1.

Following are the Current assets & current liabilities information of the balance sheet and
Sales & COGS information of the income statement for DEF Manufacturing Company Ltd.

Current Assets:

Year 2015

Year 2014

Amount (Tk.)

Amount (Tk.)

Cash & Cash Equivalents

3,000,000

5,000,000

Marketable Securities

1,000,000

2,000,000

Accounts Receivables

12,000,000

10,000,000

Inventories

20,000,000

15,000,000

Total Current Assets

36,000,000

32,000,000

Current Liabilities:
Accounts Payable
Other S/T liabilities
Total Current Liabilities

Year 1

Year 2

Amount (Tk.)

Amount (Tk.)

10,000,000

9,690,000

5,000,000

7,000,000

15,000,000
Year 1

16,690,000
Year 2

Amount (Tk.)

Amount (Tk.)

Sales*

80,000,000

89,000,000

COGS

50,000,000

65,000,000

*60% of the total sales are credit sales in both years.

Requirements:
Calculate the current and quick ratio of this company for both years. If the industry average
Current ratio in 2015 was 2.0 and acid-test ratio was 1.0. Comment on the liquidity of this
company.
b. Analyze this companys receivables activity and inventories activity by applying relevant
activity ratios and make necessary comment.
The WW Company had the following data extracted from its financial statements for the year
ending June 30, 2014:
Current Ratio = 2, Acid Ratio = 1.5, Current Liabilities = $500,000, Inventory Turnover = 5,
Gross Profit Margin = 20 percent.
What were its sales for the year?
DFG Company had the following information in 2013:
Current ratio = 3.0 times
Quick ratio = 1.4 times
Inventory turnover = 5 times
Current Assets = $810,000 (Cash, inventory & receivables)
Cash = $120,000 COGS = 75% of sales.
Requirements:
a. What is the companys Sales?
b. Assume a 360 day year & all sales are credit. What was the companys Average Collection
Period?
The ZZ Company had the following data extracted from its financial statements for the year
ending June 30, 2015:
Sales = 3.6 million
a.

2.

3.

4.

Average Collection Period = 30 days

Inventory Turnover = 9
Gross Profit Margin = 25 percent
Requirements:
a. What was its accounts receivable balance on June 30, 2015?
b. What was the inventory of the Company on that date?
5. Over the past few years, ABC Company has found that the companys receivable turnover started
to decrease from 50 days to 25 days. The companys credit terms are 1/10, n/30. Comment
whether the company is doing better. 5.
6. The inventory turnover ratio for Agora, a supermarket, is 2.0 times while the same ratio for
Airbus, an aircraft manufacturer, is 1.5 times. Which company is having better inventory turnover
ratio? Explain.
7. Current ratio of XYZ Company is 2 times, Quick Ratio is 1 times and the Current Liability is
$50,000. How much is the value of the inventory? If the industry average of the Quick Ratio is 1.5
times, then comment on the liquidity condition of the company.
8. The ABC Company has annual sales of $1.0 million and a gross profit margin of 10 percent. How
much should be the value of inventory if inventory turnover is 9?
9. WBC Company had $800,000 of debt outstanding and it pays an interest rate of 10% annually. Its
annual sales are $1,000,000 and tax payment is expected to be $40,000. The Net Profit Margin on
sales for this company is 10%. Calculate and interpret the TIE of WBC Company. Suggest some
ways by which WBC can improve its TIE.
10. Assume you are given the following relationships for the WBC Corporation: Total asset turnover
= 1.5 times Earning Power = 3% ROE = 5% Calculate the companys net profit margin and debt to
total asset ratio.
11.
XYZ has an equity multiplier (financial leverage multiplier) of 2.4. The companys assets are
financed with some combination of long term debt and common equity. What is the companys
debt to total asset ratio?