The document discusses key financial ratios used to analyze financial statements. It begins by defining financial statements as consisting of a profit and loss account and balance sheet. It then provides explanations and formulas for various ratios including current ratio, quick ratio, debt equity ratio, gross profit ratio, and inventory turnover ratio. The ratios are used to evaluate a firm's liquidity, profitability, leverage, operating efficiency, and ability to manage inventory. The document serves as a guide for understanding important financial metrics and how they are calculated from information in financial statements.
Annual update deliver by Paul Rhodes to the IFRS staff group at Crowe Soberman LLP.
Topics covered were estimation and judgment calls for functional currency; strategic investments; business combinations; impairments and going concern
Annual IFRS update delivered by Paul Rhodes to partners and managers group at Crowe Soberman LLP.
Topics covered are two of the big shiny new standards: Financial Instruments IFRS 9; Revenue IFRS 15 plus an update of other standards changes
This document outlines the policies and procedures for managing equity in a partnership called EBDM. It details how equity is accounted for when new partners are added or existing partners withdraw investments. It also describes how profit distributions are handled through partner capital accounts and outlines tax implications of the partnership. Procedures are provided for drawings, salary/loans to partners, and the accounts officer's responsibilities for tax filings and maintaining accurate partner equity records.
The SEC regulates financial reporting and disclosures of public companies. It was given authority by the Securities Acts of 1933 and 1934 to require companies to register securities and make periodic financial disclosures. The SEC oversees registration statements, reviews financial filings like the annual 10-K, and enforces regulations around proper financial reporting, disclosures, and governance. Major forms companies use for registration and reporting include the S-1, 10-K, 10-Q, and 8-K. Key requirements for public companies outlined in the Sarbanes-Oxley Act of 2002 include CEO/CFO certification of financial reports, management assessment of internal controls, and auditor attestation of the assessment.
Summary of Ind AS 28 for the students and who are new to Ind AS. They can make a basic understanding about the words, definition, terms, provisions used in the actual Ind AS 28.
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international financial reporting standards (IFRS), the structure and process of the International Accounting Standards Board (IASB), considerations around US adoption of IFRS, foreign currency translation methods, and the determination of a foreign entity's functional currency.
1. The financial statements document includes an income statement, balance sheet, and statement of cash flows. The income statement shows profitability over a period of time, the balance sheet outlines assets, liabilities, and equity at a point in time, and the statement of cash flows shows cash inflows and outflows.
2. The income statement displays revenue, expenses, and profit. The balance sheet lists current assets, fixed assets, liabilities, and equity. Current assets include cash, receivables, and inventory. Liabilities include current and long-term debt. Equity encompasses preferred stock and common stock.
3. Financial statements provide information about a company's performance and financial position to both internal and external
This document discusses key points about leases, including the differences between capital and operating leases. Capital leases transfer substantially all risks and benefits of ownership to the lessee, who accounts for it as an asset and liability. Operating leases are treated as rental expenses. The document provides an example to illustrate how to determine the interest and principal portions of a capital lease payment and compares the income statement and balance sheet effects of operating versus capital leases. It also discusses lease disclosure requirements and off-balance sheet financing using operating leases.
Annual update deliver by Paul Rhodes to the IFRS staff group at Crowe Soberman LLP.
Topics covered were estimation and judgment calls for functional currency; strategic investments; business combinations; impairments and going concern
Annual IFRS update delivered by Paul Rhodes to partners and managers group at Crowe Soberman LLP.
Topics covered are two of the big shiny new standards: Financial Instruments IFRS 9; Revenue IFRS 15 plus an update of other standards changes
This document outlines the policies and procedures for managing equity in a partnership called EBDM. It details how equity is accounted for when new partners are added or existing partners withdraw investments. It also describes how profit distributions are handled through partner capital accounts and outlines tax implications of the partnership. Procedures are provided for drawings, salary/loans to partners, and the accounts officer's responsibilities for tax filings and maintaining accurate partner equity records.
The SEC regulates financial reporting and disclosures of public companies. It was given authority by the Securities Acts of 1933 and 1934 to require companies to register securities and make periodic financial disclosures. The SEC oversees registration statements, reviews financial filings like the annual 10-K, and enforces regulations around proper financial reporting, disclosures, and governance. Major forms companies use for registration and reporting include the S-1, 10-K, 10-Q, and 8-K. Key requirements for public companies outlined in the Sarbanes-Oxley Act of 2002 include CEO/CFO certification of financial reports, management assessment of internal controls, and auditor attestation of the assessment.
Summary of Ind AS 28 for the students and who are new to Ind AS. They can make a basic understanding about the words, definition, terms, provisions used in the actual Ind AS 28.
The document discusses issues related to multinational accounting and the translation of foreign entity financial statements. It provides answers to multiple questions covering topics such as the benefits of adopting international financial reporting standards (IFRS), the structure and process of the International Accounting Standards Board (IASB), considerations around US adoption of IFRS, foreign currency translation methods, and the determination of a foreign entity's functional currency.
1. The financial statements document includes an income statement, balance sheet, and statement of cash flows. The income statement shows profitability over a period of time, the balance sheet outlines assets, liabilities, and equity at a point in time, and the statement of cash flows shows cash inflows and outflows.
2. The income statement displays revenue, expenses, and profit. The balance sheet lists current assets, fixed assets, liabilities, and equity. Current assets include cash, receivables, and inventory. Liabilities include current and long-term debt. Equity encompasses preferred stock and common stock.
3. Financial statements provide information about a company's performance and financial position to both internal and external
This document discusses key points about leases, including the differences between capital and operating leases. Capital leases transfer substantially all risks and benefits of ownership to the lessee, who accounts for it as an asset and liability. Operating leases are treated as rental expenses. The document provides an example to illustrate how to determine the interest and principal portions of a capital lease payment and compares the income statement and balance sheet effects of operating versus capital leases. It also discusses lease disclosure requirements and off-balance sheet financing using operating leases.
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 14Saskia Ahmad
The document discusses SEC reporting requirements for public companies. It provides answers to multiple-choice questions covering topics such as the legal authority of the SEC, securities acts of 1933 and 1934, SEC forms like 10-K and 8-K, registration statements, and the Foreign Corrupt Practices Act. It also includes solutions to cases analyzing objectives of securities acts, roles of the SEC and FASB, information in proxy statements, and required disclosures in Form 10-Ks.
The document discusses various topics related to analyzing investing activities including investment securities, business combinations, and derivative securities. It provides definitions and accounting treatments for different types of investment securities, the equity method of accounting for intercorporate investments, and the purchase method of accounting for business combinations. It also defines various types of derivative securities and discusses disclosure requirements related to derivatives and the fair value option for reporting financial assets and liabilities.
The general partner of Riverside Park Associates LP is Riverside Park
Associates, Inc. The limited partners are individual and institutional investors.
c.
The limited partnership agreement specifies that the general partner is responsible for
managing the day-to-day operations of the partnership and its real estate holdings.
The limited partners have limited liability and do not participate in management.
Profits, losses, cash distributions and liquidation proceeds are allocated 99% to the
limited partners and 1% to the general partner.
d.
The balance sheet shows total assets of $145.4 million as of December 31, 2006.
The largest asset is the $135.4 million net book value of the real
Solution Manual Advanced Accounting by Baker 9e Chapter 16Saskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
This document provides an overview of IFRS 9: Financial Instruments. IFRS 9 addresses the classification and measurement of financial instruments, impairment of financial assets, and hedge accounting. The key topics covered in IFRS 9 include recognition and derecognition of financial instruments, classification of financial assets and liabilities, measurement of financial instruments, impairment of financial assets, embedded derivatives, and hedge accounting. IFRS 9 establishes principles for the financial reporting of financial assets and financial liabilities.
statement of cash flow and statement of retained earnings.sabaAkhan47
The document defines key accounting terms related to financial statements:
- A statement of cash flows reports the impact of operating, investing, and financing activities on a firm's cash flows over an accounting period. It summarizes changes in a company's cash position.
