712 MULTIPLE CHOICE: 1 PART 3 ~ FINANCIAL MANAGEy ay In financial statements analysis, expressing all financials items as a percentage of base year amounts is called me a. trend analysis. . horizontal common-size a b. variance analysis. d. vertical common-size analysis, In financial statements analysis, expressing figures for a si year as a percentage of a base amount on the financial statemes (for example, total assets in a balance sheet or sales in an incon statement) is called a. trend analysis. ©. horizontal common-size anal, b. variance analysis. d. vertical common-size analysis, Which of the following statements is correct? a. Liquidity refers to the firm’s ability to pay all its obligations and to continue operations. b. Solvency refers to a firm's ability to survive in the long-term by paying its short-term obligations. ©. Trading on the equity refers to a firm’s sale of its own stocks in the stock exchange. Ratio analysis addresses such issues as the firm’s liquidity, use of leverage, management of assets, cost contro, growth, and valuation. 2 Solvency is a firm's ability to survive in the long-term by paying its long-term obligations. Its key ingredients are capital structure and earning power. Capital structure consists of a. the capital stocks of the firm. b._ the firm’s total assets, ¢._ the firm's sources of financing, whether long-term or short term, of its assets. d. the stockholders’ equity accounts. Financial leverage or trading on equity is advantageous when all of the corporation's authorized capital stocks have already been issued. a firm has an available credit line with its depository bank. earnings from borrowed funds exceed borrowing costs. a firm is in financial distress. os 9 ao{nancial Statements Analysis 33-Financial Vy coaoter 713 financial statements analysis, it ies — 5, Through fine nalysis, interested parties - such as managers, investors, and creditors — can identify the company’s financial strengths and weaknesses and know about the following, except a b. c d. profitability of the business firm. the firm's ability to meet its obligations, safety of the investment in the business. composition of management running the firm. 7. Financial statements analysis is not without problems and limitations. Among such limitations is as follows, except: a. A ratio that is acceptable to one company may not be b. acceptable to another when some other factors are considered. There may be some differences in the accounting methods and estimates used by companies so that comparison of their ratios may not be advisable. Financial statements are based on current market value of the firm’s assets, therefore they do not reflect historical costs. The timing of transactions and use of averages in applying the various techniques in financial statements analysis affect the results to be obtained. 8. Which of the following is not a limitation of ratio analysis affecting comparability among firms? a. b. © d. Provision of useful information regarding the efficiency of operations and the stability of financial conditions Different sources of information Different accounting periods Different accounting policies 9. In assessing the financial health of a firm, financial analysts use different techniques. One technique is the vertical, common-size analysis, an example of which is a. b. c total current assets is 20% of the total assets as of a certain date. total current assets as of a certain date is 20% greater compared with the previous year. : the finished goods inventory turnover is twelve times during the year. cash provided by operations is P100,000.PART 3~ FINANCIAL MaNa EME n 714 10, Price level changes affect financial statements anal, Pree ning price level changes, some indices are used, 4) TMeample of such indices is the Gross Domestic product (SOP) py