Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Accounting Basics Expert

problem 1) Following data are extracted from the book of Mr Donald during the year ended 31st December 2005.
                                                         Rs
Sales                                               128,000
Cost of Sales                                     96,000
Administrative Expenses                       9,000
Marketing & Distribution Expenses         7,000

BALANCE SHEET As at 31st December 2005                   Rs                   Rs
Fixed Assets (at cost)                                                16,000
Less Accumulated Depreciation                                  (12,800)              3,200
Current Assets
Stock                                                                        24,000
Debtors                                                                     40,000
Bank                                                                           8,000
Total Current Assets                                                   72,000
Less Current Liabilities
Creditors                                                                    (8,000)                 64,000
Net Assets                                                                                              67,200
Financed By:
Capital (at 31st December 2005)                                                                67,200

It was ascertained that the “Stock Turnover” was estimated at three times in this particular year.
Also, the information below relates to the same period in respect of the business of Mr John, who is trading in similar products.

Gross Profit Margin                                                  20%
Net Profit Margin                                                    12.5%
Expenses as a Percentage of Sales                            7.5%
Current Ratio                                                            4:1
Acid Test Ratio                                                        2.25:1
Return on Capital Employed                                        30%
Debtor’s Collection Period (in days)                          60 days
Creditor’s Collection Period (in days)                         50 days

Required:

(a) find out the financial ratios mentioned above for Mr Donald’s business in respect for the year ended 31st December 2005.

(b) Mrs Nick is interested in investing in one of these two businesses and has solicited your advice before taking a decision. Which business should she select? Justify your answer.

(c) “Financial ratios are sufficient for the evaluation of businesses”. describe

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M96427

Have any Question? 


Related Questions in Accounting Basics

1 here is a very detailed article on asset

1. Here is a very detailed article on asset valuation. http://www.investopedia.com/articles/stocks/07/allocate_assets.asp What have you found interesting in this article? How can this help you as you progress with your a ...

Modified accrual accounting and general fund itemscomplete

Modified Accrual Accounting and General Fund Items Complete the following questions based on the Chapter 4 material: • Outline revenue recognition criteria under modified accrual accounting. Include specific requirements ...

Assignment expected value and consumer choicesconsumers

Assignment: Expected Value and Consumer Choices Consumers' choices are prey to subtle discrepancies that arise in cognitive accounting. Learning how and when you are prey to these discrepancies is an important step in im ...

Abc company enters into a lease agreement with xyz

ABC company enters into a lease agreement with XYZ corporation for laser tech machines. The lease agreement qualifies as an operating lease. However, there is one thing that stands out. There is a bargain-purchase option ...

Question 1 this problem continues the haupt consulting

Question 1: This problem continues the Haupt Consulting situation from Problem 2-64 of Chapter 2. Start from the trial balance and the posted T-accounts that Haupt Consulting prepared at December 18, as follows: HAUPT CO ...

Problem 1emma and laine form the equal el partnership emma

PROBLEM #1 Emma and Laine form the equal EL Partnership. Emma contributes cash of $100,000. Laine contributes property with an adjusted basis of $40,000 and a fair market value of $100,000. A. How much gain. If any, must ...

Accounting assignmentgrant film products wishes to expand

Accounting Assignment Grant Film Products wishes to expand and has borrowed $100,000. As a condition for making this loan, the bank requires that the business maintain a current ratio of at least 1.50. Business has been ...

Review the provisions of the sarbanes-oxley act of 2002 to

Review the provisions of the Sarbanes-Oxley Act of 2002 to address the accounting scandals in the late 1990s and early 2000s (Enron, WorldCom, etc.). Identify the provisions that you believe made the most significant imp ...

Tf question1under the modified accrual basis of accounting

T/F QUESTION 1 Under the modified accrual basis of accounting, there is no matching principle and no attempt to amortize costs that benefit multiple periods. 2 In fund accounting, expenditures may be classified in differ ...

Ics manufacturing company produces plastic parts for the

ICS Manufacturing Company produces plastic parts for the automotive industry. Here is their Income Statement for 2015 - ICS Manufacturing Company Income Statement for 2015 Sales Revenue $35,500,000 Cost of Goods Sold 12, ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro