Sponsored Links


Results 1 to 2 of 2

Thread: FIN621 Solution 12 May 2010

  1. #1
    Senior Member Guru's Avatar
    Join Date
    May 2010
    Location
    Jhelum
    Posts
    117

    Post FIN621 Solution 12 May 2010

    Sponsored Links


    Part 1 (Liquidity Ratios

    Sponsored Links


    1. Acid Test Ratio/Quick ratio

    Acid Test Ratio/Quick ratio = Quick Assets/Current Liabilities
    Acid Test Ratio/Quick ratio = (Current Assets-Inventory-Prepaid expenses)/Current Liabilities
    = (36279168000-1155042000-512383000-267422000)/33455815000
    =1.0265

    2. Sales to working Capital

    Sales to working Capital = Net Sales/Working Capital
    Sales to working Capital = Net Sales/ (Current Assets-Current Liabilities)
    = 76642399000/ (36279168000-33455815000)
    = 76642399000/ (2823353000)
    =27.14


    3. How working capital does help the financial analyst?


    Part 2 (Solvency Ratio

    1. Debt-to-Equity Ratio

    Debt-to-Equity Ratio = Total Debt /Total Equity
    = (Current Liabilities + Long Term Liabilities)/ Total Equity
    = (33455815+27931963)/10315060
    = 5.466
    Description: Debt is 5.466 of the equity of the firm which is strong value as the firm is 5.466 times meet the liabilities or Debts , the financial investors like this ratio high so company can get different loans or borrowing due to this positive ratio.

    2. Time Interest Earned Ratio

    Time Interest Earned Ratio =operating Income before Interest /Annual Interest Cost
    = (2979911000)/2370674000
    = 1.2567
    Description: Debt is 5.466 of the equity of the firm which is strong value as the firm is 5.466 times meet the liabilities or Debts , the financial investors like this ratio high so company can get different loans or borrowing due to this positive ratio.


    3. Fixed Charge Coverage Ratio

    Fixed Charge Coverage Ratio =operating Income before Interest /Annual Interest Cost
    = (2979911000)/2370674000
    = 1.2567


    4. Define difference between both ratios (Time Interest Earned & Fixed Charge Coverage)? To be very precise mention why do we calculate both?




    Part 3 (Profitability ratios

    1. Gross Profit Margin
    = Gross profit/Net sales * 100
    =7404163000/76642399000*100
    = 9.660661849 %

    2. Operating Profit Margin Return on sales
    = Operating profit before IT / Net sales *100
    = 2979911000/76642399000*100
    = 3.888071145 %
    3. Pretax Margin
    = Operating profit before Tax / Net sales *100
    = 2381627000/76642399000*100
    = 3.107 %

    4. Net Profit Margin
    = Net profit / Net sales *100
    = 991067000/76642399000*100
    = 1.2 %

    5. Return on Equity (ROE)

    = Net profit / Total Equity *100
    = 991067000/10315060*100
    = 9.607 %
    6. Return on Assets (ROA

    = Net profit / Total Assets *100
    = 991067000/71702838000*100
    = 1.382 %


    7. DuPont Return on Assets
    =Operating profit margin ratio *Assets turnover ratio
    = 3.889% * (Net sales / fixed assets)
    = 3.89% * 2.17%
    =8.43913%

    8. What is the need for calculating DuPont Return on Assets when we already have Return on Assets ratio calculated?



    Part 4(Activity Ratios

    1. Inventory Turnover
    2. Accounts Receivable Turnover
    3. Accounts payable turnover
    4. Average collection period
    5. Average payment period

  2. #2
    Senior Member Guru's Avatar
    Join Date
    May 2010
    Location
    Jhelum
    Posts
    117
    Another Solution

    1. Acid Test Ratio/Quick ratio = Current Assets – ( Inventory + Prepayments) / Current
    Liabilities

    = 36,279,168 – (1,667,425 + 267,422)/ 33,455,815
    Acid test Ratio = 1.0345


    2. Sales to working Capital = Net Sales / Working Capital

    Net sales = 76,642,399
    Working capital = current assets – current liabilities = 36,279,168 – 33,455,812 = 2,823,356
    = 76,642,399 / 2,823,356
    Sales to working Capital = 27.145 / 100 = 0.2714 %