index or GDP deflator, which rreasures price fevel by @ monthly pricing of a specified set goods and services purchased by a typical urban consumer, b,. includes the prices of all goods and services produced inthe country. es cc. measures the price of specified commodities at the time of their first commercial sale. 4. is the amount charged by one organizational unit for the transfer of goods or services to another organizational unit within the same firm. a 11, Which of the following statements is not correct? A limitation of ratio analysis affecting comparability from one interim period to the next within a firm is that a. ina seasonal business, inventory and receivables may vay widely with year-end balances not reflecting the averages for the period. b. management has less incentive to window dress financal statements to improve results. c. comparability is impaired if different firms use different accounting policies. d. misleading conclusions may result if improper comparisons are selected. 12. The variance that arises solely because the actual units sold differs from the budgeted units to be sold is called a. sales volume variance, _c. _ master budget increment. b._ sales price variance, d._ sales mix variance. 13. For a muiti-product company, the sales volume can be divided into the a. sales mix variance and production volume variance. b. sales mix variance and sales quantity variance. C._ sales price variance and sales volume variance. d. sales volume variance and sales quantity variance.cchaP' 14. 16. 18, tor 13 Financial Statements Analysis The statement of cash flows a. reports the revenues earned and expenses | firm during the period, b. shows the company’s total assets, broken down and non-current assets. 3 shows the company's capital structure for a period of tir reports the net change in cash resulting from operating, investing, and financing activities of the firm ‘during the period. ao In cash flow analysis, the cash flows from operating activities ‘a. are the cash effects of transactions that create revenues and expenses. b. generally relate to changes in non-current assets. ¢. generally relate to changes in long-term liabilities and stockholders’ equity accounts d. are irrelevant. In computing a ratio, when a balance sheet amount is related to an income statement amount, a. the income statement amount should be converted to an average for the year. b. the balance sheet ami average for the year. ¢. both amounts should be converted to an average for the year. d._ the amounts may be used as is to develop a meaningful ratio. jount should be converted to an Which of the following statements is incorre t? a. the ratio of sales to working capita ‘a measure of liquidity and activity. os ee b. The number of days’ sales 'n receivables is a measure of liquidity, as well as of activity ore ital ratio would indicate that the c. Ahigh sales-to-working CaP! firm is not susceptible to liquidity problems. d. The earnings per share is a profitability ratio. The following are taken from the balance sheet of Juls Company as of December 31, 2008:PART 3~ FINANCIAL Many See, 716 Current assets: Cash on hand and in banks 341,600 ‘Accounts receivable 200,000 Merchandise inventory 308,400 850,999 Liabilities: Current liabilities: Notes payable 280,800 ‘Accounts payable _781,700 1,062,509 Long term liabilities 3,000,009 What are the company's current ratio and quick (acid test) ratio? Curent Ratio Quick (Acid Test) Ratio a 0.80 0.51 b. ost 0.80 © 0.21 1,93 da. 3.03 0.32 19. The following data were taken from the comparative balance sheets of Doims Company: Dec. 31, 200B Deo. 31, 2004 Cash P 35,000 P 33,125 Marketable securities 16,375 15,125 Notes and accounts receivable, net 49,375 48,000 Inventories 71,250 69,375 Prepaid expenses 2,375 5,000 Notes and accounts payable (short-term) 31,250 35,625 Accrued liabilities, 7,500 10,500 Bonds payable, due 200M 100,000 100,000 The company’s working capital increased (decreased) from 200A to 2008 by a. P135,625. c. (P11,125). b. P124,500. d. P11,125. ITEMS 20 to 25 ARE BASED ON THE FOLLOWING INFORMATION: Following are selected financial and operating data taken from the financial statements of Antiporda Corporation:quer 3-Firancia Statements Analysis 20. ai. 2, 24, 2008 cash P 80,000 Notes and accounts receivable, net 400,000 Merchandise inventory 720,000 Marketable securities — short-term 240,000 Land and buildings (net) 2,720,000. Bonds payable — long-term 2,160,000 Accounts payable ~ trade 560,000 Notes payable — short-term 160,000 320,000 For the Year Ended December 31 2008 200A Sales (20% cash, 80% credit sales) P18,400,000 P19,200,000 Cost of goods sold 8,000,000 11,200,000 Compute the following ratios: Current ratio as of December 31, 2008: a 05:1 ce 26:1 b. 2.0:1 d. 1:2.6 Quick (acid test) ratio es of December 31, 200B: a. 2.0tol c tot b, O5to1 d. 0.7 tol Accounts receivable turnover for 200B: a. 23.0 times c. 36.8 times b. 18.4 times d. 4.6 times . Merchandise inventory turnover for 2008: 13.33 times cc. 10.0 times b. 11.10 times. d. 8.33 times The gross margin rate for 2004: a 41.67% c. 58.33% b. 71.42% d. 56.52%718 i 2008 25, The average age ‘of accounts ree fo oe (use 360 days), a. 19.57 days a b. 19.57 months d. 18.40 days 26. The following information pertains to Batalla Company for 2098, P16,000 tory at December 31,2008 , pices ‘of merchandise, all on credit 72,000 Cost of goods sold 80,000 ‘The company’s merchandise inventory turnover for 200B was a. 4.0 months. c. 4.0 times. b. 10.0 times. d, 3.60 months. 27. The following information pertains to C2non Company for 2008; ‘Accounts receivable, January 1, 200B P8,000 Accounts receivable, December,31, 2008 9,600 Net cash sales 3,200 Accounts receivable turnover for 200B 5 times The company's net sales for 2008 was a. P47,200. cc. P51,200. b. P88,000. d. P48,000. 28, Super Hot Pan de Sal and Flaming Hot Pan de Sal compete with each other in the hot pan de sal market. Super’s strategy is to bake pan de sal to customer orders -rather than for inventory. Flaming, on the other hand, bake hot pan de sal even if there is no order, then sells from inventory so that customers do not have to wait. Selected financial information from a rec ‘5 financial statements is given below: ee Super Flaming Sales 6 P729,720 Pt, 246,760 Cost of goods sold 565,480 “959,200 Inventory, beginning 9/320 62,800 Inventory, ending 10,920 80,200 Which company has the hit 2e{Round forsee iGher inventory turnover and by how many wer to one digit after the decimal place)chapter 13 —Finarcial Statements wnaysis a. Super, 55.9 times; ¢. 4 b. Flaming, 13.4 times a eee ITEMS 29 to 31 ARE BASED ON THE FOLLOWING INFORMATION: . 30. 31. 32, Corporation: 2008 200A Sales PS00,000 P375,000 Common stock 125,000 Retained earnings 105,000 Dividend payout ratio 40% After tax profit 4% of sales Cash 12% of sales Accounts receivable 18% of sales Inventory 30% of sales Fixed assets, net 40% of sales Accounts payable 20% of sales Accruals 54% of sales How much is the retained earnings balance as of the end of 2008? a. P120,000 c. P105,000 b. P117,000 ¢. P125,000 How much is the company's total assets as of the end of 2008? a. PS500,000 cc. P242,000 b. P375,000 d. P742,000 How much was the company's long-term debt as of the end of 2008? a. PO c. P375,000 b. P125,000 d. P133,000 For the year 200B, Lim Company's return on common stockholders’ equity was 12.5%. Its average stockholders’ equity for the same period was P500,000, inclusive of P50,000 par value Of preferred stock with a dividend rate of 8%. How much was the company's net income for 200B? a. P60,250 c. P58,500 b. P56,250 d. P62,500ae a PART 3~ FINANCIAL Maye i hy 736 Key ANSWERS: 4. C 4A . B 81. a a B 42. 