Question

solve please

Project (Individual) Read the following statements (Balance sheet & Income Statement) to answer the following questions? Consolidated balance sheets of the BASF Group December 31, 2019 14525.00 21792.00 15008.00 636.00 51961.00 11223.00 9093.00 2427.00 15013.00 37756.00 89717.00 December 31, 2018 16554.00 20780.00 15008.00 570.00 52912.00 10166.00 9565.00 2300.00 14607.00 36638.00 89550.00 Assets (Million ) Intangible assets Property plant equipment Fixed Assets Inventories Accounts receivable, Cash short-term investments Current assets Total assets Equity and liabilities (Million €) Preferred Stocks Common Stocks Retained earnings Total Equity Bonds Loans Long Term liabilities Accounts payable notes payable Current liabilities Total equity and liabilities December 31, 2019 1176.00 3115.00 42056.00 46347.00 20330.00 15015.00 35345.00 5087.00 2938.00 8025.00 89717.00 December 31, 2018 1176.00 3118.00 41699.00 45993.00 19952.00 15332.00 35284.00 5121.00 3152.00 8273.00 89550.00 Statement of income (Million €) Sales revenue 2019 59316.00 2018 52675.00 Cost of sales Gross profit on sales -29061.00 30255.00 -23319.00 29356.00 Selling expenses General administrative expenses Research and development expenses Other operating expenses Total Expenses -7912.00 -1310.00 -2158.00 -3034.00 -14414.00 -8588.00 -1426.00 -2028.00 -2365.00 -14407.00 Earnings before Interest & TAX (EBIT) 15841.00 14949.00 Interest expenses -648.00 -540.00 Income before taxes 14211.00 15193.00 Income taxes -756.00 -738.00 Net income 14437.00 13473.00

Answer 1

Q1)

1) Current Ratio = Current Assets /Current Libailtiy

CR2019 = 37756 / 8025 = 4.70

Similarly

CR2018 = 36638 / 8273 = 4.43

Industry Average = 7

	2019	2018	Industry Average
CR	4.70	4.43	7

Comment: Current ration being one of the liquidity ratios tells us the ability of the company to meets its short term obligation(Daily Operation).A value greater than the 1 is considered to be good as Current Assets are greater than a current liability. However, the Actual test of the current ratio is done comparing to the industry average. The company in focus has a current ratio less than Industry Average which is a red flag. Also, the Company seems to improve its liquidity position as a slight increase (6.09%) can be noted.

2) Inventory turnover = Net Sales / Ending Inventory

Inv. Tur 2019 = 59316/11223 = 5.29

Similarly

Inv. Tur 2018 = 52675 /10166 = 5.18

Industry Average = 7

	2019	2018	Industry Average
Inv Turn	5.29	5.18	12

Comment: A right balance must be maintained when it comes to inventory turn over ratio. Relatively Low value than the industry average (Case of BASF Group) could be because of weak sales(low product demand, weak marketing) or mismanagement in the estimation of demand. A Low value signifies that closing inventory is higher resulting in other overheads like storage cost. Therefore the right balance must be maintained since the high value would be mean early run out of stocks and loosing out on the opportunity cost.

Following the guidelines of the company, all parts of question 1 have been answered. Please give a thumbs up if you find this helpful :)