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ACC501 Business Finance, Assignment # 1, Opening date November 27, 2014, Closing date December 04, 2014 .

Assignment # 1

Business Finance (ACC501)

 

Dear Students!

 

This is to inform that Assignment # 1 will be opened on November 27, 2014 and due date of assignment submission will be December 04, 2014.

 

A 24 hours extra/grace period after the due date is usually available to overcome uploading difficulties which may be faced by the students on last date.  This extra time should only be used to meet the emergencies; and above mentioned due date should always be treated as final to avoid any inconvenience.

ASSIGNMENT NO. 01
DUE DATE: 4TH DECEMBER, 2014
MARKS: 25
LEARNING OBJECTIVES:
After attempting this assignment whole-heartedly, the students will be able to:
 Calculate Different Financial Ratios.
 Interpret the Results of Ratios.
Question:
Below is the balance sheet and income statement of Mega Corporation for the year ended June 30, 2013.
Mega Corporation
Balance Sheet
As of June 30, 2013
Assets
Rs. (million)
Current Assets
Cash
225
Accounts receivables
310
Inventory
328
Total Current Assets
863
Fixed Assets
Plant and Equipment 7077
Less Depreciation 550
6527
Furniture and Fixture
50
Total Assets
7440
Liabilities and Equity
Accounts payable
308
Notes payable
1427
Total current liabilities
1735
Long term debt
2358
Owner’s Equity
Share capital
1000
Retained Earnings
2347
Total Liabilities and Equity
7440
Mega Corporation
Income Statement
For the year ended June 30, 2013
Particulars
Rs. (millions)
Sales
4053
Cost of goods sold
2780
Depreciation
550
Income before interest and tax
723
Interest paid
502
Taxable income
221
Tax @ 34%
75
Net income
146
Dividends 47
Addition to retained earnings 99
Required:
a. Based on the above financial statements of Mega Corporation, compute the ratios mentioned in the below table and interpret the results of ratios thereof. (20 Marks)
Sr. #
Ratios
1
Current ratio
2
Quick ratio
3
Cash ratio
4
Interest Coverage Ratio
5
Inventory turnover ratio
6
Account receivables turnover
7
Days’ sales in inventory
8
Days’ sales in receivables
9
Total Debt ratio
10
Dividend Payout ratio
b. Compare your computed result with industry averages given below, thereby indicating strong and weak areas of Mega Corporation. (5 Marks)
Sr. #
Ratios
Industry Averages
1
Current ratio
2 times
2
Quick ratio
1 times
3
Cash ratio
0.50 times
4
Interest Coverage Ratio
2 times
5
Inventory turnover ratio
7 times
6
Account receivables turnover
14 times
7
Days’ sales in inventory
45 days
8
Days’ sales in receivables
30 days
9
Total Debt ratio
60 percent
10
Dividend Payout ratio
30 percent
NOTE:
Complete calculations are required for every part of the problem. Incomplete calculations will result in loss of marks.
IMPORTANT:
24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
 Make sure to upload the solution file before the due date on VULMS.
 Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
 Use the font style “Times New Roman” or “Arial” and font size “12”.
 It is advised to compose your document in MS-Word format.
 You may also compose your assignment in Open Office format.
 Use black and blue font colors only.
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
 It is submitted after the due date.
 The file you uploaded does not open or is corrupt.
 It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.
 It is cheated or copied from other students, internet, books, journals etc.
Note related to load shedding: Please be proactive
Dear students!
As you know that Pre 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 semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.

Assignment File :

Fall 2014_ACC501_1.pdf

Views: 5342

Replies to This Discussion

to jnb bta do second part kesy krna h

friends aoa kindly share the discussion on ACC501 current assignment.

How to calculate the remarks of part B... are they strong or weak

 a.  Based  on  the  above  financial  statements  of  Mega  Corporation,  compute  the  ratios

mentioned in the below table and interpret the results of ratios thereof.

  1. Current Ratio :

= Current Assets / Current liabilities

 = 863 / 1735

= 0.49 or 0.50 times

  1. Quick Ratio:

= Current Assets - Inventory / Current liabilities

= 863 - 328 / 1735

= 0.31 times

  1. Cash Ratio:

= Cash / Current liabilities

= 225 / 1735

= 0.13 times

  1. Interest Coverage Ratio:

= Earnings before Interest & Tax / Interest

= 723 / 502

= 1.44 times

  1. Inventory turnover ratio:

= Cost of goods sold / Inventory

=2780 / 328

= 8.48 times

  1. Account receivables turnover:

= Sales / Accounts Receivables

= 4053 / 310

= 13.07 times

  1. Days’ sales in inventory:

= 365 / Inventory turnover

= 365 / 8.48

= 43 days

  1. Days’ sales in receivables:

= 365 / Receivables Turnover

= 365 / 13.07

= 28 days

  1. Total Debt ratio:

= Total assets – Total equity / Total assets

= 7440 – 3347 / 7440

= 0.55 times or 55%

  1. Dividend Payout ratio:

= Cash dividend / Net income

= 47 / 146

= 32 %

b. Compare your computed result with industry averages given below, thereby indicating

strong and weak areas of Mega Corporation.   

Sr. #

Ratios

Industry Averages

Mega Corporation

Comparison of our calculated results with industry averages

1

Current ratio 

  2 times

0.50 times

Weak (Mega Corporation)

2

Quick ratio 

  1 times

0.31 times

Weak (Mega Corporation)

3

Cash ratio 

  0.50 times

0.13 times

Weak (Mega Corporation)

4

Interest Coverage Ratio

    2 times

1.44 times

Weak (Mega Corporation)

5

Inventory turnover ratio 

  7 times

8.48 times

Strong (Mega Corporation)

6

Account receivables turnover

    14 times

13.07 times

Weak (Mega Corporation)

7

Days’ sales in inventory 

  45 days

43 days

Strong (Mega Corporation)

8

Days’ sales in receivables 

  30 days

28 days

Strong (Mega Corporation)

9

Total Debt ratio 

  60 percent

55%

Strong (Mega Corporation)

10

Dividend Payout ratio 

  30 percent

32%

Weak (Mega Corporation)

 

Check the Attachment file for Solution 

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