As an appointed Auditor, the company has provided you with following financial ratios for the year. Mobile
Question:
As an appointed Auditor, the company has provided you with following financial ratios for the year.
| Mobile X Ltd. Financial ratios | ||
| Ratio | Actual | Budget (expected) |
| Gross profit percentage | 40% | 45% |
| Net profit percentage | 25% | 40% |
| Trade payables ratio | 70 days | 30 days |
| Current ratio | 1.35:1 | 1.40:1 |
| Acid test ratio | 0.85:1 | 0.80:1 |
The company’s year end is the 31st March 2020.
The auditor compared the planned and actual ratios for the company. Complete the table to indicate which ratios should be accepted and which should be investigated further. Provide a reason for your answer.
| Mobile X Ltd. Financial ratios | ||||
| Ratio | Actual | Budget (expected) | Accept | Investigate further |
| Gross profit percentage | 40% | 45% | ||
| Net profit percentage | 25% | 40% | ||
| Trade payables ratio | 70 days | 30 days | ||
| Current ratio | 1.35:1 | 1.40:1 | ||
| Acid test ratio | 0.85:1 | 0.80:1 | ||
Expert Answer:
Mobile X Ltd Ratio Analysis Accept or Investigate Further Ratio Actual Budget Accept Investigate Fur... View the full answer
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I
