owners' Equity
Creditors 50,000 17,000
Common Stock 1,00,000 1,00,000
Retained Earnings 10,000 10,000
Additional Information for 2011
2. Net sales of Tk.100,000 OR Sales on account were Tk. 4,20,000, Sales returns and Allowances amounted to Tk. 20,000
3. Cost of goods sold was Tk. 1,98,000;
4. Net cash provided by operating activities was Tk. 33,000
FORMULAS (Ratio Analysis)
Total Assets = Current Assets + Fixed Assets
Total Liabilities / Debt = Current Liabilities + Long Term Liabilities
Gross Profit = Net Sales - Cost of Goods Sold
Net Sales = Sales - (Sales returns + Allowances + Discount)
Average Receivables = (Opening Receivable + Closing Receivable) /2
Average Inventory = (Opening Receivable + Closing Receivable) /2
Average Total Assets = (Opening Total Assets + Closing Total Assets) /2
SL Name of Ration Formula Result Type
Current Assets a:1 Current Liabilities
Current Assets - Inventories - Prepaid Expenses a:1 Current Liabilities
Net Sales Times Average Receivables
Cost of Goods Sold Times Average Inventory
Net Sales Times Average Total Assets
Net Income X100 = %
Average Total Assets
Average Common Stockholders' Equity
Net Cash provided by Operating Activities - Dividends a:1 Average Total Liabilities
Net Cash provided by Operating Activities a:1 Average Current Liabilities
Net Income X100 %
Gross Profit X100 = %
Net Sales
Net Profit X100 = %
Net Sales
Total Liabilities a:1 Total Assets
EXAMPLES
DECEMBER, 2012
George Company has the following comparative balance sheet data:
George Company
Balance Sheet
December, 31
2010 2011
Taka Taka
Cash 20,000 30,000
Receivable (net) 65,000 60,000
Inventories 60,000 50,000
Plant assets (net) 2,00,000 180,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
2. Sales on account were Tk. 4,20,000, sales returns and allowances amounted to Tk. 20,000.
4. Net cash provided by operating activities was Tk. 44,000.
Compute the following ratios at December 31, 2011:
Cash + Receivable + Inventories
=
=
90,000
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivable Turnover = Net Sales
(d) Inventory Turnover = Cost of Goods Sold
Current Liabilities Accounts Payable 60,000 60,000
= 1.5:1 Current Liabilities 60,000 60,000
= 6.4 times Average Receivable (Opening Receivable + Closing Receivable) /2 (65,000+60,000)/2
= 3.6 times Average Inventory (Opening Inventory + Closing Inventory) /2 (60,000+50,000)/2
=
1,40,000-50,000
=
Sales - (Sales returns + Allowances)
Cost of Goods Sold
=
(f) Cash debt coverage = Net Cash provided by Operating Activities
(g) Current cash debt coverage = Net Cash provided by Operating Activities
= 0.28 Average Total Liabilities (Opening Total Liabilities + Closing Total Liabilities)/2
=
=
Average Current Liabilities (Opening Curr. Liab. + Closing Curr. Liab.)/2
MAY, 2012
Jamuna Company Ltd. has the following comparative Balance Sheet:-
Jamuna Company Ltd.
