Solvency or Capital Structure Ratios: Case Activity

I. COMPANY Inc. has total current assets worth Php2,000,000.00, common equity of Php500,000.00 and total current liabilities worth Php1,500,000.00

The company incurred an interest expense of Php239,000.00 and EBIT of Php3,493,000.00

Question: Is the company capable to cover the interest expenses incurred?

II. FIRM Inc. has a total asset of Php10,000,000.00, stockholders equity of Php6,000,000.00 and total liabilities worth Php4,000,000.00

The company needs to raise additional capital worth Php5,000,000.00 for expansion.

Question: Will you grant the said loan to the company if you were the bank?

***Compute for the relevant solvency ratios.

Efficiency Ratios: Case Activity

Company Inc. has the following accounts in their financial statements:

-cost of sales Php3,455,000.00

-average trade payables Php856,680.00

-net credit purchases Php1,585,680.00

-materials inventory beginning Php623,000.00

-materials inventory end Php485,680.00

-sales Php6,000,000.00

-total assets Php15,800,000.00

-net plant property and equipment Php8,630,000.00

***Compute for the applicable Efficiency ratios

Question: Is the company using its cash efficiently?

LIQUIDITY CASE PROBLEM

Company Inc. has a total current asset of Php2,000,000.00 and a total current liability of Php1,000,000.00. Annual Credit Sales of the company is P5,000,000.00.

The current assets of the company are the following: cash on bank Php200,000.00, marketable securities of Php300,000.00, inventories Php1,000,000.00 and accounts receivables of Php500,000.00.

The company needs to pay a loan amounting to Php600,000.00 of debt in 2 months. The company can only collect 50% of its accounts receivable in 45 days. The time deposit of the company amounting to Php200,000.00 is due to mature for encashment at the end of the month.

Question:

-Compute for the applicable liquidity ratios

-Is the company liquid?

Profitability Ratios: Case Activity

Company Inc. has total assets of Php25,000,000.00, Liabilities of Php10,000,000.00 and common equity of 15,000,000.

The sales of the company is worth P20,000,000.00, gross profit of Php5,493,000.00, EBIT of Php2,855,000.00 and net income of Php1,984,500.00

Question: Is the company profitable based on the financial ratios. Explain?

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