The following information is taken from Tanaka Bhd for the year ended 31 December 2020. Preference dividend declared and fully paid in 2020: RM100,000 Ordinary dividend declared and fully paid in 2020: RM3,960,000 Preference share marketable price per unit at 31 December 2020: RM4.60 Ordinary share marketable price per unit at 31 December 2020: RM9.00 Required: a. Calculate the following ratio for 2020: Industry average ratio i. Current ratio 2.3 : 1 ii. Quick ratio 1.1 : 1 iii. Asset turnover 2.0 Assumption: all sales in credit; finance expense means interest; ordinary share outstanding throughout both years = 10,000,000 shares
The following information is taken from Tanaka Bhd for the year ended 31 December
2020.
Preference dividend declared and fully paid in 2020: RM100,000
Ordinary dividend declared and fully paid in 2020: RM3,960,000
Preference share marketable price per unit at 31 December 2020: RM4.60
Ordinary share marketable price per unit at 31 December 2020: RM9.00
Required:
a. Calculate the following ratio for 2020: Industry average ratio
i.
ii. Quick ratio 1.1 : 1
iii. Asset turnover 2.0
Assumption: all sales in credit; finance expense means interest; ordinary share outstanding
throughout both years = 10,000,000 shares.
Here in this question we are required to calculate current ratio, quick ratio and asset turnover ratio.
Current ratio:-
Current ratio means ratio which indicates companies ability to pay short term obligation that is due with in one year.
In other words, this ratio compares to current asset with current liability.
Formula:- Current asset / Current liability
Quick ratio:-
Quick ratio is also known as acid test ratio. It shows companies ability to pay short term obligation from its most liquid assets.
In other words, it compares quick asset with current liability.
Formula:- Quick asset / Quick liability
Asset turnover ratio:-
It measures company's sales compared to total assets of the company.
In other words, it shows how much sales is generated by using asset of the company
Formula:- Total sales / (Beginning total asset + Closing total assets)/2
Learn your way
Includes step-by-step video
Step by step
Solved in 2 steps
