3.91 2.58 Particulars Year 1 Year 2 Year 3 (a) Current assets turnover ratio 1.36 1.55 1.59 (cost of goods sold + total current assets) (b) Debtors' turnover 2.8* 3.30 3.19 (credit sales + average debtors) (c) Inventory turnover 3.46 4.10 (cost of goods sold + average inventory) (d) Fixed assets turnover 3.75 2.29 (cost of goods sold + fixed assets) (e) Total assets turnover 1.00 0.92 0.98 (cost of goods sold + total assets) *Based on debtors and inventory at the end, as their opening balances are not available. COMMENTS: The first three ratios indicate the efficiency of current assets usage, and the latter two, namely, fixed assets turnover and total assets tumover ratio, show the efficacy of utilisation of these Current assets utilisation appears to be very satisfactory as reflected in the first three types of ratios. No major change is noticeable in their values over a period of time, which is presumably indicative of con- sistency in debtors collection period and inventory tumover. There does not seem to be any significant problem regarding utilisation of current assets. However, it appears that fixed assets are not being fully utilised. Investments in fixed assets have more than doubled during years 2 and 3. The fixed assets turnover ratio has sharply fallen to 2.58 in year 3 from 3.75 in year 1. Thus, investments in fixed assets are either excessive, or the capacity of the additional plant is under-utilised. This is corroborated by the fact that sales in the latter 2 years have increased by around 15 per cent. Therefore, the remedy lies in utilising the plant capacity by increasing production and sales. P.6.10 From the ratios and other data set forth below for the Auto Accessories Ltd, indicate your inter- pretation of the company's financial condition: y19 Year 3 302 Year 1 265 155 2.75 9.83 Particulars Current ratio (per cent) Acid-test ratio Working capital turnover (times) Receivable turnover (times) Collection period (days) Inventory to working capital (per cent) Inventory turnover (times) Income per equity share (*) Net income to net worth (per cent) Operating expenses to net sales (per cent) Sales increase during the year (per cent) Cost of goods sold to net sales (per cent) Dividend per share () Fixed assets to net worth (per cent) Net profit on net sales (per cent) 99 3.25 7.2 50 110 5.41 37 Year 2 278 110 3.00 8.41 43 100 6.01 4.05 8.5 23 16 71 3 18.0 5.09 2.5 7 25 23 73 3 22.7 2.0 95 6.11 5.10 11.07 22 10 70 3 16.4 7.03 3.91 2.58 Particulars Year 1 Year 2 Year 3 (a) Current assets turnover ratio 1.36 1.55 1.59 (cost of goods sold + total current assets) (b) Debtors' turnover 2.8* 3.30 3.19 (credit sales + average debtors) (c) Inventory turnover 3.46 4.10 (cost of goods sold + average inventory) (d) Fixed assets turnover 3.75 2.29 (cost of goods sold + fixed assets) (e) Total assets turnover 1.00 0.92 0.98 (cost of goods sold + total assets) *Based on debtors and inventory at the end, as their opening balances are not available. COMMENTS: The first three ratios indicate the efficiency of current assets usage, and the latter two, namely, fixed assets turnover and total assets tumover ratio, show the efficacy of utilisation of these Current assets utilisation appears to be very satisfactory as reflected in the first three types of ratios. No major change is noticeable in their values over a period of time, which is presumably indicative of con- sistency in debtors collection period and inventory tumover. There does not seem to be any significant problem regarding utilisation of current assets. However, it appears that fixed assets are not being fully utilised. Investments in fixed assets have more than doubled during years 2 and 3. The fixed assets turnover ratio has sharply fallen to 2.58 in year 3 from 3.75 in year 1. Thus, investments in fixed assets are either excessive, or the capacity of the additional plant is under-utilised. This is corroborated by the fact that sales in the latter 2 years have increased by around 15 per cent. Therefore, the remedy lies in utilising the plant capacity by increasing production and sales. P.6.10 From the ratios and other data set forth below for the Auto Accessories Ltd, indicate your inter- pretation of the company's financial condition: y19 Year 3 302 Year 1 265 155 2.75 9.83 Particulars Current ratio (per cent) Acid-test ratio Working capital turnover (times) Receivable turnover (times) Collection period (days) Inventory to working capital (per cent) Inventory turnover (times) Income per equity share (*) Net income to net worth (per cent) Operating expenses to net sales (per cent) Sales increase during the year (per cent) Cost of goods sold to net sales (per cent) Dividend per share () Fixed assets to net worth (per cent) Net profit on net sales (per cent) 99 3.25 7.2 50 110 5.41 37 Year 2 278 110 3.00 8.41 43 100 6.01 4.05 8.5 23 16 71 3 18.0 5.09 2.5 7 25 23 73 3 22.7 2.0 95 6.11 5.10 11.07 22 10 70 3 16.4 7.03