Balance Sheet
December, 31
2011 2010
Taka Taka
Cash 30,000 45,000
Accounts Receivables 95,000 90,000
Inventories 70,000 60,000
Plant assets 2,00,000 190,000
3,95,000 3,85,000
Accounts Payable 65,000 75,000
Mortgage Payable (15%) 1,30,000 1,30,000
Common Stock 1,50,000 1,30,000
Retained Earnings 50,000 50,000
3,95,000 3,85,000
2. Sales on account were Tk. 4,20,000, sales returns and allowances amounted to Tk. 20,000.
4. Net cash provided by operating activities was Tk. 33,000.
Compute the following ratios at December 31, 2011 and make comment on those:
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
Current Liabilities Accounts Payable 65,000 65,000
= 1.92:1 Current Liabilities 65,000 65,000
= 4.32 times Average Receivable (Opening Receivable + Closing Receivable) /2 (90,000+95,000)/2
1,95,000-70,000
=
Sales - (Sales returns + Allowances)
1,25,000
=
=
(f) Gross Profit Ratio = Gross Profit X100 =
(g) Net Profit Ratio = Net Profit X100 =
4,00,000-1,98,000 X100 = 50.5% Net Sales Sales - (Sales returns + Allowances) 4,20,000-20,000
25,000 X100 = 6.25% Net Sales Sales - (Sales returns + Allowances) 4,00,000
Net Sales - Cost of goods sold X100 =
Net Income X100 =
MAY, 2011
Scally Corporation's comparative Balance Sheets are presented below:
Scally Corporation
Balance Sheet
December, 31
2010 2009
Taka Taka
Cash 4,300 3,700
Accounts Receivable 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Building 70,000 70,000
Accumulated Depreciation (15,000) (10,000)
1,10,500 1,20,100
Accounts Payable 12,370 31,100
Common Stock 75,000 69,000
Retained Earnings 23,130 20,000
1,10,500 1,20,100
Scally's 2010 income statement included net sales of Tk.100,000, cost of goods sold of Tk.60,000 and net income of Tk.15,000
(h) Return on common stockholders' equity;
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
(d) Inventory Turnover = Cost of Goods Sold
(e) Profit Margin = Net Income X100 =
Current Liabilities Accounts Payable 12,370 12,370
= 2.06:1 Current Liabilities 12,370 12,370
= 4.48 times Average Receivable (Opening Receivable + Closing Receivable) /2 (23,400+21,200)/2
= 2.69:1 times Average Inventories (Opening Inventories + Closing Inventories) /2 (7,000+10,000)/2
15,000 X100 = 15% Net Sales 1,00,000
= 1.53 times Average Total Assets (Opening Total Assets + Closing Total Assets) /2 (1,20,100+1,10,500)/2
15,000 X100 = 13% AverageTotalAssets (Opening Total Assets + Closing Total Assets) /2 1,15,300
35,500-10,000
=
25,500
=
Net Sales
=
Cost of Goods Sold
=
Sales - (Sales returns + Allowances)
=
(g) Return on Assets = Net Income X100 =
(h) Return on common stockholders' equity = Net Income X100 =
(i) Debt to total asset ratio = Total Liabilities
Net Income X100 =
Net Income X100 = 16.03% Average Stockholder's Equity (Opening S. Equity + Closing S.s Equity) /2
=
12,370
= 0.11:1
Total Assets 1,10,500
NOVEMBER, 2010
Padma Company has the following comparative Balance Sheet Data:
Padma Company
Balance Sheet
December, 31
2009 2008
Taka Taka
Cash 15,000 30,000
Receivables (net) 65,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 2,05,000 180,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock (10 per) 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
4. Net cash provided by operating activities was Tk. 33,000.
Compute the following ratios at December 31, 2011 and make comment on these:
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
Current Liabilities Accounts Payable 50,000 50,000
= 1.6:1 Current Liabilities 50,000 50,000
= 6.72 times Average Receivable (Opening Receivable + Closing Receivable) /2 (60,000+65,000)/2
1,40,000-60,000
=
