The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008: Actual results Previous year Industry average Budgeted results 1.92 Current ratio 1.97 1.87 1.92 Quick asset ratio 1.06 1.06 1.06 1.11 Inventory turnover Net profit ratio Gross margin 4.21 4.91 4.86 4.76 0.05 0.03 0.03 0.03 0.65 0.59 0.61 0.61 Required: Provide possible explanations for the results for the various ratios for Solar Ltd and outline their implications for the audit.

The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008: Actual results Previous year Industry average Budgeted results 1.92 Current ratio 1.97 1.87 1.92 Quick asset ratio 1.06 1.06 1.06 1.11 Inventory turnover Net profit ratio Gross margin 4.21 4.91 4.86 4.76 0.05 0.03 0.03 0.03 0.65 0.59 0.61 0.61 Required: Provide possible explanations for the results for the various ratios for Solar Ltd and outline their implications for the audit.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following financial ratios have been calculated for Nova Ltd for the year ended 30 June 2008:Ratio ActualresultsBudgetedresultsPreviousyearIndustry AverageCurrent ratio 1.97 1.92 1.87 1.92Quick asset ratio 1.06 1.06 1.06 1.11Inventory turnover 4.21 4.91 4.86 4.76Net profit ratio 0.05 0.03 0.03 0.03Gross margin 0.65 0.59 0.61 0.61Required:Provide four (4) possible explanations for the results of the various ratios for Nova Ltd and explaintheir implications for the audit.