- The statement of retained earnings reconciles the beginning and ending balances in the retained earnings account and shows changes from net income and dividends.
- Key terms include securities, debt securities, equity securities, amortization, and accrual-based accounts.
- The document discusses partnership liquidation, including definitions, procedures, and accounting treatments.
- A simple partnership liquidation involves one cash distribution where partners receive amounts equal to their pre-distribution capital account balances.
- Priority rankings for distributing assets in liquidation are: 1) amounts owed to non-partner creditors and partners other than for capital and profits, and 2) amounts due to partners based on remaining assets after liabilities are paid.
This document discusses the costs, revenue, and objectives of firms. It defines key concepts like total cost, average total cost, fixed cost, variable cost, total revenue, and average revenue. It explains how to calculate these terms and how costs and revenues change with different levels of output. The objectives of firms are also covered, including survival, growth, social welfare, profit satisficing, and profit maximization. Profit is maximized when the difference between revenue and costs is greatest. Firms aim to increase profits by reducing costs and raising revenues.
The document discusses additional consolidation reporting issues including:
- Cash flows from operations cannot be easily incorporated into the existing three-part workpaper format because both beginning and ending consolidated balance sheet totals are needed to determine cash flows for the period.
- Dividends paid to noncontrolling shareholders are included in the consolidated cash flow statement but not the consolidated retained earnings statement.
- The indirect method of preparing the statement of cash flows focuses on reconciling net income to cash flows from operations, but does not report explicit payments to suppliers.
1) The document discusses intercorporate acquisitions and investments in other entities. It provides answers to various questions relating to the accounting treatment and financial reporting of acquisitions under both the acquisition method and pooling of interests method.
2) It addresses topics such as goodwill calculation and allocation, consolidation requirements, transfer of assets between entities, and the treatment of acquisition-related costs.
3) The document also includes solutions to several cases involving issues like reporting alternatives across countries, assignment of acquisition costs, evaluation of a specific merger, and factors influencing merger activity.
This document provides an overview of analyzing a company's financing activities. It discusses the major sources of corporate financing which include liabilities, capital/stockholders' equity, and off-balance sheet transactions. For liabilities, it describes the two major types and how they are classified. For capital/stockholders' equity, it outlines the basic elements including preferred stock, common stock, paid-in capital, retained earnings, and treasury stock. It also discusses off-balance sheet financing methods and the motivations for using them. Commitments and contingencies are distinguished, and lease accounting is briefly covered.
The document discusses intercorporate acquisitions and investments in other entities. It provides answers to 22 questions on topics such as the purposes of forming new subsidiaries, different types of business combinations, accounting for acquisitions, goodwill, and international harmonization of accounting standards. Specifically, it addresses how assets are transferred between entities, when consolidation is required, how goodwill is calculated and allocated, the differences between pooling and purchase accounting methods, and concerns companies have regarding international accounting standard differences.
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 16Saskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
Problems based on accounting standards and guidance notes finalDwara Balaji
This document contains 12 questions related to accounting standards and guidance notes. The questions cover topics such as events occurring after the balance sheet date, prior period items, pre-incorporation expenses, revaluation of fixed assets, revenue recognition, extraordinary items, cash flow statements, and changes in accounting policies. For each question, the relevant accounting treatments, disclosures, or guidance from standards are discussed in detail in the response.
The document summarizes accounting principles used in preparing consolidated financial statements for Koninklijke Philips Electronics N.V. including:
- Using historical cost and Dutch GAAP. Consolidation includes majority owned companies and minority interests are disclosed.
- Foreign operations are translated to the reporting currency. Derivatives are used to manage currency risks and measured at fair value.
- Revenues are recognized upon delivery, provision for estimated losses, and royalties on accrual basis. Expenses use accrual basis. Income taxes use deferred tax assets/liabilities.
The document provides an overview of the equity method of accounting for investments. It discusses three methods used to account for equity investments - the fair value method, consolidation method, and equity method. The equity method is applied when an investor has significant influence over an investee. It involves adjusting the investment account for changes in the investee's equity and accruing the investor's share of the investee's earnings. Special procedures are also outlined for applying the equity method, such as retrospective adjustments when changing to the equity method and deferring unrealized profits on inventory transfers between the investor and investee.
This document discusses accounting for intercorporate investments and interests. It provides answers to questions about when to use the equity method vs cost method of accounting for investments, what constitutes significant influence, how to account for differences between the purchase price and book value of investments, how dividends are treated, and other topics related to intercorporate investments. Key points covered include how ownership levels, board representation, and other factors determine whether the equity method is appropriate. It also addresses adjustments needed when changing from one method to the other and accounting for joint ventures and other complex organizational structures.
The document discusses financial statements, including the income statement, balance sheet, statement of retained earnings, and statement of cash flows. It provides details on the key components and purposes of each statement. The income statement shows a company's revenues, expenses and profits over a period of time. The balance sheet outlines a company's assets, liabilities, and shareholders' equity at a point in time. The statement of retained earnings shows how much earnings have been retained in the business each year. And the statement of cash flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities.
1. The financial statements document includes an income statement, balance sheet, and statement of cash flows. The income statement shows profitability over a period of time, the balance sheet outlines assets, liabilities, and equity at a point in time, and the statement of cash flows shows cash inflows and outflows.
2. The income statement displays revenue, expenses, and profit. The balance sheet lists current assets, fixed assets, liabilities, and equity. Current assets include cash, receivables, and inventory. Liabilities include current and long-term debt. Equity encompasses preferred stock and common stock.
3. Financial statements provide information about a company's performance and financial position to both internal and external
The document provides an overview of key financial statements including the balance sheet and profit and loss account. The balance sheet shows a company's financial position on a particular date by outlining assets, liabilities, and equity. The profit and loss account shows operating results for a period by outlining revenues, expenses, and net profit. It summarizes the financial performance of a business over a specific period of time.
Solution Manual Advanced Accounting 9th Edition by Baker Chapter 14Saskia Ahmad
The document discusses SEC reporting requirements for public companies. It provides answers to multiple-choice questions covering topics such as the legal authority of the SEC, securities acts of 1933 and 1934, SEC forms like 10-K and 8-K, registration statements, and the Foreign Corrupt Practices Act. It also includes solutions to cases analyzing objectives of securities acts, roles of the SEC and FASB, information in proxy statements, and required disclosures in Form 10-Ks.
The document discusses various topics related to analyzing investing activities including investment securities, business combinations, and derivative securities. It provides definitions and accounting treatments for different types of investment securities, the equity method of accounting for intercorporate investments, and the purchase method of accounting for business combinations. It also defines various types of derivative securities and discusses disclosure requirements related to derivatives and the fair value option for reporting financial assets and liabilities.
The general partner of Riverside Park Associates LP is Riverside Park
Associates, Inc. The limited partners are individual and institutional investors.
c.
The limited partnership agreement specifies that the general partner is responsible for
managing the day-to-day operations of the partnership and its real estate holdings.
The limited partners have limited liability and do not participate in management.
Profits, losses, cash distributions and liquidation proceeds are allocated 99% to the
limited partners and 1% to the general partner.
d.
The balance sheet shows total assets of $145.4 million as of December 31, 2006.
