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Introduction:
Ratio Analysis
• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.
• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
•
• Current assets are assets that are convertible to cash within a period of one year or less. Current liabilities are liabilities that need to be discharged within a period of one year or less.
• Acid Test Ratio – Also known as quick ratio, it seeks to measure the liquidity position of the Business.
• It seeks to measure the short term liquidity position of the business by comparing the liquid assets i.e. current assets that are readily convertible to cash / liquid instruments and current liabilities.
•
• It seeks to measure the relation of the credit sales in proportion to the total turnover and is an indicator of how much of the receivables are blocked due to credit sales.
• Merchandise inventory turnover – A measure of the relation between the turnover and inventory measured in number of times.
• It seeks to measure the relation of the inventory rolled over in proportion to the total turnover and is an indicator of how much of the inventory is fast moving in relation to the total turnover.
•
To Prepare:
Report comparing Morgan and Parker companies highlighting their ability to meet current obligations and use current assets efficiently
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Chapter 17 Solutions
Fundamental Accounting Principles
- Give this question financial accountingarrow_forward1.3 1.2.5 za When using a computerised accounting system, the paper work will be reduced in the organisation. Calculate the omitting figures: Enter only the answer next to the question number (1.3.1-1.3.5) in the NOTE. Round off to TWO decimals. VAT report of Comfy shoes as at 30 April 2021 OUTPUT TAX INPUT TAX NETT TAX Tax Gross Tax(15%) Gross (15%) Standard 75 614,04 1.3.1 Capital 1.3.2 9 893,36 94 924,94 Tax (15%) 1.3.3 Gross 484 782,70 75 849,08 -9 893,36 -75 849,08 Bad Debts TOTAL 1.3.4 4 400,00 1 922,27 14 737,42 -1 348,36 1.3.5 (5 x 2) (10arrow_forwardNonearrow_forward
- What was her capital gains yield? General accountingarrow_forwardL.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question:arrow_forwardWhat was her capital gains yield?arrow_forward
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