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3. From the value of the different ratios given below, calculate the missing balance sheetitems and complete the balance sheet.

Sales Rs.100,000Average Collection Period 55-days

Inventory Turn over 15Debt to Assets Ratio .4 or 40%Current Ratio 3Total Asset Turnover 1.6Fixed Asset Turnover 2.9

Assets Liabilities + EquityCashAccounts Rec.InventoryPrepaid Expenses

Total Current AssetsFixed Assets

Total Assets

Rs.6000__________________

____________

______

Accounts PayableNotes PayableAccured ExpensesTotal Current Liabilities

Bonds PayableCommon StockRetained Earnings

Total Liability+ Equity

6000____

600____

____16,000_____

_____

4. Dewan Salman has Rs.1,750,000 in current assets and Rs.700,000 in currentliabilities. Its initial inventory level is Rs.500,000, and it will raise funds asadditional short term notes payable and use them to increase inventory. Howmuch can Dewans short term debt (notes payable) increase without violating acurrent ratio of 2 to 1? What will be the firms quick ratio after Dewan has raisedthe maximum amount of short term debt?

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Class Assignment Problems

1. X Co has made plan for the next year. It is estimated that the company willemploy total assets of Rs.800,000; 50% of the assets being financed by borrowed

capital at an interest of 8% per year. The direct costs for the year are estimated atRs.480,000 and all other operating expenses are estimated at Rs.80,000. The goodswill be sold to customers at 150 per cent of the direct costs. Tax rate is assumed to be50 percent.

You are required to calculate: (i) net profit margin; (ii) return on assets; (iii) assetsturnover and (iv) return on owners equity.

2. Complete the balance sheet and sales information in the table that follows forXYZ Company, using the following financial data:

Debt ratio: 50%Quick ratio: 0.8Total asset turnover: 1.5

Average collection period: 36 daysGross profit margin: 25%Inventory turnover ratio: 5

Cash _______ Accounts payable _______ Account receivable _______ Long-term debt 40,000Inventories _______ common stock ______ Fixed assets _______ Retained earnings 65,000

Total assets 200,000 Total Liab. & equity ______

Sales _______ Cost of goods sold ______

3. The following information is available on the Vanier Corp.

Balance Sheet as of June 30, 1999

Cash & M.S $ 500 Accounts Payable $ 400

Accounts receivable ? Bank loan ?

Inventories ? Accruals 200

Current assets ? Current liabilities ?

Long term debt2,650

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Net fixed assets ? C.S & R.E 3,750

Total Liabilities

Total Assets ? and Equity ?

Income Statement for 1999

Credit sales $ 8,000

Cost of goods sold ?

Gross profit ?

Selling & Admin Exp. ?

Interest expense 400

Profit before taxes ?

Taxes (44% rate) ?

Profit after taxes ?

Other information.

Current ratio 3

Depreciation $500

Net profit margin 7%Debt / equity ratio 1

Avg. collection period 45 days

Inventory turnover 3

Assuming that the sales and production are steady throughout a 360- day year,complete the balance sheet and income statement.

4. Abott Procesing has a total asset turnover of 2.0 and an operating profit margin of20%. The company uses no financial leverage and faces a 50% income tax rateCompute the net profit margin and return on total assets.