The largest asset is the $135.4 million net book value of the real
Solution Manual Advanced Accounting by Baker 9e Chapter 16Saskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
This document provides an overview of IFRS 9: Financial Instruments. IFRS 9 addresses the classification and measurement of financial instruments, impairment of financial assets, and hedge accounting. The key topics covered in IFRS 9 include recognition and derecognition of financial instruments, classification of financial assets and liabilities, measurement of financial instruments, impairment of financial assets, embedded derivatives, and hedge accounting. IFRS 9 establishes principles for the financial reporting of financial assets and financial liabilities.
statement of cash flow and statement of retained earnings.sabaAkhan47
The document defines key accounting terms related to financial statements:
- A statement of cash flows reports the impact of operating, investing, and financing activities on a firm's cash flows over an accounting period. It summarizes changes in a company's cash position.
- The statement of retained earnings reconciles the beginning and ending balances in the retained earnings account and shows changes from net income and dividends.
- Key terms include securities, debt securities, equity securities, amortization, and accrual-based accounts.
- The document discusses partnership liquidation, including definitions, procedures, and accounting treatments.
- A simple partnership liquidation involves one cash distribution where partners receive amounts equal to their pre-distribution capital account balances.
- Priority rankings for distributing assets in liquidation are: 1) amounts owed to non-partner creditors and partners other than for capital and profits, and 2) amounts due to partners based on remaining assets after liabilities are paid.
This document discusses the costs, revenue, and objectives of firms. It defines key concepts like total cost, average total cost, fixed cost, variable cost, total revenue, and average revenue. It explains how to calculate these terms and how costs and revenues change with different levels of output. The objectives of firms are also covered, including survival, growth, social welfare, profit satisficing, and profit maximization. Profit is maximized when the difference between revenue and costs is greatest. Firms aim to increase profits by reducing costs and raising revenues.
The document discusses additional consolidation reporting issues including:
- Cash flows from operations cannot be easily incorporated into the existing three-part workpaper format because both beginning and ending consolidated balance sheet totals are needed to determine cash flows for the period.
- Dividends paid to noncontrolling shareholders are included in the consolidated cash flow statement but not the consolidated retained earnings statement.
- The indirect method of preparing the statement of cash flows focuses on reconciling net income to cash flows from operations, but does not report explicit payments to suppliers.
1) The document discusses intercorporate acquisitions and investments in other entities. It provides answers to various questions relating to the accounting treatment and financial reporting of acquisitions under both the acquisition method and pooling of interests method.
2) It addresses topics such as goodwill calculation and allocation, consolidation requirements, transfer of assets between entities, and the treatment of acquisition-related costs.
3) The document also includes solutions to several cases involving issues like reporting alternatives across countries, assignment of acquisition costs, evaluation of a specific merger, and factors influencing merger activity.
This document provides an overview of analyzing a company's financing activities. It discusses the major sources of corporate financing which include liabilities, capital/stockholders' equity, and off-balance sheet transactions. For liabilities, it describes the two major types and how they are classified. For capital/stockholders' equity, it outlines the basic elements including preferred stock, common stock, paid-in capital, retained earnings, and treasury stock. It also discusses off-balance sheet financing methods and the motivations for using them. Commitments and contingencies are distinguished, and lease accounting is briefly covered.
The document discusses intercorporate acquisitions and investments in other entities. It provides answers to 22 questions on topics such as the purposes of forming new subsidiaries, different types of business combinations, accounting for acquisitions, goodwill, and international harmonization of accounting standards. Specifically, it addresses how assets are transferred between entities, when consolidation is required, how goodwill is calculated and allocated, the differences between pooling and purchase accounting methods, and concerns companies have regarding international accounting standard differences.
Solution Manual Advanced Financial Accounting by Baker 9th Edition Chapter 16Saskia Ahmad
Solution Manual, Advanced Accounting, Thomas E. King, Cynthia Jeffrey, Richard E. Baker, Valdean C. Lembke, Theodore Christensen, David Cottrell, Richard Baker, Advanced Financial Accounting, Advanced Financial Accounting by Baker Chapter 18, Advanced Financial Accounting by Baker Chapter 18 9th Edition, 9th Edition,
Problems based on accounting standards and guidance notes finalDwara Balaji
This document contains 12 questions related to accounting standards and guidance notes. The questions cover topics such as events occurring after the balance sheet date, prior period items, pre-incorporation expenses, revaluation of fixed assets, revenue recognition, extraordinary items, cash flow statements, and changes in accounting policies. For each question, the relevant accounting treatments, disclosures, or guidance from standards are discussed in detail in the response.
The document summarizes accounting principles used in preparing consolidated financial statements for Koninklijke Philips Electronics N.V. including:
- Using historical cost and Dutch GAAP. Consolidation includes majority owned companies and minority interests are disclosed.
- Foreign operations are translated to the reporting currency. Derivatives are used to manage currency risks and measured at fair value.
- Revenues are recognized upon delivery, provision for estimated losses, and royalties on accrual basis. Expenses use accrual basis. Income taxes use deferred tax assets/liabilities.
The document provides an overview of the equity method of accounting for investments. It discusses three methods used to account for equity investments - the fair value method, consolidation method, and equity method. The equity method is applied when an investor has significant influence over an investee. It involves adjusting the investment account for changes in the investee's equity and accruing the investor's share of the investee's earnings. Special procedures are also outlined for applying the equity method, such as retrospective adjustments when changing to the equity method and deferring unrealized profits on inventory transfers between the investor and investee.
This document discusses accounting for intercorporate investments and interests. It provides answers to questions about when to use the equity method vs cost method of accounting for investments, what constitutes significant influence, how to account for differences between the purchase price and book value of investments, how dividends are treated, and other topics related to intercorporate investments. Key points covered include how ownership levels, board representation, and other factors determine whether the equity method is appropriate. It also addresses adjustments needed when changing from one method to the other and accounting for joint ventures and other complex organizational structures.
The document discusses financial statements, including the income statement, balance sheet, statement of retained earnings, and statement of cash flows. It provides details on the key components and purposes of each statement. The income statement shows a company's revenues, expenses and profits over a period of time. The balance sheet outlines a company's assets, liabilities, and shareholders' equity at a point in time. The statement of retained earnings shows how much earnings have been retained in the business each year. And the statement of cash flows provides information on a company's cash inflows and outflows from operating, investing, and financing activities.
1. The financial statements document includes an income statement, balance sheet, and statement of cash flows. The income statement shows profitability over a period of time, the balance sheet outlines assets, liabilities, and equity at a point in time, and the statement of cash flows shows cash inflows and outflows.
2. The income statement displays revenue, expenses, and profit. The balance sheet lists current assets, fixed assets, liabilities, and equity. Current assets include cash, receivables, and inventory. Liabilities include current and long-term debt. Equity encompasses preferred stock and common stock.
3. Financial statements provide information about a company's performance and financial position to both internal and external
The document provides an overview of key financial statements including the balance sheet and profit and loss account. The balance sheet shows a company's financial position on a particular date by outlining assets, liabilities, and equity. The profit and loss account shows operating results for a period by outlining revenues, expenses, and net profit. It summarizes the financial performance of a business over a specific period of time.
This document discusses various financial ratios used for analyzing the financial statements of a business. It begins by defining key components of a balance sheet such as assets, liabilities, equity, current assets and current liabilities. It then explains over 20 different types of financial ratios categorized as liquidity ratios, activity ratios, leverage ratios, profitability ratios and market ratios. Specific formulas to calculate ratios such as current ratio, debt equity ratio, return on equity, earnings per share etc. are provided. Several examples are given to showcase calculation of various ratios from sample financial statement information. The document serves as a comprehensive reference guide for understanding and analyzing important financial ratios.