62, A 82.3 3D 23. D 43. C 63. A 83. 3 4c 24, A 44. A 64. B a4 5c 25. A 45. C 65. C 8. B eo 26. C 46. B 66. B 8D 7a 27, A 47, A 67. A 87, 4 | 8A 28. C 48. B 68. B 8. 4 aA 29. B 49. A 69. C 8. ¢ 10. B 30. A 50. D 70. D 90. ¢ 11. 31. D 51. A 71. D 91.4 12,8 32. A 52. B 72. C 92. A 13. B 33. ¢ 53. C 73. B 9.6 | 14. D 34. A 54. D 74. A 94D | 15. A 35. C 55. A 75. C $5. A 16. B 36. D 56. C 76. A 96. B cin 37. B 57. A 77. D 97. B 18. A 38. C 58. A 78. B 98. D | 19D 39. A 59. B 79. A 99. A D 60. C 80. C 100. D : EXPLANATIONS: AEC (Hogzental or common-size analysis (or percentage analysis) is eful for evaluating trends. The amounts for subsequent Years are stated in percentages of a base year amount. 20 serene canmensize analysis presents figures in the financial bese anaine sure fe" expressed as a percentage as , as total asset rn Sales onthe income statsreeeee'S Othe balance sheetpaper 13 Financial Statements Analysis a 3. D » Liquidity refers to the firm's ability to pay current obligations and to continue operations. » Solvency refers to a firm's ability to survive term by paying its long-term obligations. frading on the equity or financial leverage firm's use of debt to finance assets and cperatior y Capital structure consists of the firm's sources of whether short-term or long-term, of its assets. It is com of equity and debt. Earning power refers to the capacity of the firm's operations to produce cash inflows. Financial leverage or trading on equity refers to the company's use of borrowed funds (debt) to finance assets and operations. Naturally, this must be considered when the costs of borrowing (e.g., interest) is less than the earnings to be generated when. the borrowed fund is used to finance assets, projects, or operations. The effectiveness of management in running the firm. VALUATION PROBLEM — Financial statements are based on historical costs and, therefore, do not reflect the current market value of the firm's assets. Moreover, the effects of price level changes must be considered. Provision of useful information regarding the efficiency of operations and the stability of financial conditions is an advantage of using ratio analysis. It is not a limitation affecting comparability among firms. Vertical, common-size analysis expresses figures in the financial statement of a single period as percentages of an important item used as a base. For example, current assets is 20% of total assets as of a certain date > Choice B - an example of horizontal analysis > Choice C - an example of ratio analysis > Choice D - results from cash flow analysis738 PART 3 ~ FINANCIAL MANGE ye, Ny 10. B GDP PRICE INDEX OR GDP deflator includes the Prices of goods and services produced in the country, a Consumer PRICE INDEX (CPI) measures price level », monty pricing of @ speciied set Of goods and cerh 2 purchased by a typical urban consumer. PRODUCER PRICE INDEX (PPI) measures the price of SPecifieg commodities at the time of their first commercial sale. TRANSFER PRICE is the amount charged by one organizationa) unit for the transfer of goods oF services to another organizational unit within the same firm. 11, C Comparability limitations resulting from different firms using | different accounting policies are a concern when making industry comparisons. 12 A The sales volume variance arises when the actual units sold differs from the budgeted units to be sold. ~ Sales price variance arises when the actual selling price Giffers from the budgeted selling price. > Master budget increment is an increase in a budgeted figure on the firm's master budget. 