Padma Company Ratio Analysis November 2010

Q8. Padma Company has the following comparative balance sheet data (Nov’10):

Padma Company

Balance Sheet

December 31

	2009	2008
	Taka	Taka
Cash	15,000	30,000
Receivable	65,000	60,000
Inventories	60,000	50,000
Palant Assets (Net)	2,05,000	1,80,000
	3,45,000	3,20,000
Accounts Payable	50,000	60,000
Mortgage Payable (15%)	1,00,000	1,00,000
Common Stock (10 per)	1,40,000	1,20,000
Retained Earnings	55,000	40,000
	3,45,000	3,20,000

 
Additional Information for 2009:

(i) Net Income was TK. 25,000

(ii) Sales on accounts were TK. 4,20,000

(iii) Cost of goods sold was TK. 1,98,000

(iv) Net cash provided by operating activities was TK. 33,000

Requirements:

Compute the following ratios at December 31, 2009 and make comment on these:

(1) Current Ratio

(2) Acid Test Ratio

(3) Receivable Turnover

(4) Cash Return on sales

(5) Cash Debt Average

(6) Gross Profit Ratio and

(7) Net Profit Ratio

Answer the following question number (8).

1. CURRENT RATIO= (Current Asset/Current Liabilities)

= (Cash+ Receivable+ Inventories)/Accounts Payable

= (73500+6500+60000)/50000= 2.80:1

2.  Acid test ratio/ Quick test ratio = (Current Asset-Inventory-Prepaid Expenses)/Current Liabilities

                                                      = (15000+65000)/50000= 1.6:1

3. Receivable turnover

Or Debtor turnover= Net Credit Sale/Average Net Receivable

= (420000-20000)/{(65000+60000)/2}

= 6.40:1

 
4. Cash return on sale= Net Cash Provided By Operating Activities/NetSales

= 33000/400000

= 0.08:1

5. Cash debt average ratio= Net Cash Provided by Operating Activities/Average Total Liabilities

= 33000/{(345000+320000)/2}

= 0.09:1

6. Gross profit ratio= Gross Profit/Net Sales [Gross profit= Sales- Sales Return- Cost of goods sold]

= (420000-20000-198000)/400000

= 0.50: 1

7. Net profit ratio = Net Profit/Net Sales

= 25000/400000

= 0.06:1