This document provides an overview of financial statement analysis and cash flow analysis. It defines key financial statements including the balance sheet, income statement, and statement of cash flows. It explains the purpose of financial statement analysis for both internal and external users. The document then describes various items and terms for each financial statement like assets, liabilities, equity, revenues, and expenses. It also introduces several important financial ratios to measure a company's liquidity, asset management, profitability, leverage, and market value. Formulas are provided for calculating common ratios.
The document discusses the needs and purposes of key financial statements including the income statement, balance sheet, and statement of cash flows. It explains the components and calculations of these statements. It also describes common financial ratios used in analysis of statements, such as liquidity, profitability, asset management, and leverage ratios. These ratios are used to evaluate a firm's performance and financial position over time and in comparison to other companies.
Understanding Basics of Financial StatementsAnkita6745
Understanding the basic concepts and term used in the Financial Statements.Understanding the ratios used for analyzing the Financial Statements.Discussing factors that drive corporate valuations.
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby...Donc Test
Solution Manual For Financial Accounting, 8th Canadian Edition 2024, by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting, 8th Canadian Edition by Libby, Hodge, Verified Chapters 1 - 13, Complete Newest Version Solution Manual For Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Ebook Download Stuvia Solution Manual For Financial Accounting 8th Canadian Edition Pdf Solution Manual For Financial Accounting 8th Canadian Edition Pdf Download Stuvia Financial Accounting 8th Canadian Edition Pdf Chapters Download Stuvia Financial Accounting 8th Canadian Edition Ebook Download Stuvia Financial Accounting 8th Canadian Edition Pdf Financial Accounting 8th Canadian Edition Pdf Download Stuvia
The document provides an overview of key concepts in financial accounting including the five main elements of financial accounts (revenues, expenses, assets, liabilities, and equity), the three main financial statements (income statement, balance sheet, and cash flow statement), and the accounting equation. It discusses each of the five financial account elements and how they are reflected in the income statement and balance sheet. The document also provides details on the balance sheet, including its purpose and key components such as current assets, non-current assets, current liabilities, and non-current liabilities.
This document provides information on ratio analysis for financial statement evaluation. It defines various types of ratios including liquidity, activity, profitability, leverage and market ratios. Specific ratios discussed include current ratio, quick ratio, debt-equity ratio, gross profit ratio, return on equity, earnings per share and price-earnings ratio. The purpose, calculation and ideal levels of these ratios are explained. Sample balance sheet formats and ratio calculations are also presented to illustrate the concepts.
This document provides an introduction and overview of finance concepts for non-finance managers. It includes sections on understanding financial statements, revenue and expenses, income statements, cash flows, financial ratios, break-even analysis, and time value of money. Examples are provided to illustrate key points such as calculating profit, the difference between revenue and capital expenditures, and preparing an income statement. The goal is to help non-finance readers develop a basic understanding of important financial concepts.
This is to certify that the main project report entitled A Study on “FINANCIAL
ANALYSIS” with reference to NAGA HANUMAN SOLVENT OIL, PVT.LYD, BHIMADOL.”
submitted to Jawaharlal Nehru University in partial fulfillment of the requirement for the award
of the degree of Master of Business Administration (MBA), is a original work carried out by me
and that it has not been submitted to any other university/institute for the award of any degree or
diploma.
This document provides an overview of key concepts in financial accounting and analysis. It begins with definitions and principles of financial accounting. It then explains key financial statements - the income statement, balance sheet, and cash flow statement - and what types of financial information each provides. The document also covers ratio analysis and defines categories of ratios that can be used to analyze a company's performance, including activity ratios, liquidity ratios, solvency ratios, and profitability ratios. It provides examples of specific ratios within each category.
Finance for Non Finance Professionals.pptxrossymathur2
Presentation is aimed to discuss financial jargons and terminologies, How companies prepare final accounts. The process is explained in simple language. Explaining Various Formats of Financial Statements
Explaining Budgets, a look into household budget. Essentials of Budgets
Financial statement analysis involves analyzing a company's balance sheets, income statements, and cash flow statements over multiple years. Key aspects of analysis include calculating financial ratios to evaluate the company's liquidity, profitability, leverage, capital structure, and efficiency. Common ratios calculated include current ratio, debt-to-equity ratio, profit margin, return on equity, inventory turnover, and debt service coverage ratio. Comparing ratios across time periods and to industry benchmarks provides insights into the company's financial health and performance.
Financial Statement Analysis PresentationLean Teams
This document outlines an agenda for a seminar on understanding, analyzing, and using financial statements. The schedule includes breaks throughout a full day session from 9:00am to 4:00pm. The presenter will cover key concepts like the four main financial statements, accounting principles and assumptions, and how to interpret items like assets, liabilities, equity, revenues and expenses. Financial accounting will be distinguished from managerial accounting. Details like revenue recognition, depreciation, and the matching principle will be explained.
Explore the world of investments with an in-depth comparison of the stock market and real estate. Understand their fundamentals, risks, returns, and diversification strategies to make informed financial decisions that align with your goals.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
Monthly Market Risk Update: June 2024 [SlideShare]Commonwealth
Markets rallied in May, with all three major U.S. equity indices up for the month, said Sam Millette, director of fixed income, in his latest Market Risk Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
Discovering Delhi - India's Cultural Capital.pptxcosmo-soil
Delhi, the heartbeat of India, offers a rich blend of history, culture, and modernity. From iconic landmarks like the Red Fort to bustling commercial hubs and vibrant culinary scenes, Delhi's real estate landscape is dynamic and diverse. Discover the essence of India's capital, where tradition meets innovation.
2. Financial Statements generally consists of the
following two types :
Profit & Loss Account – which summarises
the expenses incurred and revenues received
during the period covered by it ; and
Balance Sheet – which lists out the Assets
and Properties owned by the Unit and the
Liabilities it owes to outsiders and also to its
owners.
05:38 PM
2
6. 1. NET SALES : This is the key figure in the Income
Statement. Which can be arrived from the following :
Net Sales = Gross Sales – Excise Duty
Where Gross Sales = (Total Domestic Sales +
Export Sales) – (Sales Tax + Octroi + Sales Return)
05:38 PM
6
7. 2. COST OF PRODUCTION : It is the sum of Cost of Raw
Materials consumed and all Manufacturing Expenses.
COP = Cost of R.M. + Manufacturing
Expenses
Manufacturing Expenses include :
(i) Spares
(ii) Power & fuel
(iii) Wages & Salaries (Direct Labour)
(iv) Other Manufacturing Expenses
(v) Depreciation
(vi) Difference between Opening & Closing Stock of SIP
05:38 PM
7
8. 3. COST OF SALES :
It is the sum of Cost of Production and
Difference between Opening & Closing Stock of
Finished Goods
05:38 PM
8
9. 4. GROSS PROFIT :
Net Sales – Cost of Sales
The percentage of Gross Profit to Net sales
indicates whether the average sale price is
sufficient to cover all expenses.
05:38 PM
9
10. 5. OPERATING EXPENSES : These are the expenses which are
required to run the business on daily basis, such as;
Selling Expenses
Administrative Expenses
General Expenses
Provision for Bad Debts
Other Misc. Expenses
05:38 PM
10
11. 5. OPERATING PROFIT : When you deduct all the operating
expenses from the Gross Profit you arrive at the Operating
Profit.
Operating Profit = Gross Profit - All Operating Expenses
Finally to this Operating Profit, Other incomes not arising out
from normal operations are added and other Non-operating
expenses are deducted to arrive at the figure of NET
PROFIT BEFORE TAX (NPBT).
From this NPBT so arrived, Income Tax is adjusted first and
thereafter Dividend is distributed as per Management’s
Policy.
The Balance amount is reinvested in business in the form of
RESERVES or added in the Capital Account.
