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Learning Objective
 To understand the concept of financial statements analysis with ratio analysis.
 To understand the way ratio analysis is conducted and ratios are interpreted.

Learning Outcomes
After attempting this assignment, the students would be able to understand:
 The concept ratio analysis within the domain of financial statement analysis.
 How to conduct ratio analysis and interpret the resulting figures.


Suppose, a construction firm is running a successful business in the market, however, complete information regarding its business operations and financial health is not available. Being a financial analyst, you intend to find some desired financial figures in order to be able to conduct an effective analysis of the firm’s financial health.

1. From the information given below, you need to determine the cost of goods sold of the firm using various ratios (Marks 3).

2. From the following information, you need to calculate receivable turnover ratio, days required to collect receivables and length of operating cycle (assume 365 days in a year) (Marks 4).

Current ratio
Quick ratio
Current liabilities
Rs. 300,000
Inventory turnover
2 times

3. Give logical interpretation of the inventory turnover ratio of the firm, if the inventory turnover in construction industry is “9.9”. Give reasons. (Marks 3).

(Note: proper formulas; step-wise complete working is required to secure good marks)
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Opening accounts receivable
Closing accounts receivable
Net credit sales
Days required to sell inventory
55 days
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Replies to This Discussion

Current Ratio = Current Assets / Current liabilities


   Current Assets = Current Ratio * Current liabilities 

Quick Ratio = Current Assets - Inventory / Current liabilities


       Inventory = Current Assets – Quick Ratio* Current liabilities



Inventory Turnover Ratio = COGS / Inventory


              COGS = Inventory Turnover Ratio * Inventory

day collection 40 ata ha

sara farooq plz upload ur solution plz jin ka galt ha wo theak kar layn

   cost of goods sold = Rs. 1200000

  Receivable turnover ratio = 9.09

Days required to collect receivable =40 days

length of operating cycle= 95

 Hello Sara,

thank you for your sharing but i am confuse in calculation , how can we find current assets in the questions. can you please share the solution. 

what is ur answer of Length of operating cycle???

Length of operating cycle = inventory sales days + receivable collection days
=55 +40

ara kindly tell me the solution of 3 rd part yaar baqi to olve hogea 

kindly uplo

u mean 55 + 40.15 = 95.15

mine also the same.....................


So the assignment is done n dusted then.......

How you find 40.15??

Days required to collect receivables

= 365 / RTO

= 40.15


Receivable Turnover ratio (RTO)

= Net credit sales / Average Receivables


Average Receivables

= (opening + closing account receivables) / 2


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