FIN623 Assignment 2 Fall 2024 – Assignments – Solution VU

FIN623 Assignment 2 Fall 2024 – Assignments – Solution VU


Financial Statement Analysis (FIN623) Assignment No. 2

Due Date: February 16, 2024                                           Marks: 20


Learning Objective:

The objective of this question is to enable the students to understand the use of ratio analysis.


Consider the following financial statements of ABC Foods and calculate under  mentioned ratios.

ABC Foods

Balance Sheet as on December 31, 2024

Liabilities & Equity Rs. Assets Rs.
Accounts payable 25,000 Cash & Equivalents 30,000
Tax payable 20,000 Marketable Securities 10,000
Other payables 5,000 Account Receivable 30,000
Total Current Liabilities 50,000 Inventory 5,000
Long Term debt 50,000 Total Current Assets 75,000
Other long term liabilities 30,000 Net Fixed Assets 385,000
Total Liabilities 130,000    
Common Stock 100,000
10,000 shares of Rs. 10 each      
Paid Up Capital in excess of Par 30,000    
Retained earnings 200,000
Total Owner’s equity 330,000    
Total Liabilities & Equity 460,000 Total Assets 460,000

ABC Foods

Income Statement

For the year ended December 31, 2024


Particulars Rs.
Sales 300,000
Less: Cost of Goods Sold 115,000
Gross Profit 185,000
Less: Administrative expenses 20,000
Less: Marketing Expenses 10,000
Operating Profit 155,000
Less: Interest Expense 10,000
Earning before tax 145,000
Less: Tax @ 40% 58,000
Net Income 87,000

Industry Norms


Ratio Norm
Current Ratio 1.5 times
Quick Ratio 1.2 times
Net Profit Margin 25%
Debt Ratio 33%
Time Interest Earned 12 times


Calculate the above mentioned ratios with respect to the company financials and provide a brief commentary about the performance of the company with respect to industry.             [20 Marks]



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