05:38 PM
11
12. Balance Sheet is a statement of Assets & Liabilities as on a
given date. It reflects the Financial Position of a concern as
on a date. The Balance Sheet can be looked at from two
angles:
1. ASSETS as USES and LIABILITIES as SOURCES OF
FUNDS
2. ASSETS as what the Business Owns and LIABILITIES as
what the Business Owes.
LIABILITIES ASSETS
NET WORTH FIXED ASSETS
TERM LIABILITIES CURRENT ASSETS
CURRENT LIABILITIES OTHER NON CURRENT ASSETS
05:38 PM
12
13. 1. Net Worth : It is the total investment of the owners in
the Business.
For a Limited Company it comprises of a sum of Share Capital +
Reserves
Share Capital is the direct investment of the owners in the
business. This includes Equity Share Capital and Preference
Share Capital.
Reserves : Profits of the business which have been reinvested
in the business. In Proprietorship and Partnership Firms they
are added to Capital and not shown separately.
05:38 PM
13
14. 2. TERM LIABILITIES : All those borrowings made by
the concern which are repayable after One Year of the
Balance Sheet date are called Term Liabilities. These include
TERM LOANS
DEBENTURE
TERM DEPOSITS
REDEEMABLE PREFERENCE SHARE CAPITAL
(Maturing with 12 years of Balance Sheet Date)
05:38 PM
14
15. 3. CURRENT LIABILITIES : All those borrowings
made by the concern which are expected to be repaid within 12
months of the date of the Balance Sheet. These include
CREDITORS
PROVISIONS FOR EXPENSES
BANK BORROWING FOR WORKING CAPITAL
DEPOSITS MATURING WITHIN 12 MONTHS
INSTALLMENTS OF TERM LOANS
DEBENTURES/REDEEMABLE PREFERENCE SHARES MATURING
WITHIN ONE YEAR
Total of Term Liabilities + Current Liabilities is called Outside
Liabilities and is the Total Borrowings of the Firm
05:38 PM
15
16. 4. FIXED ASSETS: These are the assets which help in
the production of goods & services of the concern. They are
tangible in nature and have a long life. The examples of Fixed
Assets are :
Land
Building
Plant & Machineries
Furniture & Fixtures etc.
05:38 PM
16
17. 5. CURRENT ASSETS: These are the assets which are
expected to be consumed or converted into cash through the
normal business operations and usually within one year. Such
as:
Cash & Bank Balances
FDs with Banks
Short Term Govt .Securities
Stocks of R.M., Semi F.G and F.G
Stores, Spares
Advance Payment for Suppliers
Prepaid Insurance
Debtors & Bills Receivables
05:38 PM
17
18. 6. NON CURRENT ASSETS: These are the assets
which do not fall in the above two categories of assets. They
are:
Corporate Investments
Loans not recoverable within 1 year
Non Consumable Spares
Deferred Receivables
Advance for Capital Expenditure
Intangible Assets [ Goodwill, Patent, Trade Mark]
Preliminary & Pre-operative Expenses
05:38 PM
18
19. Lenders’ need it for
carrying out :-
Technical Appraisal
Commercial Appraisal
Financial Appraisal
Economic Appraisal
Management Appraisal
Does the firm has liquidity
to meet its short term
obligations?
Would the firm be able to
meet its long term
commitments?
Is the firm using its assets
efficiently?
How profitable are the
operations of the firm?
05:38 PM
19
20. It is the process of identifying the financial strengths &
weaknesses of a firm by properly establishing relationships
between the items of the Balance Sheet and Profit & Loss A/c.
This is done by –
(1) The Firm’s Management
(2) Owners
(3) Creditors
(4) Investors
(5) Bankers & Others
05:38 PM
20
21. A. TRADE CREDITORS : They do it to know the firm’s ability
to meet their claim. [Liquidity]
B. SUUPLIERS OF LONG TERM DEBT : They need to know
the firm’s long term solvency. [Profitability over a long period
of time]
C. INVESTORS : They are concerned about the firm’s
earnings.
D. BANKERS : They need to understand the soundness of
the Business so as to take a good Credit Decision.
05:38 PM
21
22. It’s a tool which enables the banker or lender to
arrive at the following factors :
Liquidity position
Profitability
Solvency
Financial Stability
Quality of the Management
Safety & Security of the loans & advances to be or
already been provided
05:38 PM
22
23. Ratio is the indicated quotient of two mathematical expressions i.e. the
relationship between two or more things.
Ratio Analysis involves comparison for useful interpretation of the financial
statement. A single ratio does not indicate favourable or
unfavourable condition. It should be compared with some sort of
standard. Standard of comparison may consist of :
1. Ratios calculated from the past financial statements of the same firm.
2. Ratios developed using the projected financial statements of the same firm.
3. Ratios of some selected firms, especially the most progressive and
successful at the same point of time; and
4. Ratios of the industry level to which the firm belongs.
05:38 PM
23
24. As Percentage - such as 25% or 50% . For
example if net profit is Rs.25,000/- and the sales is
Rs.1,00,000/- then the net profit can be said to be
25% of the sales.
As Proportion - The above figures may be
expressed in terms of the relationship between net
profit to sales as 1 : 4.
As Pure Number /Times - The same can also be
expressed in an alternatively way such as the sale is 4
times of the net profit or profit is 1/4th
of the sales.
05:38 PM
24
25. LIABILITIES ASSETS
NET WORTH/EQUITY/OWNED FUNDS
Share Capital/Partner’s Capital/Paid up Capital/
Owners Funds
Reserves ( General, Capital, Revaluation & Other
Reserves)
Credit Balance in P&L A/c
FIXED ASSETS : LAND & BUILDING, PLANT &
MACHINERIES
Original Value Less Depreciation
[Net Value or Book Value or Written down value]
LONG TERM LIABILITIES/BORROWED
FUNDS : Term Loans (Banks & Institutions)
Debentures/Bonds, Unsecured Loans, Fixed
Deposits, Other Long Term Liabilities
NON CURRENT ASSETS
Investments in quoted shares & securities
Old stocks or old/disputed book debts
Long Term Security Deposits
Other Misc. assets which are not current or fixed
in nature
CURRENT LIABILTIES
Bank Working Capital Limits such as
CC/OD/Bills/Export Credit
Sundry /Trade Creditors/Creditors/Bills Payable,
Short duration loans or deposits
Expenses payable & provisions against various
items
CURRENT ASSETS : Cash & Bank Balance,
Marketable/quoted Govt. or other securities,
Book Debts/Sundry Debtors, Bills Receivables,
Stocks & Inventory (RM,SIP,FG) Stores & Spares,
Advance Payment of Taxes, Prepaid expenses,
Loans and Advances recoverable within 12
months
INTANGIBLE ASSETS
Patent, Goodwill, Debit balance in P&L A/c,
Preliminary or Preoperative expenses
05:38 PM
25
26. Balance Sheet
Ratio
P&L Ratio or
Income/Revenue
Statement Ratio
Balance Sheet
and Profit &
Loss Ratio
Financial Ratio Operating Ratio Composite Ratio
Current Ratio
Quick Asset Ratio
Proprietary Ratio
Debt Equity Ratio
Gross Profit Ratio
Operating Ratio
Expense Ratio
Net profit Ratio
Stock Turnover Ratio
Fixed Asset Turnover
Ratio, Return on
Total Resources
Ratio,
Return on Own
Funds Ratio, Earning
per Share Ratio,
Debtors’ Turnover
Ratio,
05:38 PM
26
27. Liabilities have Credit balances and Assets have Debit
balances
Current Liabilities are those which have either become due for
payment or shall fall due for payment within 12 months from
the date of Balance Sheet
Current Assets are those which undergo change in their
shape/form within 12 months. These are also called Working
Capital or Gross Working Capital
Net Worth & Long Term Liabilities are also called Long Term
Sources of Funds
Current Liabilities are known as Short Term Sources of
Funds
Long Term Liabilities & Short Term Liabilities are also called
Outside Liabilities
05:38 PM
27
28. Assets other than Current Assets are Long Term Use of Funds
Installments of Term Loan Payable in 12 months are to be taken as
Current Liability, only for Calculation of Current Ratio & Quick Ratio.