Sales - (Sales returns + Allowances)
80,000
=
=
(f) Gross Profit Ratio = Gross Profit X100 =
(g) Net Profit Ratio = Net Profit X100 =
4,20,000-1,98,000 X100 = 52.85% Net Sales Sales - (Sales returns + Allowances) 4,20,000
25,000 X100 = 5.95% Net Sales Sales - (Sales returns + Allowances) 4,20,000
Net Sales - Cost of goods sold X100 =
Net Income X100 =
BALANCE SHEET FORMAT (SAMPLE)
Company Name
Balance Sheet
December 31
Current Assets
Fixed Assets
Cash 20,000 30,000
Account Receivables 65,000 60,000
Inventories 60,000 50,000
Plant assets 20,000 2,000
Land 10,000 10,000
Building 50,000 50,000
(Accumulated Depreciation) 15,000 15,000
Current Liabilities Accounts Payable/Sundy
Long Term Liabilities Mortgage Payable (15%) 50,000 60,000
Owners' Equity
Creditors 50,000 17,000
Common Stock 1,00,000 1,00,000
Retained Earnings 10,000 10,000
Additional Information for 2011
2. Net sales of Tk.100,000 OR Sales on account were Tk. 4,20,000, Sales returns and Allowances amounted to Tk. 20,000
3. Cost of goods sold was Tk. 1,98,000;
4. Net cash provided by operating activities was Tk. 33,000
FORMULAS (Ratio Analysis)
Total Assets = Current Assets + Fixed Assets
Total Liabilities / Debt = Current Liabilities + Long Term Liabilities
Gross Profit = Net Sales - Cost of Goods Sold
Net Sales = Sales - (Sales returns + Allowances + Discount)
Average Receivables = (Opening Receivable + Closing Receivable) /2
Average Inventory = (Opening Receivable + Closing Receivable) /2
Average Total Assets = (Opening Total Assets + Closing Total Assets) /2
SL Name of Ration Formula Result Type
Current Assets a:1 Current Liabilities
Current Assets - Inventories - Prepaid Expenses a:1 Current Liabilities
Net Sales Times Average Receivables
Cost of Goods Sold Times Average Inventory
Net Sales Times Average Total Assets
Net Income X100 = %
Average Total Assets
Average Common Stockholders' Equity
Net Cash provided by Operating Activities - Dividends a:1 Average Total Liabilities
Net Cash provided by Operating Activities a:1 Average Current Liabilities
Net Income X100 %
Gross Profit X100 = %
Net Sales
Net Profit X100 = %
Net Sales
Total Liabilities a:1 Total Assets
EXAMPLES
DECEMBER, 2012
George Company has the following comparative balance sheet data:
George Company
Balance Sheet
December, 31
2010 2011
Taka Taka
Cash 20,000 30,000
Receivable (net) 65,000 60,000
Inventories 60,000 50,000
Plant assets (net) 2,00,000 180,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
2. Sales on account were Tk. 4,20,000, sales returns and allowances amounted to Tk. 20,000.
4. Net cash provided by operating activities was Tk. 44,000.
Compute the following ratios at December 31, 2011:
Cash + Receivable + Inventories
=
=
90,000
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivable Turnover = Net Sales
(d) Inventory Turnover = Cost of Goods Sold
Current Liabilities Accounts Payable 60,000 60,000
= 1.5:1 Current Liabilities 60,000 60,000
= 6.4 times Average Receivable (Opening Receivable + Closing Receivable) /2 (65,000+60,000)/2
= 3.6 times Average Inventory (Opening Inventory + Closing Inventory) /2 (60,000+50,000)/2
=
1,40,000-50,000
=
Sales - (Sales returns + Allowances)
Cost of Goods Sold
=
(f) Cash debt coverage = Net Cash provided by Operating Activities
(g) Current cash debt coverage = Net Cash provided by Operating Activities
= 0.28 Average Total Liabilities (Opening Total Liabilities + Closing Total Liabilities)/2
=
=
Average Current Liabilities (Opening Curr. Liab. + Closing Curr. Liab.)/2
MAY, 2012
Jamuna Company Ltd. has the following comparative Balance Sheet:-
Jamuna Company Ltd.
