Homework Answers
Answer:
(a) Quick (acid test) ratio:
Quick(Acid Test) Ratio = Current Assets (Excl. Inventory)/Current Liabilities
Proforma Balance Sheet from the given information:
| Liabilities | Amount | Assets | Amount |
| Shareholders Equity | 2,550,000 | Inventory | 1,800,000 |
| Long Term Liabilities | 2,000,000 | Current Assets (Excl. Inventory) | 650,000 |
| Current Liabilities | 900,000 | Non Current Assets (Balancing figure) | 3,000,000 |
| TOTAL | 5,450,000 | TOTAL | 5,450,000 |
Quick(Acid Test) Ratio = 650000/900000 = 0.72:1
(b) Return on Equity:
Return on Equity = Net Profit for Equity Shareholders/Shareholders Equity * 100
Given information:
| Profit after Tax (For Equity Shareholders) [150000*3] | 450,000 |
| Number of Equity Shares | 150,000 |
| Earnings Per Share [45/15] | 3 |
| Market Price per share | 45 |
| P/E Ratio {Market Price per share/Earnings Per Share} | 15 |
Return on Equity = 450000/2550000*100 = 17.65%
(c) Net Profit Margin:
Net Profit Margin = Net Profit after tax/Sales*100
Cost of Inventory Sold = 500,000
Gross Profit Margin = 55%
Hence Cost of inventory sold = 100-55 = 45%
Hence Sales = 500000/0.45 = 1,111,111
Net Profit Margin = 450000/1111111*100 = 40.50%
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3,777
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Condensed statement of financial position and income statement
data for Elkhardt Ltd. are shown below:
ELKHARDT
LTD.
Statement of Financial Position
December 31
(in thousands)
2018
2017
2016
Assets
Current assets
Cash
$29
$79
$199
Accounts receivable
898
706
502
Inventory
1,198
798
498
Total current assets
2,125
1,583
1,199
Property, plant, and equipment (net)
4,124
3,777
3,168
Total assets
$6,249
$5,360
$4,367
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Shareholders’ Equity
Liabilities
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liabilities
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$502
Non-current
liabilities
3,044
2,307
1,505
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