If there is profit it shall become part of Net Worth under the head
Reserves and if there is loss it will become part of Intangible
Assets
Investments in Govt. Securities to be treated current only if these
are marketable and due. Investments in other securities are to be
treated Current if they are quoted. Investments in
allied/associate/sister units or firms to be treated as Non-current.
Bonus Shares as issued by capitalization of General Reserves and as
such do not affect the Net Worth. But with Rights Issue, change takes
place in Net Worth and Current Ratio.
05:38 PM
28
29. 1. Current Ratio : It is the relationship between the current
assets and current liabilities of a concern.
Current Ratio = Current Assets/Current
Liabilities
If the Current Assets and Current Liabilities of a concern
are Rs.4,00,000 and Rs.2,00,000 respectively, then the
Current Ratio will be : Rs.4,00,000/Rs.2,00,000 = 2 : 1
The ideal Current Ratio preferred by Banks is
1.33 : 1
Current Assets : Cash & those assets which can
be converted into cash within 1 year. For
example, Marketable securities, Debtors,
Inventories, Prepaid Expenses.
Current Liabilities : Creditors, Bills Payable,
05:38 PM
29
30. Current Ratio measures the firm’s short term
solvency. A ratio greater than 1 means that the
firm has more current assets than current
claims against them.
As a conventional rule a Current Ratio of 2 is
considered most satisfactory. This rule is
based on the logic that in a worse situation,
even if the value of current assets become
half, the firm will be able to meet its current
obligations. It represents the “Margin of Safety’
i.e. a cushion of protection for creditors. Higher
the ratio greater the margin of safety.
05:38 PM
30
31. 2. Net Working Capital : This is worked out
as surplus of Long Term Sources over Long
Term Uses, alternatively it is the difference of
Current Assets and Current Liabilities. It
measures the firm’s potential reservoir of
funds.
NWC = Current Assets – Current
Liabilities
05:38 PM
31
32. 3. ACID TEST or QUICK RATIO : It is the ratio between Quick Current
Assets and Current Liabilities.
Quick Current Assets : Quick assets are those which can be immediately
converted into cash without a loss of value. Cash & Bank balances are the most
liquid assets. Examples of quick Assets are : Cash/Bank Balances, Receivables upto
6 months, Quickly realizable securities such as Govt. Securities or quickly
marketable/quoted shares and Bank Fixed Deposits. Inventories are less liquid hence
the same is deducted from the Current Assets to arrive at Quick Assets.
Acid Test or Quick Ratio = Quick Current Assets/Current Liabilities
Example :
Cash 50,000
Debtors 1,00,000
Inventories 1,50,000 Current Liabilities 1,00,000
Total Current Assets 3,00,000
Current Ratio = > 3,00,000/1,00,000 = 3 : 1
Quick Ratio = > 1,50,000/1,00,000 = 1.5 : 1
05:38 PM
32
33. 4. DEBT EQUITY RATIO : It is the relationship between
borrower’s fund (Debt) and Owner’s Capital (Equity). It
represents the lender’s contribution for each Rupee of owner’s
contribution.
Long Term Outside Liabilities / Tangible Net Worth
Liabilities of Long Term Nature
Total of Capital and Reserves & Surplus Less Intangible Assets
For instance, if the Firm is having the following :
Capital = Rs. 200 Lacs
Free Reserves & Surplus = Rs. 300 Lacs
Long Term Loans/Liabilities = Rs. 800 Lacs
Debt Equity Ratio will be => 800/500 = 1.6 : 1
05:38 PM
33
34. 5. PROPRIETARY RATIO : This ratio indicates the extent to which
Tangible Assets are financed by Owner’s Fund.
Proprietary Ratio = (Tangible Net Worth/Total Tangible
Assets) x 100
The ratio will be 100% when there is no Borrowing for
purchasing of Assets.
6. GROSS PROFIT RATIO : By comparing Gross Profit percentage to
Net Sales we can arrive at the Gross Profit Ratio which indicates the
manufacturing efficiency as well as the pricing policy of the concern.
Gross Profit Ratio = (Gross Profit / Net Sales ) x 100
Alternatively , since Gross Profit is equal to Sales minus Cost of
Goods Sold, it can also be interpreted as below :
Gross Profit Ratio = [ (Sales – Cost of goods sold)/ Net Sales]
x 100
A higher Gross Profit Ratio indicates efficiency in production of the unit.
05:38 PM
34
35. 7. OPERATING PROFIT RATIO :
It is expressed as => (Operating Profit / Net Sales ) x 100
Higher the ratio indicates operational efficiency
8. NET PROFIT RATIO :
It is expressed as => ( Net Profit / Net Sales ) x 100
It measures overall profitability.
05:38 PM
35
36. 9. STOCK/INVENTORY TURNOVER RATIO :It indicates the
efficiency of the firm in selling its products. It is calculated by dividing
the Cost of Goods Sold by Average Inventory. To arrive at the number
of days, weeks or months turnover the following formulas may be
applied.
(Average Inventory/Sales) x 365 for days
(Average Inventory/Sales) x 52 for weeks
(Average Inventory/Sales) x 12 for months
Average Inventory or Stocks = (Opening Stock + Closing
Stock)
-----------------------------------------
2
This ratio indicates the number of times the inventory is
rotated during the relevant accounting period, i.e. how
rapidly the inventory is turning into receivables through
sales. Generally a high inventory turnover is indicative of
05:38 PM
36
37. 10. DEBTORS TURNOVER RATIO : This is also called Debtors
Velocity or Average Collection Period or Period of Credit given .
(Average Debtors/Sales ) x 365 for days
(52 for weeks & 12 for months)
11. ASSET TRUNOVER RATIO : Net Sales/Tangible Assets
12. FIXED ASSET TURNOVER RATIO : Net Sales /Fixed Assets
13. CURRENT ASSET TURNOVER RATIO : Net Sales / Current Assets
14. CREDITORS TURNOVER RATIO : This is also called Creditors
Velocity Ratio, which determines the creditor payment period.
(Average Creditors/Purchases)x365 for days
(52 for weeks & 12 for months)
05:38 PM
37
38. 15. RETRUN ON ASSETS : Net Profit after Taxes/Total Assets
16. RETRUN ON CAPITAL EMPLOYED :
( Net Profit before Interest & Tax / Average Capital Employed) x 100
Average Capital Employed is the average of the equity share
capital and long term funds provided by the owners and the
creditors of the firm at the beginning and end of the accounting
period.
05:38 PM
38
39. Composite Ratio
17. RETRUN ON EQUITY CAPITAL (ROE) :
Net Profit after Taxes / Tangible Net Worth
18. EARNING PER SHARE : EPS indicates the quantum of net profit
of the year that would be ranking for dividend for each share of
the company being held by the equity share holders.
Net profit after Taxes and Preference Dividend/ No. of Equity
Shares
19. PRICE EARNING RATIO : PE Ratio indicates the number of times
the Earning Per Share is covered by its market price.
