ACT450
financial statement analysis
FOR Q2, Q3, Q4 and Q5 USE THE RATIOS GIVEN IN THE LAST PAGE OF THIS EXAM PAPER QUESTION 2) (30 pts) Using 2019-2020 financial reports of ABC, a) Calculate the followings FOR 2019 AND 2020: (14 pts - 2 pts each) - Show calculations. Receivable turnover (use Trade and other receivables) Days in Receivables Inventory turnover Days In Inventories Payable turnover (use Trade and other payables) Days in payables Cash conversion cycle . . . . . b) Comment on the cash conversion cycle you found in (a). Do you see an improvement in cash conversion cycle from 2019 to 2020? Explain. (min 50 words, 6 pts) c) What would you suegest companies to improve their cash conversion cycles? (min. 50 words, 10 pts) QUESTION 3) (15 Pts) Using 2019-2020 financial reports of ABC, a) Calculate current and quick ratios FOR 2020 ONLY. Show calculations. (5 pts) b) Comment on the liquidity position of the company by the end of 2020. Support your comment with the ratios you calculated in (a) (min. 50 words, 10 pts) QUESTION 4) (25 pts) Using 2019-2020 financial reports of ABC, a) Since Company ABC recorded loss in 2020 due to COVID-2019 crisis, calculate the followings FOR 2019 ONLY: (Show calculations) (10 pts - 2 pts each) Return on Asset (ROA), Return on Equity (ROE), Net Profit Ratio, Asset Turnover and Equity Multiple USE THE BELOW INDUSTRY AVERAGES FOR (b), (c), (d) and (e) parts of Question 5. Industry average Industry average Industry average Net Profit Ratio Equity Multiple 0.12 Asset Turnover 0.50 1 2.50 b) What is the industry average for ROA in 20197 Show your calculation (2.5 pts) c) Considering the ratios you found in (a) and industry average you found in (b) which ratio(s) should be improved to record a better ROA in the coming years? (min. 30 words, 5 pts) d) What is the industry average for ROE in 2019? Show your calculation. (2.5 pts) e) Considering the ratios you found in () and Industry average you found in (d) which ratio(s) should be improved to record a better ROE in the coming years? (min. 30 words, 5 pts) QUESTION 5) (20 pts) Using 2019-2020 financial reports of ABC, a) Calculate debt to equity (use debt items only) and liabilities to equity ratios FOR 2020 ONLY Show calculations. (5 pts) b) Comment on solvency position of the company in 2020. Support your comments with the ratios you calculated in (a). (min. 30 words, 5 pts) C) If you were a bank manager, would you give long term loan to this company? Discuss (min. 50 words 10 pts) Course Title: Financial Statement Analysis Course Code: ACT450 5 Page RATIOS Do not use any other formula in your calculations. Asset Turnover = Sales Revenue / Total Assets Cash Conversion Cycle = Days in Receivables + Days in Inventory-Days in Payables Current Ratio = Current Assets / Current Liabilities Days In Inventory = 360 / Inventory Turnover Days in Payables = 360 / Payables Turnover Days in Receivables = 360 / Receivables Turnover Debt to Equity = Total Debt / Total Equity Equity Multiple = Total Asset / Equity Inventory Turnover = Cost of Sales / Inventory Liabilities to Equity = Total Liabilities/Total Equity Net Profit Ratio = Net Income / Sales Revenue Payables Turnover = Cost of Sales / Accounts Payable Quick Ratio = (Current Assets - Inventory - Prepaid Expenses)/ Current Liabilities Receivables Turnover Sales Revenue / Accounts Receivable Return on Asset (ROA) - Net Income / Total Assets Return on Asset (ROA) = Net Profit Ratio x Asset Turnover Return on quity (ROE) - Net Income / Equity Return on Equity (ROE) = Return on Assets x Equity Multiple FOR Q2, Q3, Q4 and Q5 USE THE RATIOS GIVEN IN THE LAST PAGE OF THIS EXAM PAPER QUESTION 2) (30 pts) Using 2019-2020 financial reports of ABC, a) Calculate the followings FOR 2019 AND 2020: (14 pts - 2 pts each) - Show calculations. Receivable turnover (use Trade and other receivables) Days in Receivables Inventory turnover Days In Inventories Payable turnover (use Trade and other payables) Days in payables Cash conversion cycle . . . . . b) Comment on the cash conversion cycle you found in (a). Do you see an improvement in cash conversion cycle from 2019 to 2020? Explain. (min 50 words, 6 pts) c) What would you suegest companies to improve their cash conversion cycles? (min. 50 words, 10 pts) QUESTION 3) (15 Pts) Using 2019-2020 financial reports of ABC, a) Calculate current and quick ratios FOR 2020 ONLY. Show calculations. (5 pts) b) Comment on the liquidity position of the company by the end of 2020. Support your comment with the ratios you calculated in (a) (min. 50 words, 10 pts) QUESTION 4) (25 pts) Using 2019-2020 financial reports of ABC, a) Since Company ABC recorded loss in 2020 due to COVID-2019 crisis, calculate the followings FOR 2019 ONLY: (Show calculations) (10 pts - 2 pts each) Return on Asset (ROA), Return on Equity (ROE), Net Profit Ratio, Asset Turnover and Equity Multiple USE THE BELOW INDUSTRY AVERAGES FOR (b), (c), (d) and (e) parts of Question 5. Industry average Industry average Industry average Net Profit Ratio Equity Multiple 0.12 Asset Turnover 0.50 1 2.50 b) What is the industry average for ROA in 20197 Show your calculation (2.5 pts) c) Considering the ratios you found in (a) and industry average you found in (b) which ratio(s) should be improved to record a better ROA in the coming years? (min. 30 words, 5 pts) d) What is the industry average for ROE in 2019? Show your calculation. (2.5 pts) e) Considering the ratios you found in () and Industry average you found in (d) which ratio(s) should be improved to record a better ROE in the coming years? (min. 30 words, 5 pts) QUESTION 5) (20 pts) Using 2019-2020 financial reports of ABC, a) Calculate debt to equity (use debt items only) and liabilities to equity ratios FOR 2020 ONLY Show calculations. (5 pts) b) Comment on solvency position of the company in 2020. Support your comments with the ratios you calculated in (a). (min. 30 words, 5 pts) C) If you were a bank manager, would you give long term loan to this company? Discuss (min. 50 words 10 pts) Course Title: Financial Statement Analysis Course Code: ACT450 5 Page RATIOS Do not use any other formula in your calculations. Asset Turnover = Sales Revenue / Total Assets Cash Conversion Cycle = Days in Receivables + Days in Inventory-Days in Payables Current Ratio = Current Assets / Current Liabilities Days In Inventory = 360 / Inventory Turnover Days in Payables = 360 / Payables Turnover Days in Receivables = 360 / Receivables Turnover Debt to Equity = Total Debt / Total Equity Equity Multiple = Total Asset / Equity Inventory Turnover = Cost of Sales / Inventory Liabilities to Equity = Total Liabilities/Total Equity Net Profit Ratio = Net Income / Sales Revenue Payables Turnover = Cost of Sales / Accounts Payable Quick Ratio = (Current Assets - Inventory - Prepaid Expenses)/ Current Liabilities Receivables Turnover Sales Revenue / Accounts Receivable Return on Asset (ROA) - Net Income / Total Assets Return on Asset (ROA) = Net Profit Ratio x Asset Turnover Return on quity (ROE) - Net Income / Equity Return on Equity (ROE) = Return on Assets x Equity Multiple
