Fundamentals of Accountancy, Business, and Management 2 Quarter 1 - Module 5: Financial Statement Analysis

Additional Activities Wear with You Apparels, a clothing merchandising store provided the following information for the year 2019. Sales P 450,000 Cash P 53,000 Sales Discount 18,000 Accounts Receivable 48,000 Sales Returns 12,000 Inventory 62.000 Purchases 214,000 Total Assets 340,000 Purchase Return 17,000 Accounts Payable 55,000 Freight in 13,000 Loans Payable, 5 years 120,000 Selling Expenses 28,000 Total Equity 165,000 Administrative Expenses 87,000 Additional Information: 1. Of the Sales, 80% are credit sales. 2. The income tax rate is 20%. 3. All purchases are on account. 4. The liabilities of the company is composed of accounts payable and loans payable. Required: 1. Compute for the Gross Profit Ratio, Operating Profit Ratio, Net Profit Ratio, Return on Assets, and Return on Equity for Wear with You Apparels. Interpret each ratio respectively. 2. Compute for the Total Assets Turnover, AR Turnover, Days in Receivable, Inventory Turnover, Days in Inventory, AP Turnover, and Days Payables Outstanding for Wear with You Apparels. Interpret each ratio respectively. Use a separate sheet for your answers.3. To determine how effectively a company utilizes its assets to generate sales, which of the following formula should be used? A. Net Income + Net Sales B. Net Income + Average Total Assets C. Net Sales + Average Total Assets D. Net Income * Average Equity 4. XYZ Store reported cost of goods sold amounting to P180, 000, beginning inventory of P 26, 000 and ending inventory of P 34, 000. What is XYZ Store's inventory turnover? A. 6 times B. 6 days B. 60 times D. 60 days 5. An average collection period of 45 days will mean that A. The company sells its inventory every 45 days. B. The company collects its receivables every 45 days. C. The company sells its inventory 45 times in a year. D. The company collects its receivables 45 times a year. 6. If a company has net sales of 185,000 and cost of goods sold of P55,250, which of the following statements is correctly stated? A. Net Profit Ratio is 28%. B. Gross Profit Ratio is 35%. C. Return on Assets if 12%. D. Return on Equity is 15%. Plug and Play Computer Store provided the following data for 2019: Sales P 458,000 Cash P 82,000 Sales Discount 33,000 Accounts Receivable 65,000 Cost of Sales 255,000 Inventory 72,000 Operating Expenses 75,000 Total Assets 280,000 Income Tax Expense 28,500 Total Liabilities 128,000 7. Using the information from Plug and Play Computer Store, which of the following statements is true? A. Gross Profit Ratio is 60%. B. Gross Profit Ratio is 40%. C. Net Profit Ratio is 16%. D. Net Profit Ratio is 22%.Assessment The Statement of Comprehensive Income and Statement of Financial Position of Scentiments for 2019 are given in the following sections. Scentiments Statement of Comprehensive Income For the year ended December 31, 2019 Net Sales P160,000 Coat of Goods Sold 97 500 Gross Profit 62,500 Selling and Administrative Expenses 37 500 Operating Income 15 000 Interest Expense 3.000 Income Before Income Taxes 12,000 Income Tax Expense 2 400 Net Income "OF decurran! was adiked with Icecream POP Editor. Upgrade to PRD to remove watermark. 62 Beentiments Statement of Financial Position December 31, 2019 Assets Cash 7 21,400 Accounts Receivable 6,700 Inventories 22,400 Prepaid Rent 9,000 Fixed Assets 75.080 Total Assets 133.600 Liabilities and Owner's Equity Accounts Payable F 16,000 Loans Payable, 3 years CO.DOO Total Liabilities 76,000 Owner's Equity 67,600 Total Liabilities and Owner's Equity * 133.500 Compute and interpret the liquidity and solvency ratios of Scentiments for the year 2019. Use a separate answer sheet.Additional Activities The following information are available for Aquafranza Company: Sales P 320,000 Sales Return 20,000 Total Assets 240,000 Total Liabilities 140,000 Additional Information: 1. Gross Profit Rate is 40% of Net Sales. 2. Operating Expenses is 50% of the Gross Profit. 3. Interest Expense is 5% of the long-term Liabilities. 4. Of the total assets, 75% is current and 25% is noncurrent. 5. Current Assets includes Cash of P30,000; Accounts Receivable - P22,000; Short-term Investments - P50,000 and the remaining amount are Inventories.8. What can be concluded from the efficiency ratios of Plug and Play Computer Shop? A. Total Asset Turnover is 1.6 times. B. Accounts Receivable Turnover is 7 times. C. Average Collection Period is 52 days. D. Inventory Turnover is 3.5 times. 9. What is Plug and Play's Return on Equity? A. 44% B. 38% C. 24% D. 65% ant was edited with leecream PDF Editor. Upgrade to PRO to remove watermark. 39 10. The Net Profit Ratio of Plug and Play Computer Store is 16%. This means that A. 16% of sales is left after deducting the cost of goods sold. B. 16% of sales is left after deducting the operating expenses. C. 16% of sales is left after deducting all expenses. D. 16% of sales is left after deducting the income tax expense.ASSESSMENT Compute and interpret the liquidity and solvency ratios of Scentiments for the year 2019. Use a separate answer sheet. ADDITIONAL ACTIVITIES Compute and interpret the financial health ratios of Aquafranza Company using the format below. Use a separate sheet for your answers. Ratio Computation Interpretation Liquidity Ratios 4. Current Ratio 5. Quick Ratio 6. Net Working Capital Solvency Ratios 5. Debt-to-Equity Ratio 6. Debt Ratio 7. Equity Ratio 8. Interest Coverage RatioASSESSMENT Below are items about the computation and interpretation of protability and efficiency ratios. Read and analyze each item carefully. [In a separate sheet of pa per, write the letter that best answers the requirement for each number. 1. E 2. }' 3. S 4. 9. 5. 10. ADDITIONAL ACH'II'I'H ES 1. Compute for the Gross Prot Ratio, Operating Prot Ratio, Net Profit Ratio, Return on Assets, and Return on Equity for Wear with You Apparels. Interpret each ratio respectively. 2. Compute for the Total Assets Turnover, AR Turnover, Days in Receivable, Inventory Turnover, Days in Inventory, AP Turnover, and Days Payables Outstanding for 1Wear with 1I"ou Apparels. Interpret each ratio respectively. Use a separate sheet for your answers. Assessment Below are items about the computation and interpretation of profitability and efficiency ratios. Read and analyze each item carefully. On a separate sheet of paper, write the letter that best answers the requirement for each number. 1. An investor would like to determine the rate of return of his invested capital. Which of the following ratios would be most useful? A. Gross Profit Ratio B. Return on Assets C. Net Profit Ratio D. Return on Equity 2. ABC Company has an Operating Profit Ratio of 25%. This means that A. 25% of the company's sales is left after deducting the cost of sales B. 25% of the company's sales is left after deducting all expenses C. 25% of the company's sales is left after deducting the operating expenses D. 25% of the company's sales is left after deducting the cost of sales and operating expenses6. Of the total liabilities, Accounts Payable is P32,000 and Notes Payable is P18,000. The rest are long-term liabilities. Compute and interpret the financial health ratios of Aquafranza Company using the format below. Use a separate sheet for your answers. Ratio Computation Interpretation Liquidity Ratios 4. Current Ratio 5. Quick Ratio 6. Net Working Capital Solvency Ratios 5. Debt-to-Equity Ratio 6. Debt Ratio 7. Equity Ratio 8. Interest Coverage Ratio