Problem 1

The following data were taken from the financial records of East Company on December 31, 2019 (in
thousands):

Debt P200,000
Shareholder’s Equity 300,000
Total equity P500,000
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Preference dividends P 1,000

Ordinary shareholder’s equity, P100 par 200,000

Earnings before interest and taxes P 10,000

Interest expense 2,000
Earnings before tax P 8,000
Income tax (2,400)
Earnings after tax P 5,600
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Required: compute the following:

1. Debt-to-equity ratio _________________
2. Times interest earned ________________
3. Earnings per share __________________
4. Return on Shareholder’s Equity _________

Problem 2
The financial Statement of NSC Corporation at the end of 2019 is as follows:

NSC Corporation
Balance Sheet
December 31, 2019

Cash P 170,000
Trading securities 50,000
Accounts Receivables 490,000
Inventory 440,000
Prepaid insurance 20,000
Building, net 640,000
Patent 30,000
Total assets P1,840,000

Accounts Payables 330,000

Accrued expenses 70,000
Mortgage payable 240,000
Total liabilities P 640,000

Ordinary shares P 600,000

Share premium 60,000
Retained earnings 540,000
Total liabilities and shareholder’s equity P1,840,000

NSC Corporation
Income Statement
December 31, 2019

Net sales P2,000,000

Cost of goods sold:
Inventory beginning 500,000
Add: Net Purchases 1,440,000
TGAS 1,940,000
Less: Inventory end ( 440,000) (1,500,000)
Gross Profit P500,000
Less: Operating expenses (250,000)
Income before income tax P250,000

Income tax rate is 30%

Required:
5. Current ratio _______________________
6. Quick ratio ________________________
7. Inventory turnover __________________
8. Accounts payable turnover _______________
9. Accounts payable turnover _______________
10. Average collection period ________________