Analysis of financial statements
Problem 1.
During last year company has achieved following results:
 Total assets turnover ratio
2
 Gross profit margin on sales
12%
 Debt ratio
40%
 Quick ratio
1
 Current ratio
2
 Inventory
10.000
 Fixed assets
30.000
 Times-interest-earned ratio
3
 Tax rate
25%
Calculate:
a) Return on assets
b) Return on equity
c) Current asset turnover ratio
d) Net Profit margin on sales
Problem 2
At the end of the year company’s financial statement where as following:
Cash
100.000
Sales
Accounts receivable
400.000
Variable costs (75% of sales)
Inventory
300.000
Fixed costs *
Net plant and equipment
400.000
EBIT
Total assets
200.000 Earnings before taxes
Debt (16%)
550.000
b)
300.000
c)
d)
e)
Tax (40%)
Net income
Retained earnings
Total liabilities and equity
a)
Interest
Current liabilities
Common stock (100.000 a’ 3)
1.800.000
* Depreciation 200.000
* Dividend payout ratio 30%
f)
Calculate:
Debt ratio
Quick ratio
Earnings per
share
Days sales
outstanding
- HW
Inventory
turnover
ratio - HW
Fixed assets
turnover
ratio -HW
Problem 3
At the end of the year company’s BDE has following results:
Total assets
Net profit margin on sales
Total assets turnover ratio
Variable costs as part of sales
12% debt
Tax rate
Calculate:
a) Basic earning power
b) HW – Return on equity
c) HW – Times-interest-earned ratio
d) HW – Ratio of debt to equity
e) HW – Marginal contribution
2.000.000
12%
1,6
60%
1.000.000
40%
Problem 4
How many percent will profitability of a company increase if it’s net
profit margin on sales and total asset turnover both increase by
15%?
Problem 5
What will be the days sales outstanding of a company that has
average level of accounts receivable equal to 20% of sales?
Problem 6



ABC has $100 million in total assets and its corporate tax rate is 40
percent.
The company recently reported that its basic earning power (BEP)
ratio was 15 percent and its return on assets (ROA) was 9 percent.
What was the company’s interest expense?
Homework
Problem 7 - HW
Financial statements of the company ABC are as shown below:
Balance sheet of a company“ABC”
Cash
Marketable securities
Accounts recivable
Inventory
Current asset
Net plant and equipment
Total asset
10.000 Accounts payable
0 Accruals
Short-term notes
60.000
140.000
110.000
615.000 Total current liabilities
Bonds
754.000
1.000.000 Total liabilities
Nominal value of common shares (90.000)
90.000
Premium on common shares
80.000
Retained earnings
Equity
Total liabilities and equity
766.000
P&L of the company ABC
Sales
3.000.000
Costs
EBIT
Interest
88.000
EBT
Taxes (40%)
Net income
* Gross profit margin on sales 9.46%
Calculate:
a) EPS
b) P/E (PPS 23,00)
c) Current ratio
d) Quick ratio
e) Inventory turnover ratio
f) AR turnover ratio
g) Days sales outstanding
h) Fixed asset turnover ratio
i) Total asset turover ratio
j) Debt ratio
k) Times-interest-earned
l) Net profit margin on sales
m) Basic earnings power
n) Return on equity
Problem 8
Calculate return on equity of the company with following
characteristics:
Net profit margin
Total asset turnover
Days sales outstanding
Tax rate
Sales
Equity
2,7%
2,4
45 days
35%
120.000
40% of assets
Problem 9
Calculate Times-interest-earned of the company with the
following charasteristics:
Net income
Annual interest
Tax rate
10.500 kn
5.000 kn
30%
Problem 10
Company has following characteristics:




ABC’ operating income (EBIT) is $40 million.
The company’s times interest earned (TIE) ratio is 8.0,
its tax rate is 40 percent,
and its basic earning power (BEP) ratio is 10 percent.
What is the company’s return on assets (ROA)?
Problem 11
What is the ROE of the company with the following characteristics:





A firm has total assets of $1,000,000
Debt ratio of 30 percent.
Currently, it has sales of $2,500,000, total fixed costs of $1,000,000, and
EBIT of $50,000.
Firm’s before-tax cost of debt is 10 percent
Firm’s tax rate is 40 percent
Problem 12






Assume ABC is 100 percent equity financed. Calculate the
return on equity, given the following information:
Earnings before taxes = $1,500
Sales = $5,000
Dividend payout ratio = 60%
Total assets turnover = 2.0
Tax rate = 30%
Problem 13




A firm has a profit margin of 15 percent on sales of $20,000,000.
If the firm has debt of $7,500,000,
total assets of $22,500,000,
and an after-tax interest cost on total debt of 5 percent,
What is the firm’s ROA?
Solutions
Analysis of financial statement – Solutions of
the homework
6.
7.
8.
9.
10.
11.
12.
13.
d) 80
e) 6
f) 4,5
a) 1,31
b) 17,56
c) 3,23
d) 1,24
e) 4,88
f) 8
g) 46,84
16,20%
4
23
1,7%
42%
13,3%
h) 3
i) 1,5
j) 0,53
k) 3,23
l) 3,92%
m) 14,19%
n) 12,55%