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MAS311 Financial Management Exercises Financial Statement Analysis

This document contains three financial analysis exercises involving the calculation of various financial ratios for different companies. The first exercise calculates inventory for Minerva Company using information on total assets, inventory turnover, gross profit margin, and other ratios. The answer is that Minerva's inventory is P480,000. The second exercise calculates the days sales outstanding in accounts receivable for a company with given credit terms, sales per day, annual sales, and accounts receivable balance. The answer is that the DSO is 20 days. The third exercise calculates the average number of days to collect receivables in 2015 for Sushi Company using information on annual sales, expenses, accounts receivable balance, total assets

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630 views

MAS311 Financial Management Exercises Financial Statement Analysis

This document contains three financial analysis exercises involving the calculation of various financial ratios for different companies. The first exercise calculates inventory for Minerva Company using information on total assets, inventory turnover, gross profit margin, and other ratios. The answer is that Minerva's inventory is P480,000. The second exercise calculates the days sales outstanding in accounts receivable for a company with given credit terms, sales per day, annual sales, and accounts receivable balance. The answer is that the DSO is 20 days. The third exercise calculates the average number of days to collect receivables in 2015 for Sushi Company using information on annual sales, expenses, accounts receivable balance, total assets

Uploaded by

Leanne Quinto
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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MAS311 Financial Management

Exercises
Financial Statement Analysis

1. Minerva Company has P500,000 Cash, P3,000,000 in Total Assets and the following ratios:

Inventory turnover 10x


Total Assets turnover 2x
Accounts receivable turn-over 10x
Debt ratio 0.25
Gross profit margin 20%
Return on equity 8%

How much was Minerva’s inventory?

a. P120,000
b. P480,000
c. P830,000
d. P1,200,000

Total Assets Turnover = Sales/Total Assets


= Sales/3,000,000 = 2
Sales = 6,000,000

Gross profit margin = Gross profit / Sales


= Gross profit / 6,000,000 = 20%
Gross profit = 1,200,000

Cost of Goods Sold = Sales – Gross profit


= 6,000,000 – 1,200,000
= 4,800,000

Inventory turnover = Cost of Goods Sold/Inventory


10 = 4,800,000 / Inventory
4,800,000/ 10 = Inventory
480,000 = Inventory
2. A business entity offers its customers credit terms of 5/19, n/20. One third of the customers
take the cash discount and the remaining pay on day 20. On average, 20 units are sold per day,
priced at P10,000 each. The rate of sales is uniform throughout the year. Using a 360-day year,
the organization has days sales outstanding in accounts receivable, to the nearest full day of

a. 13 days c. 15 days
b. 20 days d. 17 days

DSO = Receivables/Annual Sales ÷ 360

Sales per day = 20 units x 10,000 = 200,000


Sales for 20 days (unpaid) x 20 = 4,000,000 Accounts Receivable

Annual Sales = 200,000 x 360 days = 72,000,000


Less sales discount (72,0000,0000 x 1/3) x .05 ( 1,200,000)
Net sales 70,800,000

DSO = 4,000,000 / (70,800,000 ÷360)


= 20.33 days or 20 days

3. Sushi Company reported the following data at the end of 2015:

Sales (75% on credit) P300,000


Expenses (26% on credit) 60,000
Accounts receivable (P4,000 decrease during 2015) 8,000
Total Assets 200,000
Shareholders’ equity 150,000

Assuming a 365-year, what was the average number of days to collect receivables during 2015?

a. 14.3 c. 21.9
b. 16.2 d. 36.5

Days Sales Outstanding = Average receivables / Annual credit sales ÷365


= (12,000 + 8,000) ÷2 / (300,000 x 75%) ÷ 365
= 10,000 / 616.44
= 16.2 days
Liquidity Analysis

Indicate the effects of each of the following transactions on the company’s (a) current ratio and (b) acid-
test ratio. There are three possible answers: (+) increase, (-) decrease, and (0) no effect.

Note: before each transaction takes place, both ratios are greater than 1:1

Current ratio Acid test ratio


Example: Sell merchandise for cash + +
1. Buy inventory on account - -
2. Pay an account payable + +
3. Borrow cash on a short-term loan - -
4. Issue long-term bonds payable + +
5. Collect an account receivable (0) (0)

Construction of financial statements:

The following information is available concerning ABC Company’s result in 2020 (in thousand pesos).
Turnovers are based on year-end values.

1. Return on sales 6%
2. Gross profit percentage 40%
3. Receivable turnover 5 times
4. Inventory turnover 4 times
5. Current ratio 3:1
6. Ratio of total debt to total assets 40%

Required: Fill in the blanks of the Financial statements below:

Condensed Income statement


Sales 900
Cost of Sales A
Gross profit B
Operating expenses C
Net income D

Condensed Balance Sheet


Cash 30
Receivables E
Inventory F
Plant and Equipment 670
Total G
Current liabilities H
Long-term Debt I
Shareholders’ Equity J
Total K

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