Market Price Per Equity Share/Earning Per Share
05:38 PM
39
40. 20. DEBT SERVICE COVERAGE RATIO : This ratio is one of the most
important one which indicates the ability of an enterprise to
meet its liabilities by way of payment of installments of Term
Loans and Interest thereon from out of the cash accruals and
forms the basis for fixation of the repayment schedule in
respect of the Term Loans raised for a project. (The Ideal DSCR
Ratio is considered to be 2 )
PAT + Depr. + Annual Interest on Long Term Loans &
Liabilities
---------------------------------------------------------------------------------
Annual interest on Long Term Loans & Liabilities + Annual
Installments payable on Long Term Loans & Liabilities
( Where PAT is Profit after Tax and Depr. is Depreciation)
05:38 PM
40
41. LIQUIDITY RATIOS :
1.CURRENT RATIO = C.A / C.L
2.QUICK RATIO = (C.A –
INVENTORY)/C.L
ACTIVITY RATIOS :
1.INVENTORY TURNOVER RATIO =
(COST OF GOODS SOLD OR
SALES)/INVENTORY
2.DEBTORS TURNOVER RATIO =
(CREDIT SALES OR
SALES)/AVERAGE DEBTORS
3.INVENTORY PERIOD =
360/INVENTORY TURNOVER
4.COLLECTION PERIOD =
360/DEBTORS TURNOVER
5.ASSETS TURNOVER = SALES/NET
ASSETS OR CAPITAL EMPLOYED
6.WORKING CAPITAL TURNOVER =
SALES/NET WORKING CAPITAL
PROFITABILITY RATIOS :
1.GROSS MARGIN = GROSS
PROFIT/SALES
2.NET MARGIN = PAT/SALES,
EBIT/SALES
3.PAT TO EBIT RATIO = PAT/EBIT
4.RETRUN ON INVESTMENT RATIO
= EBIT/NET ASSETS OR CAPITAL
EMPLOYED
5.RETRUN ON EQUITY = PAT/NET
WROTH
LEVERAGE RATIOS :
1.TOTAL DEBT RATIO = TOTAL
DEBT/CAPITAL EMPLOYED
2.DEBT EQUITY RATIO = NET
WORTH/TOTAL DEBT
3.CAPITAL EQUITY RATIO = C.E OR
NET ASSETS / NET WORTH
4.INTEREST COVERAGE RATIO =
(EBIT+Depr.)/INTEREST
05:38 PM
41
42. LIABILITES ASSETS
Capital 180 Net Fixed Assets 400
Reserves 20 Inventories 150
Term Loan 300 Cash 50
Bank C/C 200 Receivables 150
Trade Creditors 50 Goodwill 50
Provisions 50
800 800
EXERCISE 1
a. What is the Net Worth : Capital + Reserve = 200
b. Tangible Net Worth is : Net Worth - Goodwill = 150
c. Outside Liabilities : TL + CC + Creditors + Provisions = 600
d. Net Working Capital : C A - C L = 350 - 250 = 50
e. Current Ratio : C A / C L = 350 / 300 = 1.17 : 1
f. Quick Ratio : Quick Assets / C L = 200/300 = 0.66 : 1
05:38 PM
42
43. EXERCISE 2
LIABILITIES 2006-
07
2007-08 2006-
07
2007-
08
Capital 300 350 Net Fixed Assets 730 750
Reserves 140 160 Security Electricity 30 30
Bank Term Loan 320 280 Investments 110 110
Bank CC (Hyp) 490 580 Raw Materials 150 170
Unsec. Long T L 150 170 S I P 20 30
Creditors (RM) 120 70 Finished Goods 140 170
Bills Payable 40 80 Cash 30 20
Expenses Payable 20 30 Receivables 310 240
Provisions 20 40 Loans/Advances 30 190
Goodwill 50 50
Total 1600 1760 1600 1760
1. Tangible Net Worth for 1st
Year : ( 300 + 140) - 50 = 390
2. Current Ratio for 2nd
Year : (170 + 30 +170+20+ 240 + 190 ) / (580+70+80+70)
820 /800 = 1.02
3. Debt Equity Ratio for 1st
Year : 320+150 / 390 = 1.21
05:38 PM
43
44. Exercise 3.
LIABIITIES ASSETS
Equity Capital 200 Net Fixed Assets 800
Preference Capital 100 Inventory 300
Term Loan 600 Receivables 150
Bank CC (Hyp) 400 Investment In Govt. Secu. 50
Sundry Creditors 100 Preliminary Expenses 100
Total 1400 1400
1. Debt Equity Ratio will be : 600 / (200+100) = 2 : 1
2. Tangible Net Worth : Only equity Capital i.e. = 200
3. Total Outside Liabilities / Total Tangible Net Worth : (600+400+100) /
200
= 11 : 2
4. Current Ratio will be : (300 + 150 + 50 ) / (400 + 100 ) = 1 : 1
05:38 PM
44
45. LIABILITIES ASSETS
Capital + Reserves 355 Net Fixed Assets 265
P & L Credit Balance 7 Cash 1
Loan From S F C 100 Receivables 125
Bank Overdraft 38 Stocks 128
Creditors 26 Prepaid Expenses 1
Provision of Tax 9 Intangible Assets 30
Proposed Dividend 15
550 550
Q. What is the Current Ratio ? Ans : (1+125 +128+1) / (38+26+9+15)
: 255/88 = 2.89 : 1
Q What is the Quick Ratio ? Ans : (125+1)/ 88 = 1.43 : 11
Q. What is the Debt Equity Ratio ? Ans : LTL / Tangible NW
= 100 / ( 362 – 30)
= 100 / 332 = 0.30 : 1
Exercise 4.
05:38 PM
45
46. LIABILITIES ASSETS
Capital + Reserves 355 Net Fixed Assets 265
P & L Credit Balance 7 Cash 1
Loan From S F C 100 Receivables 125
Bank Overdraft 38 Stocks 128
Creditors 26 Prepaid Expenses 1
Provision of Tax 9 Intangible Assets 30
Proposed Dividend 15
550 550
Q . What is the Proprietary Ratio ? Ans : (TNW / Tangible Assets) x 100
[ (362 - 30 ) / (550 – 30)] x 100
(332 / 520) x 100 = 64%
Q . What is the Net Working Capital ?
Ans : C. A - C L. = 255 - 88 = 167
Q . If Net Sales is Rs.15 Lac, then What would be the Stock Turnover
Ratio in Times ? Ans : Net Sales / Average Inventories/Stock
1500 / 128 = 12 times approximately
Exercise 4. contd…
05:38 PM
46
47. LIABILITIES ASSETS
Capital + Reserves 355 Net Fixed Assets 265
P & L Credit Balance 7 Cash 1
Loan From S F C 100 Receivables 125
Bank Overdraft 38 Stocks 128
Creditors 26 Prepaid Expenses 1
Provision of Tax 9 Intangible Assets 30
Proposed Dividend 15
550 550
Q. What is the Debtors Velocity Ratio ? If the sales are Rs. 15 Lac.
Ans : ( Average Debtors / Net Sales) x 12 = (125 / 1500) x 12
= 1 month
Q. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac ?
Ans : (Average Creditors / Purchases ) x 12 = (26 / 1050) x 12 = 0.3 months
Exercise 4. contd…
05:38 PM
47
48. Exercise 5. : Profit to sales is 2% and
amount of profit is say Rs.5 Lac. Then What
is the amount of Sales ?
Answer : Net Profit Ratio =
(Net Profit / Sales ) x 100
2 = (5 x100) /Sales
Therefore Sales = 500/2 = Rs.250 Lac
05:38 PM
48
49. Exercise 6. A Company has Net Worth of Rs.5 Lac, Term
Liabilities of Rs.10 Lac. Fixed Assets worth RS.16 Lac and
Current Assets are Rs.25 Lac. There is no intangible Assets
or other Non Current Assets. Calculate its Net Working
Capital.