7 Sales mix variance occurs when a firm's actual sales mix is different from the budgeted sales mix 13. B_ The sales volume variance of ™ullti-product company can be analyzed further into the sales mix variance and ssles quantity or final sales volume variance 14. D The statement of cash flows is the basic financial statement prepared and used in cash flow analysis. It reports the cash from operating, investing, and financing activiice af the firm during the period. 15. A’ CLASSIFICATIONS OF CasH FLOWS IN Cash FLow ANaLYsis. 1. OPERATING Acrivmis - are the cash effects of transactions that create revenues and expenses,qaptet 13 Financial Statements Analysis 2. INVESTING ACTIVITIES — generally relate to chal current assets, FINANCING ACTIVITIES ~ generally relate to chal term liabilities and stockholders’ equity accounts. The income staterment amount represents an activity period of time, while the balance sheet amount is as certain date. To develop a meaningful ratio, the balance sl amount should be converted as an average for the same — period. 17. © Ahigh sales-to-working capital ratio (working capital turnover) may indicate insufficient working capital to support the company's sales level, which may result in liquidity problems. 18 A Current Ratio = ~ Quick Ratio = ~~ Current Liabilities 341,600 + P200,000 _ . 50020. 241 mT PART 3 ~ FINANCIAL MANAGE Mey, 12812008 123172094 Current assets: P 35,000 p Cash 2 : 33.125 Marketable securities 16,375 15,125 Notes and accounts receivable, en 49,375 48,000 Inventories ieee 69,375 Prepaid expenses — 2.375 5.000 Total current assets 174,375 PTT0.625 Less current liabilities: Notes and accounts payable (short-term) P 31,250 P 35.625 Accrued liabilities ——7,500 10,500 Total current liabilities P 38,750 P 46,125 Working capital P135.625 124, Increase in working capital (P135,625 — P124,500) Pitas Current Assets Current Ratio= “Current Liabilities Current assets: Cash P 80,000 Notes and accounts receivable,net | 400,000 Inventories 720,000 Marketable securities 240,000 P1,440,000 Divide by current liabilities: Accounts payable — trade P560,000 Notes payable — short-term 160,000 + 720,000 Current ratio a2 i _ Quick Assets k Ratio = ~SuTCK ASSets_ Gulek Ratio = . “Current LisbISS Quick assets: Cash P 80,000 Short-term marketable securities 240,000 Notes and accounts receivable, net 400,000 720,000 Divide by current liebilities (from Item #20) =720,000 Quick ratio 1| use are Statements Analysis __Net Credit Sales _ = Average Accounts: Receivable _P18,400,000 x 80% ~_P. 400,000 + P1 200,000 _ = 800,000 _ ~ 184times ‘Accounts receivable turnover Cost of Goods Sold 73, D Merchandise inventory | —a crane Merchandise turnover Inventory ____ 8,000,000 ~P720,000 + P 1,200,000 — 2 __P8,000,000__ = —poe0,000 = 838 times Gross Margin Rate = — ros Broft 19,200,000 - P11,200,000__ 19,200,000 Average Age of Accounts = Number of Days ina Year ae Receivable “Accounts Receivable Turnover* 360 —Faaotmes ~~ 1282 cere * Accounts receivable turnover is 18.40 times (from Item #22)PART 3 — FINANCIAL Ivy 1 742 MANAGE, Cost of Goods Sold _ Po.cS Merchandise Beginning + Ending Inventory S __laventories Turnover a 2 P80,000 ti = 40 times * Computation of beginning inventory: Cost of goods sold P 80,009 Add inventory, December 31, 2008 16.009 Total P96 000 Less purchases 72,000 Merchandise inventory, January 31,2008 24-099 27. A Accounts (Credit Sales Receivable = AR + AIR Ending Turnover 2 ey Net Credit Sales P8,000 500 Net Credit Sales P8,860 Net credit sales (5 x P8,800) P44,000 Add net cash sales 3,200 Total net sales P47,200 28 Inventory Turnover = —COSt of Goods Sold Average Inventorypogter 13 Finarcial Statemen:s Analysis ¢ 29. A 743 Cost of goods sold pen he + Average inventory 65.480 Peg9,200 ginning + Ending 2 ) = 10,420° Inventory turnover * (P9,320 + P10,920) +2 ** (P62,800 + P80,200) + 2 Supe Hot's inventory tumover is higher by 42.5 times (55 9 — Retained earnings, December 31, :100A P 105,000 