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Chapter 4 : Analysis of Financial Statements
1.
The financial ratios of a firm are as follows.
Current ratio
=
1.25
Acid-test ratio
=
1.10
Current liabilities
=
2000
Inventory turnover ratio
=
10
What is the sales of the firm? a. b. c. d. e.
4,000 5,000 3,500 3,000 None of the above
Working:
Current assets = Current liabilities x Current ratio =
2000
x
1.25
=
2500
Current assets - Inventories = Current liabilities x Acid test ratio =
Inventories
=
Sales
=
x
300
Inventories x Inventory turnover ratio =
1
2000
300
Chandra: Financial Management, 9e
x
10
=
3000
1.10 = 2200
*Copyright © 2015 by McGraw Hill Education (India) Private Limited
2. Determine the current liabilities of a firm given the following information:
Sales
=
720,000
Quick ratio
=
0.8
Current assets
=
200,000
Inventory turnover ratio
=
6
a. b. c. d. e.
155,000 100,000 230,000 90,000 None of the above
Working : Inventory = Sales/Inventory turnover ratio= 720,000/6 = 120,000
Current assets – inventories =
3.
CL x Acid-test ratio
200,000 – 120,000
=
CL x 0.8
CL
=
100,000
Determine the current liabilities of a firm given the following information:
2
Chandra: Financial Management, 9e
*Copyright © 2015 by McGraw Hill Education (India) Private Limited
Sales
=
90,820
Quick ratio
=
1.2
Current assets
=
42,000
Inventory turnover
=
9.6
a b. c. d. e.
22,440 19,820 27,117 28,450 None of the above
Working : Inventory = Sales/Inventory turnover ratio= 90820/9.60=9460 Current assets – inventories = CL x Acid-test ratio
4.
42000-9460
=CL x 1.2
CL
= 32540/1.2 = 27117
Determine the sales of a firm given the following information : Current ratio
=
1.5
Acid-test ratio
=
1.2
Current liabilities
=
10,000
Inventory turnover
=
6
a. b. c. d. e.
3: Working
24,000 18,000 30,000 12,000 None of the above
Chandra: Financial Management, 9e
Current assets = 10000 x 1.5 = 15,000 Current assets – inventories = CL x Acid-test ratio
*Copyright © 2015 by McGraw Hill Education (India) Private Limited
5.
Determine the sales of a firm given the following information: Current ratio
= 2
Acid-test ratio
= 1.5
Current liabilities
= 10,000
Inventory turnover
= 6
a. b. c. d. e.
30,000 29,000 35,000 45,000 None of the above
Working : Current assets = 10,000 x 2 = 20,000 Current assets Inventories = CL x Acid – test ratio = 10,000 x 1.5 = 15,000 Inventories
= 20,000 – 15,000 = 5,000
Sales
= Inventories x Inventory turn over ratio = 5,000 x 6
6. Determine the sales of a firm, given the following information:
4
Chandra: Financial Management, 9e
= 30,000
*Copyright © 2015 by McGraw Hill Education (India) Private Limited
Current ratio
= 2
Acid-test ratio
= 1.2
Current liabilities
= 15,000
Inventory turnover ratio
= 6
a. b. c. d. e.
65,000 80,000 82,000 72,000 None of the above
Working : Current assets = 2 x 15,000 = 30,000 CA Inventories = CL x Acid- test ratio = 15,000 x 1.2 = 18,000 Inventories
= 30,000 – 18,000 = 12,000
Sales
= Inventories x Inventory turnover ratio = 12,000 x 6 = 72,000
7 Determine the sales of a firm given the following information :
Current ratio
=
2.5
Acid-test ratio
=
1.7
Current liabilities
=
25,000
Inventory turnover
=
7
a. 120,000 b. 170,000
5
Chandra: Financial Management, 9e