Business Accounting

Business Accounting

Group Assignment

Amna Ilyas (U140248)

Vishavambher Sharma (U140421

Jawad Hassan (U140198)

Profitability Ratios

Ratio | Formula | Year: 2012 | Year: 2013 | Year: 2014 | Trend |

Return on Asset | Net Income/Assets x100 | 8.5% | 9.15% | 10.35% | Increasing |

Return on Equity | Net Income/Shareholder Equity x 100 | 11.96% | 12.58% | 14.29% | Increasing |

Gross Profit Margin | Gross Profit/Net Sales x 100 | 23.57% | 25.34% | 27.70% | Increasing |

Net Profit Margin | Net Profit/ Net Sales x 100 | 5.54% | 6.51% | 7.48% | Increasing |

Efficiency Ratios

Ratio | Formula | Year: 2012 | Year: 2013 | Year 2014 | Trend |

Asset Turnover (times) | Net Sales/ Average Total Assets | 1.572 times

(2218/ 1410.5) | 1.48 times(2272/ 1535) | 1.397 times(2285/ 1634.5) | Decreasing |

Asset Turnover (days) | 365/Asset Turnover | 233 days

| 247 days | 261 days | Increasing |

Account Receivable Turnover (days) | 365/ (sales/Average Accounts Receivable) | 120 days365/ (2218/725) | 132 days365/ (2272/816.5) | 144 days365/ (2285/897.5) | Increasing |

Liquidity Ratios

Ratio | Formula | Year: 2012 | Year: 2013 | Year: 2014 | Trend |

Current Ratio | Current Assets/ Current Liabilities | 3.289 | 3.57 | 3.50 | Increased in 2013 and decreased in 2014 |

Quick Asset Ratio | (Current Assets – Inventory)/ Current Liabilities | 2.68 | 2.95 | 2.89 | Increased in 2013 and decreased in 2014 |

Capital Structure Based Ratios

Ratio | Formula | Year: 2012 | Year: 2013 | Year: 2014 | Trend |

Gearing Ratio | Long Term Debts/ Shareholder’s Equity x 100 | 7.78%(80/1028 x100) | 6.972(82/1176 x100) | 7.10%(85/1196 x100) | Decreased in 2013 and increased in 2014. |

Debt to Equity Ratio | Total Liabilities/ Share Holder’s Equity | 0.41 | 0.375 | 0.38 | Decreased in 2013 and increased in 2014. |

Report to ABC Company

Decision: Loan Application Approved

Reasons for Decision:

Profitability Ratios:

Relates to advantageous, giving...