Exercise on the Analysis of Financial Statements

Financial Mix RatioApproach

1.)Compute the current ratio of JENNY Merchandising and make a simple analysis of the result.

2.)Compute the quick ratio or acid-test ratio of JENNY Merchandising for the year 2015 and 2016 then make a simple analysis.

3.)Using the data reflected on the financial statements of JENNY Merchandising, compute for its receivable turnover and make a simple analysis of the result.

4.)Using the data reflected on the financial statements of JENNY Merchandising, compute its inventory turnover and make a simple analysis of the result.

5.)Explain the significance of the following ratios:

a.Current ratio

b.Quick ratio

c.Receivable turnover

d.Inventory turnover

Operating income 194 203 216 691 731 Interest expense 20 32 29 28 24 Income before tax 174 171 187 663 707 Income tax 51 56 199 212 Net income 122 120 131 464 495JENNY Merchandising Statement of Comprehensive Income December 31, 2014 to 2018 (Amounts in Thousand Pesos) 2014 2015 2016 2017 2018 Sales 2,560 2,598 3,585 4,551 4,933 Cost of sales 1,872 1.885 2.584 2.983 3,164 Gross profit 688 713 1,001 1.568 1,769 Operating expenses Selling expenses 345 348 547 632 760 Administrative 149 162 238 245 278 Total 494 510 785 877 1038JENNY Merchandising Statement of Financial Position December 31, 2014 to 2018 (Amounts in Thousand Pesos) 2014 2015 2016 2017 2018 Current assets Cash and cash equivalents 84 176 177 Trading securities 222 249 315 119 119 118 Trade and other receivables 135 783 610 691 810 Inventory 876 592 659 726 805 760 Prepaid expenses 182 152 155 156 106 Total 1,956 1,716 1.868 2,111 2.126 Non-current assets Property, plant, and equipment 1,281 2,047 2,071 2,143 2,160 Long-term investment 13 332 487 487 524 Total 1,294 2,379 2.558 2.630 2,684 Total assets 3,250 4.095 4.426 4.741 4.810 Current liabilities Trade and other payables 731 860 783 639 611 Other current liabilities 221 57 75 104 86 Total 952 917 858 743 697 Non-current liabilities 4% Bonds payable 488 798 722 688 602 Total liabilities 1,440 1,715 1,580 1,431 1,299 Owner's equity Jenny, Capital 1,810 2,380 2.846 3.310 3,511 Total liabilities and owner's capital 3,250 4.095 4.426 4,741 4,810