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Question 3 a) Examine what happens to the current ratio when: a. an accounts payable is paid with cash. b. inventory is purchased on credit.

Question 3 a) Examine what happens to the current ratio when: a. an accounts payable is paid with cash. b. inventory is purchased on credit. c. money is received from a debtor. Current ratio = Current assets Current liabilities b) Examine what happens to the gross profit margin when: a. advertising is incurred. b. selling prices are increased assuming customers buy the same amount. c. suppliers increase their prices. Gross profit margin = Gross profit 100 Sales revenue 1 c) The income statement and the balance sheet for MobileNet are presented below. MobileNet Balance sheet as at 30 June 2020 Assets Current assets Investments Property, plant and equipment Intangible assets $20 000 5 000 32 000 15 000 Total assets $72 000 Liabilities Current liabilities Long-term liabilities $9 000 16 000 Total liabilities 25 000 Owner's equity M. Phone capital 47 000 Total liabilities & owner's equity $72 000 MobileNet Income statement for the year ended 30 June 2020 Sales revenue Cost of sales $45 000 20 000 Gross profit 25 000 Operating expenses 18 000 Profit $7 000 Calculate the following: The current ratio The return on assets The return on equity The debt to equity ratio Prepare the presentation on the financial analysis conducted, commenting on the performance and position of MobileNet.

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