Add income, 2008 (P500,000 x 4%) 20,000 Total P125,000 Less dividends paid (40% x P20,000)* 8,000 Retained earnings, December 21, 2008 P17 000 * Dividend payout ratio= 40% = -Pividends _ Earnings 40% = Dividends 20,000 Dividends = P20,000 x 40% = 8.000 Cash (12% of P500,000) P 60,000 Accounts receivable (18% of PS00,000 90,000 Inventory (30% of P500,000) 150,000 Fixed assets, net (40% x 500,000) Total assets 500,000 Total assets (from item #30) 500,000 Less Accounts payable (20% of P500,000) P 100,000 Accruals (5% of P500,000) 25,000 Common stosk (given) 125,000 Retained earnings (from Item # 29) » 117,000 _367,000 Long-term debt P133,000PART 3~ FINANCIAL MaNage ye, 744 Net Income for Common 32, A Return on Stockholders Common = ‘Average Common Stockholders’ Stockholders’ Equity Equity Net Income for Common Stockholders P500,000 — P50,000 12.5% Net income from common stockholders (P450,000 x 12.5%) P56,250 ‘Add dividend for preferred stockholders (P50,000 x 8%) 4,000 Net income for 2008 P60.250 33. C_ The profit margin ratio is the return on sales, which is equal to income divided by sales. Given the return on asset (Income ~ Assets) and asset tumover (Sales ~ Assets), the return on sales may be obtained using the Du Pont Formula: Asset Return on Return onSales x Turnover = Assets -Sales_ ~~ ___Income Assets Assets Return on Sales x 16 = 24% Return on Sales or Profit Margin Ratio= 24% ~ 1.6 =15% 34 A atu on Net Income + interest Expense verage Total = X(1=TaxR Assets henge oe Average Total Assets P70,000 + [(P125,000 x 12%) x = (1 - 0.30) P9000 + P750 2 = —P81,000 ; P825,000 = 28%i - craote 13 Financial Statements Analysis that show what income would have sclely by selling shares of stocks ‘ow well the assets have been lenced by how the assets were The interest expense was added back to net ine the adjusted income would been if assets were acquired Thus, the return shows h employed, and is not influ financed. With the adjustment made, the return on total assets can be compared with companies having different amounts of debt, or with a company whose capital structure (mix of debt and equity) changes over time. 35. C An absolute value of P500,000 and no value for a percentage change. In mathematics, division by zero is not permissible. %. D Eamings per _ __Net Income nen Share (EPS) Number of Shares Price Earnings _ _Price per Share ___, Ratio (P/E) EPS S Price per Share ae Price pershare= 5x10 = 50 . = — Dividend per Share _ Dividend Yield = —— SiS par Share 8% Dividend per Share a Dividend per Share= 50x8% =P4 37. B_ Current liabilities EB eT ae Long-term liabilities 180,000 Total liabilities eee720 3. 35. 36. PART 3 — FINANCIAL Mang, Sp, ios were computed from Siason i Co The following ral : Man, financial statements for 2008: a Ms; Return on asset re fo Asset turnover “9 mes iny’s profit margin ratio? ech c. 15% Bees d. 24% b. 6% i Ethaniel Company’ |. The following figures are taken from Pany’s finan statements for the calendar years 200B and 200A: 2008 2004 Total assets 900,000 750,09) Long-term debt (12% interest rate) 125,000 8% Preferred stocks, P100 par value 225,000 225,000 Total stockholders’ equity 600,000 350,000 Net income (after tax of 30%) 70,000 What is the return on average total assets? a 9.8% C. 12.95% b. 10.5% d. 14.9% Last year, a business had no long-term investments; this year, long: term investments amount to P500,000. Ina horizontal analysis, the change in long-term investments should be expressed as 2 an absolute value of P500,000 and an increase of 100%. an absolute value of P500,000 and an increase of 1,00 Percent, Saf absolute value of 500,000 and no value for a percentale change. 4. no change in any terms because there was no investment * the previous year. Earnings per share a 5. Ifthe dividend yield is Boe : ns Hees Price of the stock must be P40. the amount op 3,0, the stock cannot be determined. 