    PART 2
    Solvency Ratio
    1. Debt-to-Equity Ratio = Total Liabilities / Shareholder Equity

    = 61,387,778 / 10,315,060
    Debt-to-Equity Ratio = 5.951


    2. Time Interest Earned Ratio = EBIT / interest Expense

    = 4,752,301 / 2,370,674
    Time Interest Earned Ratio = 2


    1. Fixed Charge Coverage Ratio = EBIT + Lease payments / Interest Exp + Lease
    Payment
    = 4,752,301 + 1,392,776 / 1,392776 + 2,370,674
    Fixed Charge Coverage Ratio = 1.63





    PART 3

    Profitability Ratios

    1. Gross Profit Margin = Gross profit / Net Sales * 100


    = 7,404,163 / 76,642,399 * 100
    Gross Profit Margin= 9.66 %



    2. Operating Profit Margin = Operating profit / Net sales * 100


    = 2,979,911 / 76,642,399 * 100


    Operating Profit Margin = 3.9 %


    3. Pretax Margin = Net earnings + Income Tax / Net Sales

    Net Earnings = 991,067
    Income Tax = 1,390,560
    Net Sales = 76,642,399

    = 991,067 + 1,390,560 / 76,642,399

    Pretax Margin = 0.031 * 100 = 3.1%



    4. Net Profit Margin = Net Pr ofit After Tax / Revenue * 100%



    = 991,067 / 76,642,399 * 100
    Net Profit Margin = 1.29 %






    5. Return on Equity (ROE) = NP after Tax / Shareholder Equity * 100


    = 991,067 / 10,315,060 * 100
    Return on Equity (ROE) = 9.6




    6. Return on Assets (ROA) = Net Income / Total Assets * 100


    = 991, 067 / 71,702,838 * 100
    ROA = 1.382


    PART 4

    Activity Ratios



    1. Inventory Turnover = Cost of Goods Sold / Avg. Inventory

    CGS = 69,238,236
    Avg. Inventory = Open stock + Closing Stock / 2

    = 1,391,068 + 1,667,425 / 2
    Avg. Inventory = 1,529,247

    = 69,238,236 / 1,529,247

    Inventory Turnover = 45.24


    2. Accounts Receivable Turnover = Net Sales / Avg. Account receivable



    = 76,642,399 / 18,053,051

    Accounts Receivable Turnover = 4.245 Times




    3. Accounts payable turnover = CGS / Avg. Account payable



    = 69,238,236 / 27,809,479
    Accounts payable turnover = 2.489 times




    4. Average collection period = (Trade Debtors No. of Working Days) / Net Credit Sales

    Accounts Receivable = 20,045,028
    No. of Working Days = 360
    Net Credit Sales = 76,642,399

    = 20,045,028 * 360 / 76,642,399
    = 94 days

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. fin621 solution GDB fall 2010
    By Xpert in forum GDB Discussion
    Replies: 0
    Last Post: 11-25-2010, 07:18 PM
  2. FIN621 GDB 1 discussion fall 2010 idea solution
    By Xpert in forum GDB Discussion
    Replies: 0
    Last Post: 11-23-2010, 05:04 AM
  3. fin621 assignment solution
    By marjan in forum Assignments & Solutions
    Replies: 15
    Last Post: 08-03-2010, 08:02 PM
  4. FIN621 GDB Solution, June 2010
    By viki in forum GDB Discussion
    Replies: 0
    Last Post: 06-30-2010, 06:50 AM
  5. FIN621 Assignment Solution May 13,2010
    By viki in forum Assignments & Solutions
    Replies: 2
    Last Post: 05-14-2010, 01:34 AM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
-: Vuhelp Disclaimer :-
None of the files shown here are hosted or transmitted by this server. The links are provided solely by this site's users. The administrator's or staff of Vuhelp.net cannot be held responsible for what its users post, or any other actions of its users. You may not use this site to distribute or download any material when you do not have the legal rights to do so. It is your own responsibility to adhere to these terms. If you have any doubts about legality of content or you have any suspicions, feel free to contact us.
Online Education | JhelumSoft