2.

Compute for the following ratios:

a. Profitability Ratios – Gross Profit Ratio; Net profit ratio; operating ratio, return on shareholders; \’ investment;
Return on equity capital
2018 2017
Gross Profit Ratio = (6,747,631/16,720, 063) (11,328,868.00/24,331,395.00)
(Gross Profit / Net *100=40.36% *100 = 46.56%
Sales)*100
Net Profit Ratio = Net (1,812,315/16,720, 063) 4,942,755.30/24,331,395.00=
Income/ Net Sales*100 20.31%
*100= 10.77%
Operating Ratio = 2,573,308.00/16,720,063.00= 7,061,079.00/24,331,395.00=
(Operating Income / 15.39% 29.02%
Net sales) *100
Return on Equity = (Net 1,801,315.60/ (11,441,526- 4,942,755.30/ (16,159,744-
Income / Average 1,180,605) = 17.56% 2,817,171) = 37.04%
Owner's Equity) *100
Return on Equity 2,573,308.00* (1-0.3)/ 7,061,079.00*
Capital = [ Profit before (8,603,412-2,838,114) = (1-0.3)/(13,917,916-
interest & tax (1 - tax 31.24% 2,241,828)= 42.33%
rate)]/ [Average Total
Assets] *100
b.  Liquidity Ratios Current ratio, acid test/quick ratio
2018 2017
(INCOME STATEMENT) (INCOME STATEMENT)
LIQUIDITY RATIOS:
Current ratio = 8,603,412/1,180,605= 3.03 13,917,916/2,817,171= 6.21
Current Assets /
Current Liabilities
Quick or Acid test (2,869,876+10,000+4,180,016)/1,180,605= (4,976,330+10,000+7,127,853)/2,817,171=
ratio = Liquid Assets / 5.98 4.30
Current Liabilities

c. Activity Ratios – Inventory turnover ratio, Receivables turnover ratio, average collection period; payable
turnover ratio’ working capital turnover ratio; Fixed assets turnover ratio
2018 2017
(INCOME STATEMENT) (INCOME STATEMENT)
Inventory Turnover 9,972,432.00/ (312,029- 13,002,527.00/ (329,300-
ratio = Cost of Goods 94,159) = 24.55 134,280) = 28.05
Sold / Average
Inventory Balance
Accounts Receivable 16,720,063.00/4,180,016= 24,331,395.00/7,127,853=
Turnover = Net Sales 4.00 3.41
/ Average Accounts
Receivable Balance
Average Collection 365/ 4= 91.25 365/ 3.41= 106.93
Period = 365 days/
Accounts receivable
turnover
Accounts Payable 9,972,432.00/1,180,605= 13,002,527.00/2,817,171=
Turnover = Cost of 8.45 4.62
Goods Sold /
Average Accounts
Payable
Working Capital 16,720,063.00/(312,029- 24,331,395.00/(329,300-
Turnover = Net Sales 94,159)= 2.25 134,280)= 1.37
/ Average Working
Capital
Fixed Asset Turnover 16,720,063.00/2,838,114= 24,331,395.00/2,241,828=
= Net Sales / 5.89 10.85
Average Net
Property, Plant, and
Equipment
d. Long- term solvency or leverage ratios – debt to equity ratio; Equity ratio
2018 2017
Debt to Equity 3490/10260921= 2817171/13342573=
Ratio = Total 0.12 0.21
Liabilities / Total
Equity
Equity Ratio = 10260921 / 13,342,573 /
Total Equity / 11441526= 0.90 16,159,744= 0.83
Total Assets