7 f dividend the dividend is pq pare ae be determined. i mounts to P10 and the price earnings rat apseponte 13~Financial Statements Analysis 37, The following information w: statements of Dianice Industries: men Current liabilities Long-term liabilities Preferred stock Number of common shares outstanding a 10,000 aay ne debt-to-equity ratio of 0.96 to 1 at the end of last, year. fas the book value per share at the end of last year? a. P13.75 c. 25.00 : b. 20.00 a p49.00 ITEMS 38 and 39 ARE BASED ON THE FOLLOWING INFORMATION: Net sales, P1.8M; Cost of goods sold, P1.08M; Operating expenses, P315,000; Earnings before interest and tax, 405,000; Net income, P195,000; Total stockholders’ equity, P0.75M; Total assets, PIM; Cash flow from operating activities, P25,000. 38. The return on investment is a. 22.5%. Cc. 19.5%. b. 26.5%. d. 40.5%. 39. The cash flow margin is a. 14%. c. 10.8%. b. 2.5%. d, 12.8%. 40. If a company has current assets of 200,000, including inventory ‘of 80,000 and a quick ratio of 2:1, what is the value of the company’s current liabilities? a. P100,000 cc. P240,000 b. P140,000 d. P 60,000 ITEMS 41 and 42 ARE BASED ON THE FOLLOWING INFORMATION: Consider the following data about a company: Current ratio 3.5tol Acid-test ratio 3.0 tol Current liabilities at year-end 150,000 Inventory, beginning of the year P1z5,000 Inventory turnoverPART 3 ~ FINANCIAL MANAG a 722 41, What is the value of the company’s inventory at the end of a Laat c. P150,000 b Bee d. 525,000 /s cost of goods sold during the years 42. How much is be company’s co: fo Soren : b. so0000 d. P 800,000 ITEMS 43 to 45 ARE BASED ON THE FOLLOWING INFORMATIon. Preser i f Financial Po: nnted below are the comparative Statements of ile of DM Atienza Company for the calendar years 200B and 200A: DM ATIENZA COMPANY Statements of Financial Position December 31 JN THOUSANDS ASSETS 2008 200A Current assets: Cash P 240 P 200 Marketable securities 160 120 Accounts receivable (net) 360 240 Inventories 480 400 Other current assets 120 160 Total current assets P1,360 P1,120 Non-current assets: Investment in securities P 200 P 160 Property, plant, and equipment, net 2,000 2,120 Other non-current assets, net 440 240 Total non-current assets P2640 2,520 Total assets 4.000 3,640 UABILITIES AND EQUt Liabilities; QuITy Current liabilities on-current liabilities Total liabilities746 PART 3 FINANCIAL MANAGE Ny Debt-to-equity ratio ( e) = 0.96 to 1 D cE S 0.96 P240,000 _ _ 9 9g E . Equity = 2240.00 — = P250,000 “Total stockholders’ equity P250,000 Less preferred stock —50,000 - Common stockholders’ equity P200,000 + Number of common shares outstanding 10,000 Book value per shere P20 c Returnon _ _NetIncome ____P195,000___ Investment ~ “Total Assets P7,000,000 ~ 72.5% Cash Flow from 39, a CashFlow _ Operations P25,000 _ 4 4m Margin Net Sales P1,800,000 ~~ 40. D Current Assets — 7 Quick Assets Inventory k = slit Assets ad copies Current Current Liabilities Liabilities = ——P200,000 ~ P80,000 Current S Current Libities = —-—P123.000 en ooncopter 33~Financial Statements Analysis a1 3.5 = Current Assets P150,000. P 150,000 x 3.5 = P525,000 Quick R; s— atio a Current Assets = 3= Quick Assets P150,000. Quick Assets = P150,000 x 3 = P450,000 Current assets P525,000 Less quick assets 450,000 Inventory at year-end 2 75.000 = —_ Cost of Goods Sold 42D Inventory Turnover = ‘average Inventory g = Cost of Goods Sold P 125,000 + P75,00 = Cost of Goods Sold = P%00,000x8 = 800,001 BoC 2008 200A Current assets P1,360 1,120 Divide by current liabilities 680 + 440 Current ratio 2.00 Quick assets: Cash P240 P200 Marketable securities 160 120 Accounts receivable 360 ~240 Total quick assets P760 P560 Divide by current liabilities £680 2440 Quick (acid-test) Ratio 112 az