Selected Condensed data taken from a recent of financial position of Morino

Ltd. Are as follows.

Morino Ltd.
Statement of Financial Position (partial)
Other currents assets £ 6,271,000
Inventory £ 14,814,000
Accounts receivable (net) £ 12,545,000
Short-term investments £ 4,947,000
Cash £ 8,113,000
Total current assets £ 46,690,000
Total current liabilities £ 41,200,000

What are the (a) working capital, (b) current ratio, and (c). Acid-test ratio
Answer :
a. Working Capital = Current Assets - Current Liabilities
Working Capital = £46,690,000 - £41,200,000
Working Capital = £5,490,000

b. Current Ratio = Current Assets

Current Liabilities

Current Ratio = £ 46,690,000

£ 41,200,000

Current Ratio = 1.1333 or 113.33%

c. Acid-test ratio / quick ratio = Quick Assets (Current Assets - Inventory)

Current Liabilities

Acid-test ratio / quick ratio = £ 46,690,000 -

£41,200,000

Acid-test ratio / quick ratio = £ 31,876,000

£ 41,200,000

Acid-test ratio / quick ratio = 0.7737 or

Assets - Inventory)

£ 14,814,000
200,000

77.37%
 The following data are taken from the financial statements of Gladow Company
2020 2019
Accounts receivable (net), end of year € 550,000 € 520,000
Net Sales on account € 3,680,000 € 3,000,000
Terms for all sales are 1/10, n/60

A. Compute for each year (1) the accounts receivable turnover and (2) the average collection period.
At the end of 2018, accounts receivable (net) was €480.000
Anwer :
1. Accounts Receivable Turnover = Net Credit Sales
Average net accounts receivable

2020
Accounts Receivable Turnover = € 3,680,000
€ 520,000 + € 550,000
2

Accounts Receivable Turnover = € 3,680,000

€ 535,000

Accounts Receivable Turnover = 6.88 times

2. Average Collection Period = 365

Accounts Receivable Turnover

2020
Average Collection Period = 365
6.88 times

Average Collection Period = 53.064 or 53 days

B. What conclusions about the management of accounts receivable can be drawn from these data ?
Anwer :
Based on (A) number 1, it can be concluded that the current accounts receivable turnover ratio was
This shows that the higher the receivable turnover ratio, the faster the return on business capital. This happen
because sales on credit are paid faster. In 2019, the receivable turnover ratio was 6 times, then in 2020 it was
6,88 times or if be rounded to 7 times. While point a number 2, when viewed from the average collection per
there was decrease from 2019 to 2020. In 2019, the average collection period was 60,833 or if be rounded to
it was 53,064 or if be rounded to 53 days which means a decrease of 3 days.
 erage collection period.

2019
Accounts Receivable Turnover = € 3,000,000
€ 480,000 +
2

Accounts Receivable Turnover = € 3,000,000

€ 500,000 € 520,000

Accounts Receivable Turnover = 6.00 times

2019
Average Collection Period = 365
6.00 times

Average Collection Period = 60.833 or 61 days

n from these data ?

urnover ratio was increased.

siness capital. This happens
6 times, then in 2020 it was
m the average collection period in the two years,
60,833 or if be rounded to 61 days, while in 2020
The following data from the income statement of Charkes A.S.

2020 2019
Sales Revenue ₺ 6,420,000 ₺ 6,240,000
Beginning Inventory ₺ 980,000 ₺ 860,000
Purchases ₺ 4,440,000 ₺ 4,720,000
Ending Inventory ₺ 1,020,000 ₺ 980,000

A. Compute for each year (1) the inventory turnover and (2) the days in the inventory.
Answer :
(1) Inventory Turnover = Cost of Goods Sold COGS= (Beginning Inv
Average Inventory

2020
Inventory Turnover = ₺ 5,420,000 - ₺ 1,020,000
₺ 980,000 + ₺ 1,020,000
2

Inventory Turnover = ₺ 4,400,000

₺ 1,000,000

Inventory Turnover = 4.40 times or 4 times

(2) Days in the inventory = 365

Inventory Turnover

2020
Days in the inventory = 365
4.40 times

Days in the inventory = 82.95 days or 83 days

B. What conclusions concerning the management of the inventory can be drawn from these da
Answer :
Based on the calculation in point (a) number 1, it can be concluded that the inventory turnover in
2019 was 5 times and in 2020 was 4.40 times or if be rounded to 4 times. This shows that
inventory in order to support greater company sales in 2019 because the greater the inventory
turnover number shows greater efficiency. And based on point (a) number 2 shows that
days in the inventory of 2019 was 73 days and in 2020 was 82,95 days or if be rounded to
It shows that the days in the inventory in 2020 was faster than 2019.
n the inventory.

