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Financial statement analysis (FIN621)......Assignment no 1 .....Due date : 23 Jan 2017 ....Marks: 10

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Find out the missing values in the table by using the provided financial data Financial Data Mr.IJazbusiness Competitor’sBusiness
Net Sales 2,400,000 2,700,000
Net income 175,000
Net profit margin (W-1) 7.29% 5.50%
Total Debt (w-4) 608,696
Total Equity (W-3) 1,400,000
Total asset (W-2) 102941
Return on Equity 12.50% 12.20%
Asset turnover 1.7 1.6
Debt-to-equity ratio 2.3

W-1) Net Profit Margin=Net Income/Net Sales or Revenue *100
= 175,000 / 2,400,000
(W-2) ROA = Annual Net Income/Total Assets
1.7 = 175,000/Total Assets
175,000/1.7 = Total Assets
Total Assets = 102941.2
(W-3) Return On Equity Ratio = Net Income / Equity
12.50% =175,000 / Equity
Equity = 1,40.0000
(W-4) Debt to Equity Ratio =Total Debt /Equity
2.3 = Total debt / 1,40,000
Equity = 1,400,000 /2.3
Equity = 608,696
Based on the results of profitability and Debt-Equity ratio, should the bank sanction a loan to the business of Mr. Ijaz? Support your answer with logical comments
On the base of Debt-Equity ratio bank can not sanction a loan to the business of Mr. Ijaz because A debt to equity ratio of 1 would mean that investors and creditors have an equal stake in the business assets.
A lower debt to equity ratio usually implies a more financially stable business. Companies with a higher debt to equity ratio are considered more risky to creditors and investors than companies with a lower ratio.

apka assets turnover ka formula gilt hy

Debt to equity ratio = Total Debt/Total Equity

                          2.3 = Total Debt/ 1,400,000

              Total Debt = 1,400,000*2.3 = 3,220,000

ap apni calculation check kry again

Huma Mughal how about the other calculation ? they are right or wrong.

and also how to find total debt of competitor's business.

    Assets Turnover = Net Sales/Total Assets

                     1.7 = 2,400,000/Total Assets

      Total Assets = 2,400,000/1.7 = 1,411,765

    Return on equity = Net Income / Total Equity

                12.5% = 175,000/ Total Equity

      Total Equity = 175,000/12.5% = 1,400,000

    Net profit margin = Net Income/Net sales  

Net profit margin = 175,000/2,400,000 = 7.29%

i don't know about the total debt of the competitor's businesshow to find it

i think we can find total debt of competitor's business by

Total assets-total equity. 

is this right ????


your calculations are correct. and solution of total debt and equity is incorrect in solution file which is uploaded over here.

Debt to Equity Ratio is 0.9 of Competitor's Business. Now Solve by ur own.

how 0.9 ?. plz explain


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