Question

Question 2 The comparative statements of Skysong Company Limited are presented below. 2016 £419,000 SKYSONG COMPANY LIMITED Income Statement For the Years Ended December 31 2017 Net sales (all on account) £499,000 Expenses Cost of goods sold 315,000 Selling and administrative 119,000 Interest expense 8,800 Income tax expense 20,800 Total expenses 463,600 Net Income £ 35,400 255,000 115,000 5,900 14,800 390,700 E 28,300

Answer 1

Current Ratio= Current Asset Current Liability Cauurent Assets Current Liability 206100 134300 Ratio= 206100/134300 1.5:1 Acid Test ratio= Liquid asset current liability Liquid Asset = Accounts Receivable+Short term Investment+cash Liquid asset= 85,700+18,500+21,600= Current Liability 125800 134300 Acid test ratio=125,800/134,300 0.94 :1

Accounts receivable turnover= Net Sales/ Average Accounts Receivables Net Sales 4,99,000 Average Accounts Receivbales = Beginning Accounts receivables + Ending accounts Receivables /2 Beginning accounts receivables Ending accounts Receivables 75,000 85,700 Average Accounts Receivables= Accounts receivable turnover= 80350 6.2 Times Inventory Turnover= Cost of Goods sold /Average Inventory Cost of goods sold 3,15,000 Average Inventory=Beginning Inventory +Ending Inventory/2 Beginning Inventory 60,300 Ending Inventory 80,300 Average Inventory Inventory Turnover= 70300 4.5 Times

Profit Margin= Net Income Sales x 100 Net Income Net sales 35.400 4.99,000 Profit margin= 7.1% Asset turnover Net sales /Average Total Asset Net sales 4,99,000 Average total asset = Beginning Asset + Ending Asset/2 Beginning asset Ending Asset 5,50,700 6,28.100 Average Total Asset 589400 Asset Turnover 0.8 Times

Return on Asset= net income Average Total Asset Net Income Average Total Asset 35,400 589400 Return on Asset= 6.0% Return on Ordinary shareholders Equity= Net Income / shareholders Equity x 100 Net Income Share holders Equity 35,400 372800 Return on ordinary share holders equity= 9.5% Earning Per Share= Net Income / No of shares Net Income 35,400 No of shares= 152000/5 30400 Earning per share f 1.16

Price earning ratio= Market price Per Share/ Earning Per share Market Price Per share Earning per share £ 20.00 £ 1.16 Price Earning Ratio 17.2 times Payout Ratio = Dividend Paid Net Income x 100 Dividend Paid=Net Income - changes in Retained earnings Changes in Retained earnings Ending Ratained earnings - Beginning Ratained earnings 220800-197600= 23200 Payout ratio= 65.5% Debt to Total Asset=Debt/ Total Asset Debt (total liabilities) Total Asset 255300 6,28,100 Debt to total Asset= 40.6%

Times Interest earned = Earnings Before Interest and tax / Interest expense EBIT= Net Income + Tax +Interest 35400+20800+8800 65000 Interest expense Times Interest Earned 8800 7.4 Times