SEMESTER FALL 2014 BUSINESS FINANCE (ACC501) ASSIGNMENT NO. 01

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1 SEMESTER FALL 2014 BUSINESS FINANCE (ACC501) DUE DATE: 4 TH DECEMBER, 2014 MARKS: 25 LEARNING OBJECTIVES: ASSIGNMENT NO. 01 After attempting this assignment whole-heartedly, the students will be able to: Question: Calculate Different Financial Ratios. Interpret the Results of Ratios. Below is the balance sheet and income statement of Mega Corporation for the year ended June 30, Mega Corporation Balance Sheet As of June 30, 2013 Assets Rs. (million) Current Assets Cash 225 Accounts receivables 310 Inventory 328 Total Current Assets 863 Fixed Assets Plant and Equipment 7077 Less Depreciation

2 Furniture and Fixture 50 Total Assets 7440 Liabilities and Equity Accounts payable 308 Notes payable 1427 Total current liabilities 1735 Long term debt 2358 Owner s Equity Share capital 1000 Retained Earnings 2347 Total Liabilities and Equity 7440 Mega Corporation Income Statement For the year ended June 30, 2013 Particulars Rs. (millions) Sales 4053 Cost of goods sold 2780 Depreciation 550 Income before interest and tax 723 Interest paid 502 Taxable income % 75 Net income 146 Dividends 47

3 Addition to retained earnings 99 Required: a. Based on the above financial statements of Mega Corporation, compute the ratios mentioned in the below table and interpret the results of ratios thereof. (20 Marks) Sr. # Ratios 1 Current ratio 2 Quick ratio 3 Cash ratio 4 Interest Coverage Ratio 5 Inventory turnover ratio 6 Account receivables turnover 7 Days sales in inventory 8 Days sales in receivables 9 Total Debt ratio 10 Dividend Payout ratio b. Compare your computed result with industry averages given below, thereby indicating strong and weak areas of Mega Corporation. (5 Marks) Sr. # Ratios Industry Averages 1 Current ratio 2 times 2 Quick ratio 1 times 3 Cash ratio 0.50 times

4 4 Interest Coverage Ratio 2 times 5 Inventory turnover ratio 7 times 6 Account receivables turnover 14 times 7 Days sales in inventory 45 days 8 Days sales in receivables 30 days 9 Total Debt ratio 60 percent 10 Dividend Payout ratio 30 percent NOTE: Complete calculations are required for every part of the problem. Incomplete calculations will result in loss of marks. IMPORTANT: 24 hours extra / grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience. OTHER IMPORTANT INSTRUCTIONS: DEADLINE: Make sure to upload the solution file before the due date on VULMS. Any submission made via after the due date will not be accepted. FORMATTING GUIDELINES: Use the font style Times New Roman or Arial and font size 12. It is advised to compose your document in MS-Word format. You may also compose your assignment in Open Office format. Use black and blue font colors only.

5 RULES FOR MARKING Please note that your assignment will not be graded or graded as Zero (0), if: It is submitted after the due date. The file you uploaded does not open or is corrupt. It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc. It is cheated or copied from other students, internet, books, journals etc. Note related to load shedding: Please be proactive Dear students! As you know that Pre Mid-Term semester activities have started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments, quizzes or GDBs.