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Select Business & Technology College

Department of Accounting and Finance
Financial Management I (AcFn-331) – Assignment (20%)
Problem 1

Assume that a firm has owner’s equity of Br. 100,000. The ratios for the firm are:
• Current debt to total debt… ............................ 0.40
• Total debt to owner’s equity ........................... 0.60
• Fixed assets to owner’s equity ........................ 0.60
• Total assets turnover ....................................... 2 times
• Inventory turnover .......................................... 8 times

Complete the following balance sheet, given the information above.

Assets Liabilities & owner’s Equity
Cash …………. Current debt ………..
Inventory ………….. Long-term debt …………
Total current assets ………….. Total debt …………
Fixed assets ………….. Owner’s equity …………
Total assets ………….. Total liabilities & owner’s equity …………

Problem 2

The comparative balance sheets and profit and loss statements for AARON PLC are given below:
AARON PLC
Comparative Balance Sheet
December 31
Assets 2020 2019 2018
Cash 54,485 16,218 29,179
Account Receivables 33,638 60,495 54,364
Inventory 120,725 90,526 83,454
Prepaid 4,311 2,269 1,299
Total current assets 213,159 169,508 168,296
Net fixed assets 136,210 121,345 114,046
Total 349,369 290,853 282,342
Liabilities and capital
Total current liabilities 121,149 76,834 68,003
Owner’s capital 228,220 214,019 214,339
Total 349,369 290,853 282,342

BEREKET N. March,2021

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AARON PLC
Summarized Profit and Loss Statements
December 31
2020 2019 2018
Sales 538,211 458,618 428,253
Cost of goods sold 318,133 276,174 258,703
Gross profit 220,078 182,444 169,550
Operating expenses 199,982 166,029 147,802
Net profit 20,096 16,415 21,748

Required: Compute all the ratios analysis (vertical analysis) and comment on the performance
and indicate areas which require investigation.

Problem 3

AARON PLC has made plans for the next year. It is estimated that the company will employ total
assets of Br. 800,000; 50% of the assets being financed by borrowed capital at an interest rate of
8% per year. The costs of goods sold for year are estimated at Br. 480,000 and all other operating
expenses are estimated at Br. 80,000. The goods will be sold to customers at 150% (or 1.50) of
the direct costs. Tax rate is estimated to be 50%.

Required:
• Net profit margin
• Return on investment
• Assets turnover

Assessment
• Group Assignment 20%
Instructions:
• Form a group of 5 students and solve the above problems
• Papers are to be typed
• Papers should be error-free
Deadline
• Last date for submitting print-out of the above problem is March 27, 2021 (Saturday)
• Assignments that do not meet deadlines will bear penalties and shall not be considered

BEREKET N. March,2021