-&fA - 7L

Q,*;o* 9,A,,,o{ ol d.".-,".;r^,*, MAS-12

F'INANCIAL STATEMENT ANAL YSIS

5- R.ELATIONSHIPS. Assume a 360-ciay year for each of tlre folkrwing independent cases:
Case A; The cr:rrent ratio is 2.5 to 1; the acid-test rol;o i:, 0.9 to 1; cash and receivabies are p 270/000.
l'he current aesets are conlro.spd of cash, rece,ivabks, and invenrory. Compute:
1) Current liabi[tjeq iL,l"!,' ( 2qC! l' . -t ,i
2) Inventory j<n .'
Case B: The age of receivatrles is 45 days. Annuai sales of P 900,000 are spread evenly throughouLthe
year. Inventory turnover is 4 tirnes. Compute:
1) Average accounts /l:', hi i ti .. ,;riir'i'
2) Operatirrg cycle leceivable
lilr . jt,,,, I 1 -v1.,, .f ... .,..,, :'
Case C: Net sales total P 100,000. Net profit margill ts L2o/o.Interest charges are earnecl-6,times.
1) How much is the earninqs before interests and taxes (tax rate: 4oo/o)? 'lL!'
2) Assunring that inventory age is 30 days aricl average annual amount of inventory is p 5,000,
how much is the company's operatirrg experrses? !'rl
Case D; Given the following:
' Return on sales is 5o,h.
.'
Return on assets is 10Yo.
.
Return on equity is 259b.
.
There is no preferred stock.
Determine the folk:winS u:ii,g Du Ponr technique: pf r ; i,'' 'll':. : ' j
i. t
,l fif,T lii,l"'"'q,u2'i
n'1t*;
u. ,,.) '1"\ !
3) ':i'rt; .;../U
Case E;
oent Lqrity ,ati['
^| l] , \
A company decided to go publrr At ttrht tidrie,'ridt income available fo common shareholders
anrounted to p 300,000. The number of common shares issued and outstancling is 125,000.
1) Assume that the pay-out ratto is 60o/c, how; r4uch of the total dividends shall a shareholder
owning 10,000 corlrmon shares rec-eive? l.t:
2) Assume that tFe pay-oul ratio is 60%r iinci,Uthe price per share is P 20, what is the dividerrd
'
Yielci? r-' 'r '
3) Assume that the price-earninrls !-at.io rr.,ili be set 12 times and 25,000 new shares wilf he
rssued:
34) l"iow much is the initial publit offering (iPO) per share of the 25,000 new shares,
38) How nruch is the nei proceeds frorn issuance if underwriter spread is Zola? {,1,
?q
l_
* '{l ';k

GROSS PROFIT VARIANCE ANALYSIS

The analysis of variation in gross profit is an ,r'rdispensable tool in evaluatinq operational perforrnance;
the adequacy or inadequacy of gross profit determins:s l-he final rr:sults of operalions (net income). Gross
profit must be adequate to cover operating and other expenses, along with a desirecJ amount of prr:fit.
Sales - Sales Volurne x Unit Selling price
I Cost of GoorJs Sold = Sales Volurne x Unit fjost
Gross Profit = Sales Volume x (Unit Selling prrce - Unit Cost)
GP variance rnay be analyzed though the following;
'. GP (Actual) vs. Gp (Budget)
GP (Current Period) vs. GP (Last period)

Gross profit variance * GP (Actual) "- Gp (Budget)

Favarable: If actual (current) Gp is greater ttran budgetecl (last year) Gp

unfavorable.' If actual (current) Gp is less than budgeted (last year) Gp.
Analysis:
Sales price variance = AQ x A Sp
Cost price variance = AQ x A Unit Cost
Volume variance * AQ x Budgetecl r,Jr-rit. Gp
I

F Sales volume varlance = A e x Burlgeted Sp

L-9, Cost volume variance - A Qx l}_rdgeted Unit Cost
.Lesen"dl
AQ - Actual quantity SP - Selling price per unit .i1
Alternative analysis:
sares varan.n { 3:l:: 3:,,:;'j}:X::." r il:::Xl;:ih;i}lT;X;;t*9lJff"",:"T:J",
variance
Cost varian.u *.[] Cost price = currerlt CGS * currentlolunre (0 buclgeted unit cost
Cost volume variail/:e -: crri'rer)l
'",olrirne (d bLrdgeted unit cost - bLrdqeted CGS
i)a,.:t. : .. i :. r;ti