COGS= (Beginning Inventoy + Purchases) - Ending Inventory

2019
Inventory Turnover = ₺ 5,580,000 - ₺ 980,000
₺ 860,000 + ₺ 980,000
2

Inventory Turnover = ₺ 4,600,000

₺ 920,000

Inventory Turnover = 5 times

2019
Days in the inventory = 365
5.00 times

Days in the inventory = 73 days

be drawn from these data?

he inventory turnover in
. This shows that the efficient use of
greater the inventory
er 2 shows that
r if be rounded to 83 days
Condensed statement of fi nancial position and income statement data for Clarence
Limited appear below.

Clarence Limited
Statements of Financial Position
Dec-31
2020 2019
Plant and equipment (net) £ 400,000 £ 370,000
Investments £ 75,000 £ 70,000
Other current assets £ 90,000 £ 95,000
Accounts Receivable (net) £ 50,000 £ 45,000
Cash £ 25,000 £ 20,000
Total Assets £ 640,000 £ 600,000

Share capital-ordinary, £10 par £ 345,000 £ 315,000

Retained earnings £ 145,000 £ 123,000
Non-current liabilities £ 80,000 £ 87,000
Current liabilities £ 70,000 £ 75,000
Total equity and liabilities £ 640,000 £ 600,000

Additional information :
1. The market price of Clarence's ordinary share was £4.00, £5.00,and £7.00 for 2018, 2019, and 20
2. All dividens were paid in cash.

Instructions
A. Compute the following ratios for 2019 and 2020
1. Profit Margin
Answer :
Profit Margin = Net Income
Net Sales
2019
Profit Margin = £ 30,000
£ 640,000

Profit Margin = 0.047 or 4.69%

2020
Profit Margin = £ 44,000
£ 700,000

Profit Margin = 0.063 or 6.29%

2. Asset Turnover
Answer :
Asset Turnover = Net Sales
Average total assets
2019
Asset Turnover = £640,000
£ 533,000 + £ 600,000
 2

Asset Turnover = £ 640,000

£ 566,500

Asset Turnover = 1.1297 times

2020
Asset Turnover = £700,000
£ 600,000 + £ 640,000
2

Asset Turnover = £ 700,000

£ 620,000

Asset Turnover = 1.1290 times

3. Earnings per share. (Weighted-average ordinary shares in 2020 were 32.000 and in 2019
Answer :
Earnings per share (EPS) = Dividens (Net Income - Dividends)
Weighted-average ordinary shares outstanding
2019
Earnings per share (EPS) = £ 30,000
£ 31,000

Earnings per share (EPS) = £ 0.9677

2020
Earnings per share (EPS) = £ 44,000
£ 32,000

Earnings per share (EPS) = £ 1.3750

4. Price-earings ratio
Answer :
Price-earnings (P-E) ratio = Market price per share
Earings per share
2019
Price-earnings (P-E) ratio = £ 5
£ 0.9677

Price-earnings (P-E) ratio = 5.167 times

2020
Price-earnings (P-E) ratio = £ 7
£ 1.3750

Price-earnings (P-E) ratio = 5.091 times

5. Payout ratio
Answer :
Payout Ratio = Dividens Paid
Net Income
2019
Payout Ratio = £ 20,000
£ 30,000

Payout Ratio = 0.6667 or 67%

2020
Payout Ratio = £ 22,000
£ 44,000

Payout Ratio = 0.50 or 50%

6. Debt to assets ratio

Answer :
Debt to assets ratio = Total liabilities
Total assets
2019
Debt to assets ratio = £ 162,000
£ 600,000

