Working Capital Current Assets - Current Liabilities

120000-70000 CA

50000 Cash 20,000

The company has an excess current
asset of Ar 40,000

50,000 after paying of its CL. Inventory 50,000

Liquidity Ratio Prepaid Expenses 10,000

Current Ratio Current Assets / Current Liabilities 120,000

120000/70000 CL

1.71 Accounts Payable 20,000

For every peso of current liability, you
have Notes Payable 50,000

1.71 of current assets to pay it off. 70,000

Quick Asset
Ratio
Quick asset/ current liability Quick Assets (Cash, AR and Short-term
60000/70000 investments)
0.86
For every peso of current liability, you have
.86 of quick assets to pay it off.
Activity Ratios

A/R Turnover Net Credit Sales/Average AR Sales of 1000,000, 100,000 is cash sales
900,000/ ((450,000+350,000)/2) AR Y1 450000
2.25 x Y2 350000
The company collects accounts receivable 2.25 times in a year

Average Collection Period/ Day Sales Outstanding

365/ AR Turnover
162.22 days
163 days
The company collects its accounts receivable within 163 days.

Inventory Turnover
Cost of Sales/ Average Inventory Cost of Sales 600000
600,000/((124,000+156,000)/2) Inventory Y1 124000
4.29 X y2 156,000
The company replenishes its inventory 4.29 times a year.
Average Age of Inventory
365/Inv Turnover
365/4.29
85.08 days
86 days
The company replenishes its inventory within 86 days.

Total Asset Turnover

Net Sales/Average total Assets Net Sales 900000
Total
900,000/ ((600000+700000)/2) Assets Y1 600,000
1.38 X y2 700,000
For every peso of asset that the company utilize, it generates 1.38 times of sales.

Profitability Ratios
Gross Profit Margin
Gross Profit/Net Sales
81,000/180,000
45%
For every peso of sale the company receives a gross profit of .45 to cover your operating
expense.

Net Profit
Margin
Net Profit/Net Sales
14,040/180,000
7.80%
For every peso of sale the company receives, it earns 7.8 percent .

Return on Total Assets

Profit + Interest / Average total asset Total Asset Y1 400,000
(14,040 + 0)/((400,000+500000)/2) Y2 500,000
3.12%
For every peso of asset that the company invested, it earns 3.12% of profit.

Return on
Equity
Profit / Average Equity Y1 240,000
(14,040/((240,000+260,000)/2) Y2 260,000
5.62%
For every peso of equity that the owners invested, they will earn 5.62%.

Solvency Ratios Income before intrest and taxes 1

Times Interest Earned Ratio Interest
 Income before interest and taxes / interest Income before taxes
120000/24000 Taxes
5 X Net Income
The company can cover its interest 5 times its profit before interest and taxes.

Debt Ratio A=L+C

Total
Total Debt/Total Asset Liabilities 430,000
430,000/700,000 Total Assets 700000
61.43% Total Equity 270,000
61.43 percent of the total assets is financed throught debt.

Debt to Equity
Debt/Equity
430,000/270,000
1.59
For every peso that the owner invested in the company, it owes the creditors 1.59 peso

Equity Ratio
Total Equity/ Total Asset
270,000/700,000
38.57%
38.57 percent of the total assets is financed through equity.