MARKING SCHEME

1. Company Cannon

i) Current ratio = (73,900/50,450) = 1.46

ii) Debt-to-equity ratio = (149,950/21,950) = 6.83
iii) Working Capital =73,900 - 50,450 = $23,450
iv) Quick ratio = (32,800 + 300 + 1000) / 50,450 = 0.67
v) Debt ratio = 149,950/171,900 * 100 = 87.23%

2. Example Corporation

i) Gross profit margin = (120,000/500,000) * 100 = 24%

ii) Net profit margin = (23,000/500,000) *100 = 4.6%
iii) Operating profit margin = (40,000/500,000) * 100 = 8%

3. For its most recent year a company had Sales (all on credit) of $830,000 and Cost of
Goods Sold of $525,000. At the beginning of the year its Accounts Receivable were
$80,000 and its Inventory was $100,000. At the end of the year its Accounts Receivable
were $86,000 and its Inventory was $110,000.

Required:
Using the above information, estimate the followings:
i) Average accounts receivable for the year.
(80,000 + 86,000)/2 = $83,000
ii) Average inventory for the year.
(100,000 + 110,000)/2 = $105,000
iii) Accounts receivable turnover ratio for the year.
(830,000/83,000) = 10.0
iv) Inventory turnover ratio for the year.
(525,000/105,000) = 5.0
v) Average days of sales for Accounts Receivable during the year.
(83,000/830,000) x 365 = 36.5 days

4. At December 31st, a company's records show the following information:

Required:
Using the above information, estimate the followings:
i) Company’s current asset
10,000 + 30,000 + 80,000 + 6,000 = $126,000
ii) Company’s net working capital
 126,000 – 60,000 = $66,000
iii) Company’s current ratio
126,000/60,0000 = 2.1
iv) Company’s quick ratio
(126,000 – 80,000) / 60,000 = 0.77

5. Refer financial statement below:

Required:
Using the above information, estimate the followings:

i) Current ratio = (89,000/61,000) = 1.46x

ii) Inventory turnover ratio = (380,000/31,000) = 12.26x
iii) Average collection periods = (40,500/ 500,000) *365 = 30 days
iv) Average payment periods = (35,900/ 500,000) *365 = 26 days
v) Total asset turnover ratio = (500,000/770,000) = 0.65x
vi) Time Interest Earned = (40,000/12,000) = 3.33x
vii) Return on Assets = (23,000/770,000) = 0.03 @ 3%