Question 1 i. ii. In the evaluation of financial statements, different end-users of these statements seek...

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Question 1 i. ii. In the evaluation of financial statements, different end-users of these statements seek to answer different questions. Identify two questions each of the following stakeholder seek to answer regarding a company's finances? Give two examples of ratios likely to be considered by each party and explain why the ratios selected are important? Creditors Investors [3 Marks] [3 Marks] Using the ratios provided analyse the financial statement of AM Construction Ltd to determine the missing values (A to 1). Use a 365-day year in your evaluations and assume all sales are credit sales. [8 Marks] AM Construction Ltd. Balance Sheet As of December 2018 Cash Inventory Accounts Receivable A B Accounts payable Long-term debe F G Total Current Asset D Total Liabilities H Fixed Assets 625,000 Shareholders' Funds $ E $ 850,000 1 Debt ratio (debt/total assets) 45% Quick ratio 0.7 Current Ratio 1.4 Sales to total asset 3.2 Average collection period 23 days iii. Ratio analysis is an important tool in the examination of financial statements. Explain the significance of the items listed below. 1) A strong current ratio and a weak acid-test which is decreasing. [2+4-6 Marks] 2) A decrease in return on equity, return on investment, net profit margin, and gross profit margin Question 1 i. ii. In the evaluation of financial statements, different end-users of these statements seek to answer different questions. Identify two questions each of the following stakeholder seek to answer regarding a company's finances? Give two examples of ratios likely to be considered by each party and explain why the ratios selected are important? Creditors Investors [3 Marks] [3 Marks] Using the ratios provided analyse the financial statement of AM Construction Ltd to determine the missing values (A to 1). Use a 365-day year in your evaluations and assume all sales are credit sales. [8 Marks] AM Construction Ltd. Balance Sheet As of December 2018 Cash Inventory Accounts Receivable A B Accounts payable Long-term debe F G Total Current Asset D Total Liabilities H Fixed Assets 625,000 Shareholders' Funds $ E $ 850,000 1 Debt ratio (debt/total assets) 45% Quick ratio 0.7 Current Ratio 1.4 Sales to total asset 3.2 Average collection period 23 days iii. Ratio analysis is an important tool in the examination of financial statements. Explain the significance of the items listed below. 1) A strong current ratio and a weak acid-test which is decreasing. [2+4-6 Marks] 2) A decrease in return on equity, return on investment, net profit margin, and gross profit margin

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i Creditors 1 Questions Will the company be able to repay its debts on time What is the financial health of the company in terms of liquidity and solv... View the full answer