INSTITUTE OF BANKERS DIPLOMA IN BANKING, FINANCE AND CREDIT ASSIGNMENT 3

Transcription

1 INSTITUTE OF BANKERS COURSE: MODULE: DIPLOMA IN BANKING, FINANCE AND CREDIT Analysing Financial Statements MODULE CODE: DAFS 2000 TOTAL MARKS: 100 EXAMINER: MODERATOR(S): N.P. Uzera Dr F Tjingaete ASSIGNMENT 3 INSTRUCTIONS: ANSWER ALL QUESTIONS. START EACH QUESTION ON A NEW PAGE. LEAVE YOUR ANSWERS TO TWO DECIMAL PLACES WHERE NECESSARY WRITE NEATLY AND CLEARLY 1

2 Dear Student, Welcome to Institute of Bankers (IOB) and especially to Analysing Financial Statements course. I trust that you will find this course very exciting. I would like to advice you that in order to get started with this course; you should develop a love for numbers and calculations. It is our mission to offer you a course of good standard, to construct a good support system, a positive environment and to help build your characters so that you all become well educated, honest and dedicated young adults. As a Student of this particular course, it is important for you to: Attend all classes. Communicate (by phone, in writing or in person) with myself and other students pursuing the course with regard to any problems you may encounter in this course. Dedicate enough time to the preparation of this course. Do the assignments yourselves as well as the problems at the end of each unit in your study guide. Closing remarks If you study diligently, your efforts will be rewarded. Should you need any assistance or clarification, we can be reached anytime at the numbers indicated below. Be assured of our unwavering interest in your academic development. "If we take care in the beginning the end will take care of itself" Norman Vincent Peale, 1988 Nehemia Puuaapo Uzera Institute of Bankers (IOB) npuzera@gmail.com Mobile: Tutor/Maker 2

3 SECOND SEMESTER ANALYSING FINANCIAL STATEMENTS (DAFS 2000) ASSIGNMENT 3 DUE DATE: 25 th August

4 MARKS: 100 Question 1 [30 Marks] Choose the letter that best answers the question. (2 Marks for each question) 1.1 General Profitability ratios are based on a) Investments b) Sales c) Index numbers 1.2 While calculating Gross Profit ratio, a) Closing stock is deducted from cost of goods sold b) Closing stock is added to cost of goods sold c) Closing stock is ignored 1.3 While calculating Gross Profit, if net profit is given, a) It can be converted into gross profit by adding interest to it b) It can be converted into Gross profit by adding indirect expenses to it c) Both a and b 1.4 Gross profit ratio is calculated by a) (Gross Profit/Gross sales)*100 b) (Gross Profit/Net sales)*100 c) (Net Profit/Gross sales)* Given Sales is 120,000 and Gross Profit is 30,000, the gross profit ratio is a) 24% b) 25% c) 40% d) 44%% 4

5 1.6 What will be the Gross Profit if, total sales is N$ 260,000 Cost of net goods sold is N$ 200,000 and Sales return is N$ 10,000? a) 13% b) 28% c) 26% d) 20% 1.7 If selling price is fixed 25% above the cost, the Gross Profit ratio is a) 13% b) 28% c) 26% d) 20% 1.8 Turnover ratios are also known as a) Activity ratios b) Performance ratios c) Both a and b 1.9 Determine stock turnover ratio if, Opening stock is N$ 31,000, Closing stock is N$ 29,000, Sales is N$ 320,000 and Gross profit ratio is 25% on sales. a) 31 times b) 11 times c) 8 times d) 32 times 1.10 Determine Debtors turnover ratio if, closing debtors is N$ 40,000, Cash sales is 25% of credit sales and excess of closing debtors over opening debtors is N$ 20,000. a) 4 times b) 2 times c) 6 times d) 8 times 1.11 Determine Working capital turnover ratio if, Current assets is N$ 150,000, current liabilities is N$ 100,000 and Cost of goods sold is N$ 300,000. a) 5 times b) 6 times c) 3 times 5

6 d) 1.5 times 1.12 If sales is N$ 500,000 and net profit is N$ 120,000 Net Profit ratio is a) 24% b) 416% c) 60% 1.13 If sales is N$ 1 000,000, sales returns is N$ 50,000, Profit Before Tax is N$ 200,000, Income tax is 40%, Net profit ratio is a) 12.63% b) 20% c) 10% d) 50% 1.14 Net operating profit ratio determines while net profit ratio determines a) Overall efficiency of the business, working efficiency of the management b) Working efficiency of the management, overll efficiency of the business c) Overall efficiency of the external market, working efficiency of the internal management 1.15 Determine Operating ratio, if operating expenses is N$ 60,000, Sales is N$ 940,000, Sales Return is N$ 40,000 and Cost of net goods sold is N$ 660,000. a) 80% b) 15% c) 25% d) 11% Question 2 [40 Marks] 6

7 Assets Current Assets Balance Sheet ($ in Millions) 2015 Liabilities and Owners' Equity Current Liabilities 2015 Cash 300 Accounts Payable 300 Accounts Receivable 400 Notes Payable 500 Inventory 200 Total Current Liabilities Total Current Assets Fixed Assets Property, Plant, and Equipment Less Accumulated Depreciation 900 Long-Term Liabilities 800 Long-Term Debt 700 Total Long-Term Liabilities 1800 Owners' Equity Common Stock ($1 Par) 500 Net Fixed Assests 1500 Capital Surplus 300 Retained Earnings 100 Total Owners' Equity 900 Total Assets 2400 Total Liab. and Owners' Equity 2400 Income Statement ($ in Millions) 2015 Sales 5100 Cost of Goods Sold 2800 Administrative Expenses 300 Depreciation 201 Earnings Before Interest and Taxes 1799 Interest Expense 130 Taxable Income 1669 Taxes 537 Net Income 1132 Dividends 444 Addition to Retained Earnings Other Information Number of Shares Outstanding (Milions) Price per Share 3.85 Based on the above Balance Sheet and Income Statement calculate the following ratios: 2.1 Gross Profit Margin (4) 2.2 Net Profit Margin (4) 2.3 Return on Assets (4) 2.4 Return on Equity (4) 2.5 Inventory Turnover (4) 2.6 Average Collection Period (assume a 365 days year) (4) 2.7 Average Payment Period (assume credit purchase amounted to $1500 and is 365 days year) (4) 2.8 Current ratio (4) 2.9 Quick (acid-test) ratio (4) 2.10 Net Working Capital (4) Question 3 [30 Marks] 7

8 Using your own words, explain the meaning of the following terms: 3.1 Financing Activities (5) 3.2 Last-in, first-out (LIFO) (5) 3.3 Trend analysis (5) 3.4 Generally accepted accounting principles (GAAP) (5) 3.5 Working capital (5) 3.6 First-in, first-out (FIFO) (5) ~THE END~ 8