Analysis and interpretation

[janesmith]

can someone please help me

The following information has been extracted from the financial statements of Burgers Galore Pty Ltd. The owner is concerned about the profitability, Liquidity and financial structure of the business at 30 June 2011.


Revenues (Sales on credit) 30 June 2010 $530 000 - 30 June 2011 $480 000
Cost of Sales 30 June 2010 $360 000 - 30 June 2011 $300 000
Other expenses 30 June 2010 $70 000 - 30 June 2011 $95 000
Cash and cash equivalents 30 June 2010 $20 000 - 30 June 2011 $30 000
Inventories 30 June 2010 $16 000 - 30 June 2011 $12 000
Trade accounts receivables (net) 30 June 2010 $20 000 -30 June 2011 $18 000
Non-current assets (net) 30 June 2010 $202 000 -30 June 2011 $170 000
Trade accounts payable 30 June 2010 $25 000 - 30 June 2011 $15 000
Thymes, Capital 30 June 2010 $183 000 - 30 June 2011 $165 000
Non-current liabilities 30 June 2010 $50 000 - 30 June 2011 $50 000

Inventories at 1 July 2009 was $14 000.

Required:
A. Calculate the following ratios for 2010 and 2011:
1. Profit margin
2. Return on Equity
3. Current ratio
4. Quick ratio
5. Debt ratio
6. Inventory turnover.

 

[Deleted member 4993]

can someone please help me

The following information has been extracted from the financial statements of Burgers Galore Pty Ltd. The owner is concerned about the profitability, Liquidity and financial structure of the business at 30 June 2011.


Revenues (Sales on credit) 30 June 2010 $530 000 - 30 June 2011 $480 000
Cost of Sales 30 June 2010 $360 000 - 30 June 2011 $300 000
Other expenses 30 June 2010 $70 000 - 30 June 2011 $95 000
Cash and cash equivalents 30 June 2010 $20 000 - 30 June 2011 $30 000
Inventories 30 June 2010 $16 000 - 30 June 2011 $12 000
Trade accounts receivables (net) 30 June 2010 $20 000 -30 June 2011 $18 000
Non-current assets (net) 30 June 2010 $202 000 -30 June 2011 $170 000
Trade accounts payable 30 June 2010 $25 000 - 30 June 2011 $15 000
Thymes, Capital 30 June 2010 $183 000 - 30 June 2011 $165 000
Non-current liabilities 30 June 2010 $50 000 - 30 June 2011 $50 000

Inventories at 1 July 2009 was $14 000.

Required:
A. Calculate the following ratios for 2010 and 2011:
1. Profit margin
2. Return on Equity
3. Current ratio
4. Quick ratio
5. Debt ratio
6. Inventory turnover.

Since we do not know - what you know - I want to make sure you know the definitions of the terms whose numerical values you are trying determine.

Please tell us the definitions of:

1. Profit margin
2. Return on Equity
3. Current ratio
4. Quick ratio
5. Debt ratio
6. Inventory turnover.

Please share your work/thoughts with us, indicating exactly where you are stuck - so that we may know where to begin to help you.

 

[janesmith]

Profit margin
Profit from ordinary Activities after income tax ÷ Income
2010 360 000 ÷ 530 000 x 100 ÷ 1 = 67.92% 2011 300 000 ÷ 480 000 x 100 ÷ 1 = 62.5%

Return on Equity
Profit – Preference dividends ÷ Average ordinary equity
2010 396,000 ÷ 183,000 = 2.16 2011 330,000 ÷ 165,000 = 2

Current ratio
Current Assets ÷ Current Liabilities
2010 396,000 ÷ 25,000 = 15.84 2011 330,000 ÷ 15,000 = 22

Quick ratio
Cash Assets + Receivables ÷ Current Liabilities
2010 360,000 + 20,000 ÷ 25,000 = 15.2 2011 300,000 + 18,000 ÷ 15,000 = 21.2

Debt ratio
Total Liabilities ÷ Total Assets
2010 788,000 ÷ 688,000 = 1.145 2011 710,000 ÷ 625,000 = 1.136

Inventory turnover
Cost of Sales ÷ Average inventory Balance
2010 360,000 ÷ 16,000 x 100 ÷ 1 = 2,250 2011 300,000 ÷ 12,000 x 100 ÷ 1 = 2,500


this is what i got i just want to no if im right or wrong and how to fix it

 

[joelee]

Hi Jane,
wouldnt be doing ACG11 with openuniversities by any chance, would you?
Found your post while trying to find info on undertaking assessment with ratio's and thought I might be able to help.
There is also a facebook study group, called Study Group for UNISA Accounting for Business (SP1) 2011
http://www.facebook.com/home.php?sk=gro ... 5767159107

We arent given the profit figure so it needs to be calculated., you need to subtract the cost of sales from revenues to get gross profit.
And since we havent been given any tax figures, this is the number to use.
Then you divide your profit figure by the revenue figure to get your profit margin. shown as a percentage

You will also need the profit figure calculated to work out return on ordinary equity.
We arent given pref. dividends, so can only use the profit figure.
Then divided by average ordinary equity.
To get an average you need to add the current years figure with the previous years figure.
So for 2011, you add the 2011 capital amount with the 2010 capital amount and then divide by 2 to get the average ordinary equity for that year.
For the 2010 calculation,you aren't given 2009 capital, so you can't average, so you just use the amount of capital for 2010 as the ordinary equity
Shown as a percentage

the current ratio is the total for all current assets for that year divided by the total for all current liabilities for that year.
So you don't include revenue, cost of sales, other expenses, noncurrent assets, capital or non current liabilities in your total.
You do include cash, inventory and trade recievables (another term for accounts receivable)
this is shown in the format of (your answer):1
so just say the answer after your calculations was 3, your answer needs to be shown in the format 3:1 (meaning 3 to 1)

The quick ratio is just cash+receivables/current liabilities. Cost of sales is not one of these.
answer is also shown in the (answer):1 format

Debt ratio is total liabilities divided by total assets
For this calculation, the only liabilities you have are trade accounts payable and noncurrent liabilities.
Your assets are cash, inventory, trade accounts receivable and noncurrent assets.
Shown as a percentage

Inventory turnover is cost of sales divided by average inventory balance.
Again for this, you need to add the current years inventory with the previous years inventory and divide by 2 to get the average balance.
You will notice that you are given an inventory balance for 2009.

As for limitations on assessing with ratios, still on the hunt for the answers myself, but there is some info in the text around page 588 i think.
Hope that is of some help, and if you would like to join the facebook group, just find it and send a request to join. It has been a lot of help.
Good Luck
Cheers JOelee