Use the historical financial statement of Y Company to compute the following:

1. FINANCIAL RATIOS: (Compute for year 2020 only, answers must be rounded off in
two decimal places) (5 points)
A. Current Ratio
B. Asset Turnover Ratio
C. Average Collection Period
D. Inventory Turnover Ratio
E. Days Inventories

2. FINANCIAL STATEMENT ANALYSIS: (Answers must be rounded to the nearest whole

number) (15 points)
F. Vertical Analysis (Statement of Profit and Loss only)

3. PROJECTED FINANCIAL STATEMENTS (20 points)

Before the end of 2020, the owners of Y Company had instructed the Finance
Manager to prepare the 2021 Projected Statement of Financial Position and Projected
Statement of Profit and loss. The following assumptions were prepared for the 2021
projected financial statements.

G. A projected sale for 2021 is expected to increase by 10% from 2020 sales level.
H. The following financial statement accounts are expected to vary with sales based on the
2020 financial statements:
I. Cost of Sales
II. Cash
III. Trade accounts receivable
IV. Inventories
V. Other current assets
VI. Trade accounts payable

Variable operating expense is 7.5% of sales. Depreciation is 10% of the gross beginning
balance of PPE. As of December 31, 2020, the gross balance of PPE is P17,000,000.
For January 2021, P3,000,000 new PPE will be acquired. It is the policy of the company
that PPE acquired in the first half of the year will be depreciated for one full year.

I. As of December 31, 2020, there are two long-term loans. Both have annual interest rate
of 10%
• First loan will mature on June 30, 2021 and the remaining principal balance to
be paid on June 30, 2021 is P1,000,000
• Second loan amounting to 3,000,000 which was incurred on December 31,
2020 is paid at the rate of 500,000 principal balance every June 30 and
December 31
• New loans of PHP4,000,000 will be incurred on December 31, 2021 payable at the
rate of PHP500,000 every June 30 and December 31. Annual interest rate is
expected at 10%.
J. Income tax rate is 30% of the income before taxes. 75% of the income tax expense will
be paid in 2021 while the balance will be paid in 2022.
K. Cash dividend of P3,000,000 will be paid on 2021. Other noncurrent assets and other
liabilities will remain unchanged.
 Y Company
Statement of Profit and Loss
For the year Ending December 31, 2017-2020

2020 2019 2018 2017

Sales 22,000,000 19,000,000 15,000,000 12,000,000
Cost of Sales 15,000,000 13,000,000 9,450,000 7,500,000
Gross Profit 7,000,000 6,000,000 5,550,000 4,500,000
Operating Expenses 4,000,000 3,200,000 2,950,000 2,150,000
Operating Income 3,000,000 2,800,000 2,600,000 2,350,000
Interest Expense 500,000 450,000 400,000 240,000
Income before taxes 2,500,000 2,350,000 2,200,000 2,110,000
Taxes 750,000 705,000 660,000 633,000
Net Income 1,750,000 1,645,000 1,540,000 1,477,000

Y Company
Statement of Financial Position
December 31, 2017-2020
2020 2019 2018 2017
Assets
Current Assets
Cash 1,050,000 998,000 850,000 745,000
Receivable 3,000,000 2,000,000 1,000,000 990,000
Inventories 4,900,000 4,450,000 3,950,000 3,750,000
Other Current Assets 1,045,550 700,000 600,000 500,000
Total Current Assets 9,995,550 8,148,000 6,400,000 5,985,000
Property, plant, and equipment, net 15,000,000 14,300,000 10,500,000 9,000,000
Other Non-current Assets 70,000 62,000 50,000 47,000
Total Non-current Assets 15,070,000 14,362,000 10,550,000 9,047,000
Total Assets 25,065,550 22,510,000 16,950,000 15,032,000

Liabilities & Equity

Current Liabilities
Notes payable
Trade payables 6,300,000 4,900,000 2,800,000 1,950,000
Income taxes payable 187,500 176,250 165,000 158,250
Current portion of long-term debt 2,250,000 2,500,000 1,000,000 900,000
Other current liabilities 85,600 28,700 32,500 31,600
Current liabilities 8,823,100 7,604,950 3,997,500 3,039,850
Long-term debt 2,000,000 1,250,000 1,150,000 800,000
Total Liabilities 10,823,100 8,854,950 5,147,500 3,839,850
Stockholder's equity
Capital stock 9,000,000 9,000,000 9,000,000 9,000,000
Retained earnings 5,242,450 4,655,050 2,802,500 2,192,150
Total stockholder's equity 14,242,450 13,655,050 11,802,500 11,192,150
Total Liabilities and stockholder's equity 25,065,550 22,510,000 16,950,000 15,032,000