Answer
Total Assets = 16 + 25 = Rs. 41 Lac
Total Liabilities = NW + LTL + CL = 5 + 10+ CL = 41 Lac
Current Liabilities = 41 – 15 = 26 Lac
Therefore Net Working Capital = C. A – C.L
= 25 – 26 = (- )1 Lac
05:38 PM
49
50. Exercise 7 : Current Ratio of a
concern is 1 : 1. What will be the Net
Working Capital ?
Answer : It suggest that the Current
Assets is equal to Current Liabilities hence
the NWC would be NIL ( since NWC =
C.A - C.L )
05:38 PM
50
51. Exercise 8 : Suppose Current Ratio is
4 : 1. NWC is Rs.30,000/-. What is the
amount of Current Assets ?
Answer : 4a - 1a = 30,000
Therefore a = 10,000
Thus Current Liabilities is Rs.10,000
Hence Current Assets would be 4a = 4
x 10,000 = Rs.40,000/-
05:38 PM
51
52. Exercise 9. The amount of Term Loan
installment is Rs.10000/ per month,
monthly average interest on TL is
Rs.5000/-. If the amount of Depreciation
is Rs.30,000/- p.a. and PAT is
Rs.2,70,000/-. What would be the DSCR ?
DSCR = (PAT + Depr. + Annual Intt.) / (Annual Intt.
+ Annual Installment)
= (270000 + 30000 + 60000 ) / (60000 + 120000)
= 360000 / 180000
= 2
05:38 PM
52
53. Exercise 10 : Total Liabilities of a firm is Rs.100 Lac
and Current Ratio is 1.5 : 1. If Fixed Assets and Other
Non Current Assets are to the tune of Rs. 70 Lac and
Debt Equity Ratio being 3 : 1. What would be the
Long Term Liabilities?
Answer
We can easily arrive at the amount of Current Asset being Rs. 30 Lac
i.e. ( Rs. 100 L - Rs. 70 L ).
If the Current Ratio is 1.5 : 1, then Current Liabilities works out to be
Rs. 20 Lac.
That means the aggregate of Net Worth and Long Term Liabilities
would be Rs. 80 Lacs.
If the Debt Equity Ratio is 3 : 1 then Debt works out to be Rs. 60
Lacs and equity Rs. 20 Lacs.
Therefore the Long Term Liabilities would be Rs.60 Lac.
05:38 PM
53
54. Exercise 11 : Current Ratio is say 1.2 : 1 .
Total of balance sheet being Rs.22 Lac. The
amount of Fixed Assets + Non Current Assets
is Rs. 10 Lac. What would be the Current
Liabilities?
Answer
When Total Assets is Rs.22 Lac then Current
Assets would be (Total Assets less Fixed+Non
Current Assets)= 22 – 10 i.e Rs. 12 Lac.
Thus we can easily arrive at the Current Liabilities
figure which should be Rs. 10 Lac, since the
Curret Ratio being 1.2 : 1
05:38 PM
54
55. 05:38 PM
55
Exercise 12 : Total Sales (all credit sales) of a firm is Rs.640000. It has
gross profit margin of 15% and a Current Ratio of 2.5. The firms Current
liabilities are Rs.96000, Inventories – Rs.48000 and Cash – Rs.16000.
a)Determine the average inventory to be carried by the firm, if an inventory
turnover of 5 times is expected? Assuming a year having 360 days.
Inventory Turnover = Cost of Goods Sold / Average Inventory
Given that Gross Profit margin is 15% means the Goods sold should be 85%
of the sales. So Cost of Goods Sold = Sales x 85% = 640000 x 85% = 544000
Hence 5 = 544000 / Average Inventory
or Average Inventory = 544000/5 = 108800
56. 05:38 PM
56
Exercise 12 : Total Sales (all credit sales) of a firm is Rs.640000. It has
gross profit margin of 15% and a Current Ratio of 2.5. The firms Current
liabilities are Rs.96000, Inventories – Rs.48000 and Cash – Rs.16000.
b) Determine the average collection period if the opening balance of debtors is
intended to be Rs.80000/-. Assume a year having 360 days.
Average Collection Period = (Average Debtors/Credit Sales) x 360
Average Debtors = (Opening Bal of Debtors + Closing Bal of Debtors)/2
Current Liabilities given is Rs.96000/-, Current Ratio is 2.5
So Current Assets = 96000 x 2.5 = 240000
If you deduct Inventory and Cash i.e. 48000 + 16000 = 64000 from Current
Assets, you get closing balance of Debtors,
So Closing Balance of Debtors is 240000 – 64000 = 176000
Therefore the average Debtors would be (80000 + 176000)/2 = 128000
Hence Average Collection Period = (128000/640000)x360
= 72 days.
57. EXERCISE 13. A firm sold its stocks in CASH, in order to meet its liquidity
needs. Which of the following Ratio would be affected by this?
1.Debt Equity Ratio
2.Current Ratio
3.Debt Service Coverage Ratio
4.Quick Ratio
EXERCISE 14. A company is found to be carrying a high DEBT EQUITY
Ratio. To improve this, a bank may suggest the company to :
1.Raise long term interest free loans from friends and relatives
2.Raise long term loans from Institutions
3.Increase the Equity by way of Bonus Issue
4.Issue Rights share to existing share holders.
EXERCISE 15. Which of the following is a fictitious Asset?
1.Goodwill
2.Preliminary Expenses
3.Pre-operative expenses
4.Book Debts which have become doubtful of recovery
05:38 PM
57
58. EXERCISE 16. Under which of the following methods of depreciation on
Fixed Assets, the annual amount of depreciation decreases?
1.Written Down Value method
2.Straight Line method
3.Annuity method
4.Insurance policy method
EXERCISE 17 Debt Service Coverage Ratio (DSCR) shows :
1.Excess of current assets over current liabilities
2.Number of times the value of fixed assets covers the amount of loan
3.Number of times the company’s earnings cover the payment of interest
and repayment of principal of long term debt
4.Effective utilisation of assets
EXERCISE 18. Which of the following is not considered a Quick Asset?
1.Cash and Bank balances
2.Bank Fixed Deposits
3.Current Book Debts
4.Loans and Advances
05:38 PM
58
59. Questions on Fund Flow Statement
Q 19. Fund Flow Statement is prepared from the Balance sheet :
1.Of three balance sheets
2.Of a single year
3.Of two consecutive years
4.None of the above.
Q 20. Why this Fund Flow Statement is studied for ?
1.It indicates the quantum of finance required
2.It is the indicator of utilisation of Bank funds by the concern
3.It shows the money available for repayment of loan
4.It will indicate the provisions against various expenses
Q 21. In a Fund Flow Statement , the assets are represented by ?
1.Application of Funds
2.Sources of Funds
3.Surplus of sources over application
4.Deficit of sources over application
05:38 PM
59
60. Q 22. In Fund Flow Statements the Liabilities are represented by ?
1.Sources of Funds
2.Use of Funds
3.Deficit of sources over application
4.All of the above.
Q 23 . When the long term sources are more than long term uses, in the
fund flow statement, it would suggest ?
1.Increase in Current Liabilities
2.Decrease in Working Capital
3.Increase in NWC
4.Decrease in NWC
Q 24. When the long term uses in a fund flow statement are more than
the long term sources, then it would mean ?
1.Reduction in the NWC
2.Reduction in the Working Capital Gap
3.Reduction in Working Capital
4.All of the above
05:38 PM
60
61. Q 25. How many broader categories are there for the Sources of funds,
in the Fund Flow Statement ?
1. Only One, Source of Funds
2.Two, Long Term and Short Term Sources
3.Three , Long, Medium and Short term sources
4.None of the above.
R K MOHANTY
email ID : rajendra2411@gmail.com,
rajendra2411@hotmail.com
05:38 PM
61