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# FINANCIAL STATEMENTS ANALYSIS (FIN621) ASSIGNMENT NO. 02

DUE DATE: 15TH FEBRUARY, 2016

MARKS: 10

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.

Assignment

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.
Required:

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
3.5
Quick ratio
1.5
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)
IMPORTANT:
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IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS
OTHER IMPORTANT INSTRUCTIONS:
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 Use black and blue font colors only.
Opening accounts receivable
Rs.250,000
Closing accounts receivable
Rs.300,000
Net credit sales
Rs.2,500,000
Days required to sell inventory
55 days
REFERENCING GUIDELINES:
 Use APA style for referencing and citation. For guidance search “APA reference style” in Google and read various websites containing information for better understanding or visit http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
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Dear students!
As you know that Post Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current s

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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.....................

Thanks..

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

How you find 40.15??

Days required to collect receivables

= 365 / RTO

= 40.15

and

Receivable Turnover ratio (RTO)

= Net credit sales / Average Receivables

and

Average Receivables

= (opening + closing account receivables) / 2

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