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thanks alot !!!

ACC501 Assignment no 01 solution fall 2020



Before Proposed Investment

(Amount in Rs.)

After Proposed Investment

(Amount in Rs.)




Net profit






Total Debts



Total Equity




Requirement # a) Compute N.M’s ROA and ROE before and after the proposed investment.


ROA Before Proposed Investment:

 = Net Income/ Total Asset



ROA After Proposed Investment:

 = Net Income/ Total Asset




ROE Before Proposed Investment:

 = Net Income/ Shareholder’s Equity





ROE After Proposed Investment:

 = Net Income/ Shareholder’s Equity



N.M should go for the investment as ROA & ROE increased after proposed investment.




Supporting Calculations

1- Total Assets Before Proposed Investment:-

Total assets turnover ratio= Total sales/Average assets

0.8=Rs.860,000/Average assets

0.8 Average assets= Rs.860,000

Average assets=Rs.860,000/0.8

Average Assets=Rs.1,075,000

Average assets are assets before proposed investment


2- Total Debts Before Proposed Investment:-

Debt ratio= Total debts/ Total assets

0.4=Total debts/ Rs.1,075,000

0.4XRs.1,075,000 =Total debts

Total debts =Rs.430,000

3-  Equity Before Proposed Investment:-

Assets= Owner’s equity- Liabilities

Rs.1,075,000= Owner’s equity – Rs.430,000

Rs.1,075,000-Rs.430,000= Owner’s equity

Owner’s equity= Rs.645,000

4- Net Profit After Proposed Investment:-

Rs.95,000 + Rs.25,000=Rs.120,000

5- Assets After Proposed Investment:-

  Rs.1,075,000+ Rs.130,000= Rs.1,205,000

Assets were purchased by taking loan Rs.130,000 and Rs.130,000 were paid cash from the business.

6- Debts After Proposed Investment:-

 Rs.430,000+ Rs.130,000=Rs.560,000



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