Danica Jane B.

Ramos
BSAC 3-2

Fundamental Analysis: FSA

Problem Solving

PROBLEM 1:

WYENARD Corporation had the following comparative current assets and

current liabilities:
Dec. 31, 2019 Dec. 31, 2020
Cash 20,000 30,000
Short-term investments 40,000 10,000
Accounts receivable 55,000 95,000
Inventory 110,000 90,000
Prepaid expenses 35,000 20,000
Accounts payable 140,000 110,000
Salaries payable 40,000 30,000
Income tax payable 20,000 15,000

Credit sales and P600,000

cost of goods sold were P350,000

1.   Current Ratio = Current assets ÷ Current liabilities

2020 2019

= P245,000 ÷ P155,000     = P260,000 ÷ P200,000    

= P1.58 = P1.30

2. Working Capital = Current assets - Current liabilities  

2020 2019

= P245,000 - P155,000 = P260,000 - P200,000    

= P90,000 =P60,000
Average Working Capital = (Opening Working capital + Closing Working capital) /2

= (P90,000 + P60,000) ÷ 2

= P75,000

3.  Acid Test Ratio = (Cash and cash equivalents + Short Term Investment + Current
Receivables) ÷ Current liabilities

2020 2019

= (P30,000 + P10,000 + P95,000) ÷ = (P60,000 + P40,000 + P55,000) ÷

P155,000     P200,000    

= 0.87 = 0.775

4.  Accounts receivable turnover times = Net Credit Sales ÷ Average Accounts Receivable

= P600,000 ÷ P75,000

= 8 times

Average Accounts Receivable = (P55,000 + P95,000) ÷ 2

= $75,000

5.  Inventory Turnover Times = Cost of Goods Sold ÷ Average Inventory  

= P350,000 ÷ P100,000

= 3.5 times

Average Inventory = ($110,000 + $90,000) ÷ 2

= $100,000
PROBLEM 2: PROBLEM 2

Selected financial statement data for Wyenard Company are presented below.

Net sales 1,200,000

Cost of goods sold 700,000

Interest expense 10,000

Net income 180,000

Total assets (ending) 850,000

Total common stockholders' equity (ending) 650,000

Total assets at the beginning of the year 750,000

Total common stockholders' equity 50,000

at the beginning of the period. *

1. Total Asset Turnover = Net Sales  Total Assets

= 1,200,000  [(750,000 + 850,000)/2]

= 1. 5

2. Profit Margin = (Earnings available for common stockholders  Net Sales) * 100

= (180,000  1,200,000) *100

= 15%
3. Return on Total Assets = (Net Income  Total Assets) * 100

= (180,000  [(750,000 + 850,000)/2]) * 100

= 22.5%

4. Return on Ordinary Shareholder’s Equity = (Net Income  Common stock equity) * 100

= (180,000  [(50,000 + 650,000)/2]) * 100

= 51.43%

PROBLEM 3:
PROBLEM 3

Wyenard Corporation has issued common stock only. The company has been
successful and has a gross profit rate of 20%. The information shown below was taken
from the company's financial statements.

Beginning inventory P482,000

Purchases P5,636,000
Ending inventory ?

Average accounts receivable P700,000

Average common stockholders' equity P3,500,000

Sales (all on credit) P7,000,000

Net income P525,000

1. Accounts receivable turnover = Credit Sales  Average Accounts Receivable

= P7,000,000  P700,000
= 10 times
Average collection period = 365 days  Receivable Turnover
= 365 Days  10
= 36.5 days

2. Inventory turnover = Cost of Goods Sold  Average Inventory

= P5,600,000  P500,000
= 11.2 times
Ending Inventory
Beginning Inventory P482,000
Add: Purchases 5,636,000
Less: Cost of Goods Sold (5,600,000)
Ending Inventory P518,000
P518,000

Since the gross profit ratio is 20%, the cost of goods sold ratio is 80%.
(P7,000,000 * 80%) = P5,600,000
Average Inventory = (Beginning Inventory + Ending Inventory) / 2
= (P482,000 + P518,000) / 2
 = P500,000
Days in Inventory = 365 days  Inventory Turnover
= 365 Days  11.2
= 32.59 days

3. Return on Common Stockholder’s Equity = (Net Income  Common stock equity) * 100

= (P525,000  P3,500,000) * 100

= 15%