Debt to assets ratio = 0.27 or 27%

2020
Debt to assets ratio = £ 150,000
£ 640,000

Debt to assets ratio = 0.234375 or 23%

 Clarence Limited
Income Statement
For the Years Ended December 31
2018 2020
£ 358,000 Sales revenue £ 740,000
£ 45,000 Less : Sales returns and allowances £ 40,000
£ 64,000 Net sales £ 700,000
£ 48,000 Cost of goods sold £ 420,000
£ 18,000 Gross profit £ 280,000
£ 533,000 Operating expenses (including income taxes) £ 236,000
Net income £ 44,000
£ 300,000
£ 113,000
£ 50,000
£ 70,000
£ 533,000

£7.00 for 2018, 2019, and 2020, respectively.

B. Based on the ratios calculated, discuss briefly the improvement or lack thereof in
and operating results from 2019 to 2020 of Clarence Limited.
Answer :
1 Profit margin is getting improved as compared to the last
year as the net sales has been improved in 2020
2 Assets turnover ratio is improving which is a good sign for
the company which means they are utilising the assets more effectively.
3 Earning per share is also improving due to increase in net
income during the tear which is directly due to increase in sales
4 Price per share is delpeting as the current market price
per share is increase in comparison the earning per share, it
means there sales has been has not been increased as per market trends
5 Payout ratio has decreased during the current year which means they won't
be short on funds in the near future
6 Debt to asset ratio has decreased during the current year
which means their assests is more thn their laibilities which
is a good sign as their net worth is increasing
020 were 32.000 and in 2019 were 31.000)

Dividends)
hares outstanding
Dividends Paid = (Net Income + RE Awal) - RE Akhir
1
2019
£ 700,000
£ 60,000
£ 640,000
£ 400,000
£ 240,000
£ 210,000
£ 30,000

improvement or lack thereof in financial position

nce Limited.

d to the last

good sign for

he assets more effectively.
rease in net
o increase in sales

g per share, it
ased as per market trends
year which means they won't

bilities which
Selected fi nancial data of Target (USA) and Wal-Mart Stores, Inc. (USA) for a recent
year are presented below (in millions).

Net Sales
Cost of goods sold
Selling and administrative expenses
Interest expense
Other income (expense)
Net income tax expense
Net Income

Non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities

Instructions
1. Current Ratio
Answer :
Target Corporation

Current Ratio =

Current Assets
Current Liabilities

$ 11,573
Current Ratio =
$ 12,777.00

Current Ratio = 0.906

91%

2. Accounts Receivable Turnover

Answer :
Target Corporation
 Accounts Receivable Net Sales
Turnover = Ave. net acc. Receivable

Accounts Receivable $ 72,596

Turnover = $ 2,921

Accounts Receivable 24.853

Turnover = 25 times

3. Average Collection Period

Answer :
Target Corporation
365
Average Collection Period =
Acc. Receivable Turnover

365
Average Collection Period =
25 times

14.686
Average Collection Period =
15 days

4. Inventory Turnover
Answer :
Target Corporation
Inventory Cost of Good Sold
Turnover = Average Inventory

Inventory $ 51,160
Turnover = $ 8,335

Inventory 6.138
Turnover = 6 times

5. Days in Inventory
Answer :
Target Corporation
Days in 365
Inventory = Inventory Turnover

Days in 365
Inventory = 6 times

Days in 59.466
Inventory = 59 days

6. Profit Margin
Answer :
Target Corporation
 Net Income
Profit Margin =
Net Sales

$ 1,971
Profit Margin =
$ 72,596

0.027
Profit Margin =
2.7%

7. Asset Turnover
Answer :
Target Corporation
Net Sales
Asset Turnover =
Average total assets

$ 72,596
Asset Turnover =
$ 46,358

1.566
Asset Turnover =
1.6 times

8. Return on assets
Answer :
Target Corporation
Return on Net Income
assets = Average Total Assets

Return on $ 1,971
assets = $ 46,358

Return on 0.043
assets = 4.3%

9. Return on ordinary shareholder's equity

Answer :
Target Corporation
Return on ordinary NI - Preference Dividens
shareholder's equity = Weighted Average

