Business Finance
Quiz No. 1 | FS Analysis and Interpretation
2nd Semester, SY 2023-2024
January 25, 2024
Deadline: JANUARY 29, 2024 (4:15 P.M.)
GENERAL INSTRUCTIONS:
1. Use Microsoft Excel to answer Problems 1 to 3, with one spreadsheet for every problem. Answers
should be presented in good form. Use MS Excel formulas and functionalities for the computation;
otherwise, your answers will not be given any point. Final answers should be in bold.
2. For Problem 4, answers should be in short bond paper size, with one-inch margin in all sides, Times
New Roman 11 pt with 1.5 spacing, and in PDF format.
3. Submit all your answers by uploading them in Schoology.
4. Forty percent (40%) of your score will be recorded as Written Work; the remaining 60% will be
recorded as Performance Task.
5. Best of luck!
Problem 1. Horizontal Analysis (27 points)
Below are the balances in the comparative statements of financial position of Heaven Eleven Corporation,
a chain of convenience stores, as at and for the year ended December 31, 2023 and 2022:
December 31
Current Assets
Cash and cash equivalents
Short-term investments
Accounts receivable
Allowance for bad debts
Merchandise inventory
Prepayments
Noncurrent Assets
Property and equipment
Accumulated depreciation
Trademark
Refundable deposits on rent
TOTAL ASSETS
Current Liabilities
Accounts payable
Withholding taxes payable
Other government payables
Current portion of loans payable
Interest payable
Income tax payable
Noncurrent Liabilities
Loans payable - net of current portion
Total Liabilities
Shareholders’ Equity
Common stock
Additional paid-in capital
Retained earnings
Total Shareholders’ Equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
2023
2022
P7,020,593
2,665,330
2,213,617
(110,680)
5,561,813
115,832
17,466,505
P5,376,106
2,530,950
1,975,685
(98,784)
4,328,438
105,630
14,218,025
12,098,295
(2,497,115)
240,135
1,114,850
10,956,165
P28,422,670
11,340,330
(2,324,770)
240,135
1,051,630
10,307,325
P24,525,350
P4,090,235
127,580
333,250
1,100,000
3,000
505,640
6,159,705
P1,383,635
97,205
397,860
1,100,000
3,000
137,650
3,119,350
2,500,000
8,659,705
3,700,000
6,819,350
7,571,045
4,164,273
8,027,647
19,762,965
P28,422,670
7,571,045
4,164,273
5,970,682
17,706,000
P24,525,350
Conduct a horizontal analysis in the comparative statement of financial position in all of its line items.
2nd Semester, SY 2023-2024
January 25, 2024
Business Finance
Quiz No. 1 | FS Analysis and Interpretation
Problem 2. Vertical Analysis (23 points)
Below are the comparative statements of comprehensive income of Marian Company and Heartian
Company for the year ended December 31, 2023:
Sales
Sales returns and allowances
Sales discounts
Net sales
For the year ended December 31, 2023
Marian Company
Heartian Company
P763,110
P4,050,135
(75,250)
(217,690)
(16,440)
(87,185)
671,420
3,745,260
Cost of goods sold
(418,950)
(2,865,150)
Gross profit
Other income and gains
252,470
98,610
880,110
118,450
Total income
351,080
998,560
75,950
113,400
6,050
195,400
495,930
212,550
17,900
726,380
Operating income
Interest expense
155,680
(6,000)
272,180
(30,000)
Income before income taxes
149,680
242,180
Income tax expense
(29,936)
(48,436)
Less: Operating expenses
Selling and distribution
General and administrative
Other expenses and losses
Net income
P119,744
P193,744
Conduct a vertical analysis between the two entities. Which of the two is more profitable? Explain.
Problem 3. Financial Ratios (64 points)
Refer to the given below:
MICO CORPORATION
STATEMENT OF COMPEHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2023
Net sales
Cost of goods sold
Gross profit
Less: Operating expenses
General and administrative
Selling and distribution
Other expenses and losses
Operating income
Interest expense
Income before income taxes
Income tax expense
Net income
P10,000,000
(7,500,000)
2,500,000
775,000
375,000
50,000
1,200,000
1,300,000
(20,000)
1,280,000
(320,000)
P960,000
2nd Semester, SY 2023-2024
January 25, 2024
Business Finance
Quiz No. 1 | FS Analysis and Interpretation
MICO CORPORATION
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2023
Current Assets
Cash and cash equivalents
Marketable securities
Accounts receivable - net
Merchandise inventory
Prepayments
P1,050,000
200,000
800,000
665,000
285,000
3,000,000
Noncurrent Assets
Property and equipment - net
Trademark
8,100,000
900,000
9,000,000
P12,000,000
TOTAL ASSETS
Current Liabilities
P900,000
200,000
24,930
50,620
10,000
14,450
1,200,000
Accounts payable
Notes payable
Withholding taxes payable
Other government payables
Interest payable
Income tax payable
Noncurrent Liabilities
Loan payable
Total Liabilities
3,000,000
4,200,000
Shareholders’ Equity
Common stock (200 shares at P8 par)
Additional paid-in capital
Retained earnings
Total Shareholders’ Equity
1,600,000
1,000,000
5,200,000
7,800,000
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Current ratio
Quick ratio
Average sale period
Average collection period
Debt ratio
Times interest earned ratio
Gross profit margin
Operating profit margin
Net profit margin
Return on assets
Return on equity
Earnings per share
Price/Earnings ratio
Market/Book ratio
Industry average
2023
1.85
1.05
42.44 days
35.50 days
30%
8.00 times
25.00%
10.00%
5.30%
P0.04
P0.07
P1.50
P11.20
P1.10
Actual
2023
?
?
?
?
?
?
?
?
?
?
?
?
?
?
P12,000,000
Actual
2022
1.55
0.92
39.63 days
36.90 days
20%
7.30 times
27.00%
12.00%
6.20%
P0.05
P0.07
P2.20
P10.50
P1.05
Actual
2021
1.40
1.00
38.34 days
45.60 days
20%
8.20 times
30.00%
12.00%
6.20%
P0.04
P0.06
P1.75
P12.00
P1.20
Analyze Mico Corporation’s liquidity, activity, leverage, profitability, and marketability by comparing the
actual 2023 ratios versus (1) actual 2022 and 2021 ratios and (2) industry average in 2023.
2nd Semester, SY 2023-2024
January 25, 2024
Business Finance
Quiz No. 1 | FS Analysis and Interpretation
Problem 4. Case Study (21 points)
As the CPA for CKC Company, you have been asked to develop some key ratios from the comparative
financial statements. This information is to be used to convince creditors that the company is solvent and
will continue as a going concern. The data requested and the computations developed from the financial
statements follow.
Current ratio
Acid-test ratio
Net income
Earnings per share
2023, 3.1 times
2023, 0.8 times
2023, 32% increase vs 2022
2023, P3.30
2022, 2.1 times
2022, 1.4 times
2022, 8% decrease vs 2021
2022, P2.50
The Company asks you to provide brief comments stating how each of these items supports the solvency
and going-concern potential of the business. The Company wishes to use these comments to support its
presentation of data to its creditors. You are to prepare the comments as requested, giving the implications
and the limitations of each item separately. Then prepare a collective inference that may be drawn from
the individual items about the Company’s solvency and going-concern potential.
<END OF QUIZ>