Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Return on ordinary shareholders' equity
20.0%
18,750
Profit margin ratio
4.0%
(850)
Dividend yield
5.0%
Current ratio
Acid-test ratio
Days' sales uncollected
) Inventory turnover
Equity ratio
Times interest earned
2.5:1
1.3.1
28.1 days
6
60.0%
6
Adjustments to reconcile profit to net cash
provided by operating activities:
Depreciation expense
Increase in accounts receivable
Increase in inventory
(140)
Decrease in accounts payable
(420)
Net cash provided by operating activities
26,064
Cash flows from investing activities
Cash paid for equipment
(22,470)
Net cash used in investing activities
(22,470)
Cash flows from financing activities
Cash paid for dividends
(5,504)
Cash received from interest-bearing loan
980
Net cash used in financing activities
(4,524)
Net decrease in cash
(930)
Cash balance at beginning of 20x3
4,220
3,290
Cash balance at the end of 20X3
Note: All income tax payable was settled in the year when it was incurred.
Additional information
Market prices of issued shares at year end (20×3): Ordinary. $60.00
Using the above industry averages, comment on the company's profitability, liquidity,
efficiency, and solvency ratios.
Calculate the following ratios for 2003. The industry average for similar businesses is
also provided.
Describe a key precaution that needs to be taken when making comparison with the
industrial average.
Return on total assets
Industry average
12.0%
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Transcribed Image Text:Return on ordinary shareholders' equity 20.0% 18,750 Profit margin ratio 4.0% (850) Dividend yield 5.0% Current ratio Acid-test ratio Days' sales uncollected ) Inventory turnover Equity ratio Times interest earned 2.5:1 1.3.1 28.1 days 6 60.0% 6 Adjustments to reconcile profit to net cash provided by operating activities: Depreciation expense Increase in accounts receivable Increase in inventory (140) Decrease in accounts payable (420) Net cash provided by operating activities 26,064 Cash flows from investing activities Cash paid for equipment (22,470) Net cash used in investing activities (22,470) Cash flows from financing activities Cash paid for dividends (5,504) Cash received from interest-bearing loan 980 Net cash used in financing activities (4,524) Net decrease in cash (930) Cash balance at beginning of 20x3 4,220 3,290 Cash balance at the end of 20X3 Note: All income tax payable was settled in the year when it was incurred. Additional information Market prices of issued shares at year end (20×3): Ordinary. $60.00 Using the above industry averages, comment on the company's profitability, liquidity, efficiency, and solvency ratios. Calculate the following ratios for 2003. The industry average for similar businesses is also provided. Describe a key precaution that needs to be taken when making comparison with the industrial average. Return on total assets Industry average 12.0%
Financial statements for Sengkang Ltd are presented below:
Sengkang Ltd
Comparative Statements of Financial Position
As at 20X3 and 20X2
Revenue (net sales)
Less: Cost of sales
Gross profit
($'000)
110,000
70,200
39,800
Less: Expenses
Selling and distribution expenses
14,200
(S'000)
($'000)
20X3
20X2
Administrative expenses
9,940
Finance costs
3,120
Total expenses
27,260
Profit before income tax
12,540
3,290
4,220
Income tax expense
3,816
8,200
7,350
Profit
8,724
14,000
13,860
25,490
25,430
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Total current assets
Non-current assets
Property, plant and equipment
34,380
30,660
Total non-current assets
34,380
30,660
Total assets
59,870
56,090
Current liabilities
Additional information
The total depreciation expense charged in the Income Statement for 20X3 was
$18,750,000 and the total income tax paid was $3,816,000.
Statement of Changes in Equity
For the year ended 31 December 20X3
Account payable
11,560
11,980
($'000)
Total current liabilities
11,560
11,980
Share capital
Non-current liabilities
Ordinary (15,400,000 shares)
Interest-bearing liabilities
19,880
18,900
Total share capital
15,400
Total non-current liabilities
19.880
18,900
Retained earnings
Total liabilities
Balance at the start of the period
9.810
31,440
30,880
Total comprehensive income for the period
8.724
Equity
Dividend paid - ordinary
(5.504)
Share capital
15,400
15,400
Balance at the end of the period
13,030
Retained earnings
13,030
9,810
Total equity
28,430
25,210
Statement of Cash Flows
Income Statement
For the year ended 31 December 20X3
For the year ended 31 December 20X3
Cash flows from operating activities
($'000)
Net profit/(loss)
8,724
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Transcribed Image Text:Financial statements for Sengkang Ltd are presented below: Sengkang Ltd Comparative Statements of Financial Position As at 20X3 and 20X2 Revenue (net sales) Less: Cost of sales Gross profit ($'000) 110,000 70,200 39,800 Less: Expenses Selling and distribution expenses 14,200 (S'000) ($'000) 20X3 20X2 Administrative expenses 9,940 Finance costs 3,120 Total expenses 27,260 Profit before income tax 12,540 3,290 4,220 Income tax expense 3,816 8,200 7,350 Profit 8,724 14,000 13,860 25,490 25,430 Current assets Cash and cash equivalents Accounts receivable Inventories Total current assets Non-current assets Property, plant and equipment 34,380 30,660 Total non-current assets 34,380 30,660 Total assets 59,870 56,090 Current liabilities Additional information The total depreciation expense charged in the Income Statement for 20X3 was $18,750,000 and the total income tax paid was $3,816,000. Statement of Changes in Equity For the year ended 31 December 20X3 Account payable 11,560 11,980 ($'000) Total current liabilities 11,560 11,980 Share capital Non-current liabilities Ordinary (15,400,000 shares) Interest-bearing liabilities 19,880 18,900 Total share capital 15,400 Total non-current liabilities 19.880 18,900 Retained earnings Total liabilities Balance at the start of the period 9.810 31,440 30,880 Total comprehensive income for the period 8.724 Equity Dividend paid - ordinary (5.504) Share capital 15,400 15,400 Balance at the end of the period 13,030 Retained earnings 13,030 9,810 Total equity 28,430 25,210 Statement of Cash Flows Income Statement For the year ended 31 December 20X3 For the year ended 31 December 20X3 Cash flows from operating activities ($'000) Net profit/(loss) 8,724
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Survey of Accounting (Accounting I)
Accounting
ISBN:9781305961883
Author:Carl Warren
Publisher:Cengage Learning