Balance Sheet
December, 31
2011 2010
Taka Taka
Cash 30,000 45,000
Accounts Receivables 95,000 90,000
Inventories 70,000 60,000
Plant assets 2,00,000 190,000
3,95,000 3,85,000
Accounts Payable 65,000 75,000
Mortgage Payable (15%) 1,30,000 1,30,000
Common Stock 1,50,000 1,30,000
Retained Earnings 50,000 50,000
3,95,000 3,85,000
2. Sales on account were Tk. 4,20,000, sales returns and allowances amounted to Tk. 20,000.
4. Net cash provided by operating activities was Tk. 33,000.
Compute the following ratios at December 31, 2011 and make comment on those:
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
Current Liabilities Accounts Payable 65,000 65,000
= 1.92:1 Current Liabilities 65,000 65,000
= 4.32 times Average Receivable (Opening Receivable + Closing Receivable) /2 (90,000+95,000)/2
1,95,000-70,000
=
Sales - (Sales returns + Allowances)
1,25,000
=
=
(f) Gross Profit Ratio = Gross Profit X100 =
(g) Net Profit Ratio = Net Profit X100 =
4,00,000-1,98,000 X100 = 50.5% Net Sales Sales - (Sales returns + Allowances) 4,20,000-20,000
25,000 X100 = 6.25% Net Sales Sales - (Sales returns + Allowances) 4,00,000
Net Sales - Cost of goods sold X100 =
Net Income X100 =
MAY, 2011
Scally Corporation's comparative Balance Sheets are presented below:
Scally Corporation
Balance Sheet
December, 31
2010 2009
Taka Taka
Cash 4,300 3,700
Accounts Receivable 21,200 23,400
Inventory 10,000 7,000
Land 20,000 26,000
Building 70,000 70,000
Accumulated Depreciation (15,000) (10,000)
1,10,500 1,20,100
Accounts Payable 12,370 31,100
Common Stock 75,000 69,000
Retained Earnings 23,130 20,000
1,10,500 1,20,100
Scally's 2010 income statement included net sales of Tk.100,000, cost of goods sold of Tk.60,000 and net income of Tk.15,000
(h) Return on common stockholders' equity;
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
(d) Inventory Turnover = Cost of Goods Sold
(e) Profit Margin = Net Income X100 =
Current Liabilities Accounts Payable 12,370 12,370
= 2.06:1 Current Liabilities 12,370 12,370
= 4.48 times Average Receivable (Opening Receivable + Closing Receivable) /2 (23,400+21,200)/2
= 2.69:1 times Average Inventories (Opening Inventories + Closing Inventories) /2 (7,000+10,000)/2
15,000 X100 = 15% Net Sales 1,00,000
= 1.53 times Average Total Assets (Opening Total Assets + Closing Total Assets) /2 (1,20,100+1,10,500)/2
15,000 X100 = 13% AverageTotalAssets (Opening Total Assets + Closing Total Assets) /2 1,15,300
35,500-10,000
=
25,500
=
Net Sales
=
Cost of Goods Sold
=
Sales - (Sales returns + Allowances)
=
(g) Return on Assets = Net Income X100 =
(h) Return on common stockholders' equity = Net Income X100 =
(i) Debt to total asset ratio = Total Liabilities
Net Income X100 =
Net Income X100 = 16.03% Average Stockholder's Equity (Opening S. Equity + Closing S.s Equity) /2
=
12,370
= 0.11:1
Total Assets 1,10,500
NOVEMBER, 2010
Padma Company has the following comparative Balance Sheet Data:
Padma Company
Balance Sheet
December, 31
2009 2008
Taka Taka
Cash 15,000 30,000
Receivables (net) 65,000 60,000
Inventories 60,000 50,000
Plant Assets (net) 2,05,000 180,000
3,45,000 3,20,000
Accounts Payable 50,000 60,000
Mortgage Payable (15%) 1,00,000 1,00,000
Common Stock (10 per) 1,40,000 1,20,000
Retained Earnings 55,000 40,000
3,45,000 3,20,000
4. Net cash provided by operating activities was Tk. 33,000.
Compute the following ratios at December 31, 2011 and make comment on these:
Cash + Account Receivables + Inventories
=
(b) Acid Test Ratio = Current Assets - Inventories
(c) Receivables Turnover = Net Sales
Current Liabilities Accounts Payable 50,000 50,000
= 1.6:1 Current Liabilities 50,000 50,000
= 6.72 times Average Receivable (Opening Receivable + Closing Receivable) /2 (60,000+65,000)/2
1,40,000-60,000
=
Sales - (Sales returns + Allowances)
80,000
=
=
(f) Gross Profit Ratio = Gross Profit X100 =
(g) Net Profit Ratio = Net Profit X100 =
4,20,000-1,98,000 X100 = 52.85% Net Sales Sales - (Sales returns + Allowances) 4,20,000
25,000 X100 = 5.95% Net Sales Sales - (Sales returns + Allowances) 4,20,000
Net Sales - Cost of goods sold X100 =
Net Income X100 =
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