Return on ordinary $ 1,971

shareholder's equity = $ 16,395

Return on ordinary 0.120

shareholder's equity = 12%

10. Debt to total assets

Answer :
Target Corporation
 Total liabilities
Debt to total assets =
Total assets

$ 28,322
Debt to total assets =
$ 44,553

0.636
Debt to total assets =
63.6%

11. Time interested earned

Answer :
Target Corporation
NI + In Expense + NI Tax Ex
Time interested earned =
Interest Expense

$ 4,229
Time interested earned =
$ 1,126

3.756
Time interested earned =
4 times
USA) for a recent

Target Wal-Mart
Corporation Stores, Inc.
Income Statement Data for Year
$ 72,596 $ 476,294
$ 51,160 $ 358,069
$ 16,816 $ 91,353
$ 1,126 $ 2,335
-$ 391 -$ 410
$ 1,132 $ 8,105
$ 1,971 $ 16,022

Statement of Financial Position

Data (End of Year)
$ 32,980 $ 143,566
$ 11,573 $ 61,185
$ 44,553 $ 204,751
$ 16,231 $ 81,339
$ 15,545 $ 54,067
$ 12,777 $ 69,345
$ 44,553 $ 204,751

Wal-Mart Stores, Inc

Current Ratio =

Current Assets
Current Liabilities

$ 61,185
Current Ratio =
$ 69,345

Current Ratio = 0.882

88%

Wal-Mart Stores, Inc

 Accounts Receivable Net Sales
Turnover = Ave. net acc. Receivable

Accounts Receivable $ 476,294

Turnover = $ 6,723

Accounts Receivable 70.845

Turnover = 71 times

Wal-Mart Stores, Inc

365
Average Collection Period =
Acc. Receivable Turnover

365
Average Collection Period =
71 times

5.152
Average Collection Period =
5 days

Wal-Mart Stores, Inc

Inventory Cost of Good Sold
Turnover = Average Inventory

Inventory $ 358,069
Turnover = $ 44,331

Inventory 8.077
Turnover = 8 times

Wal-Mart Stores, Inc

Inventory 365
Turnover = Inventory Turnover

Inventory 365
Turnover = 8 times

Inventory 45.189
Turnover = 45 days

Wal-Mart Stores, Inc

 Net Income
Profit Margin =
Net Sales

$ 16,022
Profit Margin =
$ 476,294

0.034
Profit Margin =
3.4%

Wal-Mart Stores, Inc

Net Sales
Asset Turnover =
Average total assets

$ 476,294
Asset Turnover =
$ 203,928

2.336
Asset Turnover =
2.3 times

Wal-Mart Stores, Inc

Return on Net Income
assets = Average Total Assets

Return on $ 16,022
assets = $ 203,928

Return on 0.0786
assets = 7.86%

Wal-Mart Stores, Inc

Return on ordinary NI - Preference Dividens
shareholder's equity = Weighted Average

Return on ordinary $ 16,022

shareholder's equity = $ 81,539

Return on ordinary 0.196

shareholder's equity = 19.6%

Wal-Mart Stores, Inc

 Total liabilities
Debt to total assets =
Total assets

$ 123,412
Debt to total assets =
$ 204,751

0.603
Debt to total assets =
60.3%

Wal-Mart Stores, Inc

NI + In Expense + NI Tax Ex
Time interested earned =
Interest Expense

$ 26,462
Time interested earned =
$ 2,335

11.333
Time interested earned =
11 times
 Beginning-of-Year Balances
Total assets $ 48,163 $ 203,105
Total equity $ 16,558 $ 81,738
Current liabilities $ 14,031 $ 71,818
Total liabilities $ 31,605 $ 131,287

Other Data
Average net accounts receivable $ 2,921 $ 6,723
Average inventory $ 8,335 $ 44,331
Net cash provided by operating activities $ 6,520 $ 23,257

B. Compare the liquidity, profi tability, and solvency of the two companies
1. Liquidity
Target's Current ratio
have 0.9 is the same as
Wal-Mart's, 0,9. But,
Wal-Mart has an
inventory turnover ratio
and an Account
Receivable turnover
ratio better than Target
Corporation.

2. Profitability
Wal-Mart has better profitabillity than Target's Corporation

3. Solvency
Wal-Mart has better Solvency than Target's Corporation