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Problem 2 (Liquidity): The following items were taken from the records of Batangas Corp.
Problem 5 (Activity Ratios): The following data were taken from the accounting records and
financial statements of Palawan Corporation:
Year 1 Year 2
Accounts Receivable P 40,000 P 50,000
Inventory 50,000 30,000
Accounts Payable 15,000 30,000
Sales 450,000
Cost of Sales 200,000
Purchases 180,000
Required: Compute the following:
1. Inventory Turnover and Days in Inventory
2. Receivable Turnover and Days in Receivable
3. Payable Turnover and Payable Deferral Period
4. Operating Cycle and Cash Conversion Cycle
Problem 6 (Activity Ratios): Determine the missing items
Company A Company B Company C
Sales P 800,000 __________ P 400,000
Cost of Sales P 500,000 __________ P 250,000
Purchases P 400,000 __________ P 180,000
Accounts Receivable P 40,000 P 80,000 __________
Inventory P 50,000 P100,000 __________
Accounts Payable P 80,000 P 50,000 __________
Inventory Turnover __________ 5 times __________
Days in Inventory __________ __________ 144 days
Receivable Turnover __________ 12 times __________
Days in Receivable __________ __________ 180 days
Payable Turnover __________ __________ __________
Deferral Period __________ __________ 60 days
Operating Cycle __________ __________ __________
Cash Conversion Cycle __________ 72 days __________
Problem 8 (Return on Assets): A company currently has total operating income at P100,000 while
interest expense amounted to P 10,000. Average operating assets were determined to be P 1,000,000
for the year. The company is subject to 40% income tax rate.
Required:
1. Determine the Basic Earning Power.
2. What is the return on operating assets?
Problem 9 (Return on Equity): The following were taken from the comparative statement of financial
position of Laguna Corporation:
Year 1 Year 2
Ordinary Shares P 200,000 P 200,000
Preference Shares (10%) 100,000 100,000
Retained Earnings 300,000 390,000
Total Shareholders’ Equity P 600,000 P 690,000
During Year 2, the company was able to earn P 120,000 in after tax profit. The company declared and
paid P 20,000 in Ordinary share dividends and P10,000 in preference share dividends.
Required: What is the company’s return on equity?