The following information relates to the business of Federation Inc. Balances are at 31 December 2017....

 

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The following information relates to the business of Federation Inc. Balances are at 31 December 2017. Sales (credit) Cost of goods sold All other expenses Cash at bank Inventory Debtors (net) Non-current assets (net) Creditors M. Monash, Capital Non-current liabilities 2016 Required: (a) Calculate the following ratios for 2017: (1) Rate of return on Equity (Net Profit/ Average Capital) (ii) Current Ratio (Current Assets / Current Liabilities) 18 000 12 000 (1) rate of return on equity (ii) current ratio (iii) quick asset ratio (iv) debt ratio (v) inventory turnover (vi) debtors turnover 60 000 15% 1.20:1 0.80:1 (iii) Quick Asset Ratio (Cash at bank + Debtors / Current Liabilities) (iv) Debt ratio (Total Liabilities/Total Assets) 30% 32 days 35 days 2017 $90 000 63 000 21 000 (v) Inventory turnover (Average Inventory/Cost of Goods Sold)*365 (vi) Debtors turnover (Average Debtors/Credit Sales)*365 2 000 33 000 30 000 48 000 29 000 72 000 12 000 (b) Write a short report to the owner in relation to the profitability and financial stability of the business, comparing your 2017 with the following information for 2016: The following information relates to the business of Federation Inc. Balances are at 31 December 2017. Sales (credit) Cost of goods sold All other expenses Cash at bank Inventory Debtors (net) Non-current assets (net) Creditors M. Monash, Capital Non-current liabilities 2016 Required: (a) Calculate the following ratios for 2017: (1) Rate of return on Equity (Net Profit/ Average Capital) (ii) Current Ratio (Current Assets / Current Liabilities) 18 000 12 000 (1) rate of return on equity (ii) current ratio (iii) quick asset ratio (iv) debt ratio (v) inventory turnover (vi) debtors turnover 60 000 15% 1.20:1 0.80:1 (iii) Quick Asset Ratio (Cash at bank + Debtors / Current Liabilities) (iv) Debt ratio (Total Liabilities/Total Assets) 30% 32 days 35 days 2017 $90 000 63 000 21 000 (v) Inventory turnover (Average Inventory/Cost of Goods Sold)*365 (vi) Debtors turnover (Average Debtors/Credit Sales)*365 2 000 33 000 30 000 48 000 29 000 72 000 12 000 (b) Write a short report to the owner in relation to the profitability and financial stability of the business, comparing your 2017 with the following information for 2016:

Answer rating: 100% (QA)

a Calculate the ratios as follows Net Profit900006300021000 6000 Average Capital60000720002 66000 i Rate of Return on Equity Rate of Return on Equity6... View the full answer