Part I: Work out Dear student, an analysis of financial statement with the help of ‘accounting ratio’ is termed as Ratio Analysis. Ratio Analysis is a process of determining and interpreting relationships between the items of financial statements. Its purpose is to provide a meaningful understanding of the performance and financial position of an enterprise. Thus, it is a technique for analyzing the financial statements by computing ratios.
1.
Ethio Selam Company
Consolidated Balance Sheet
For 2021, September 30
(ETB millions)
Assets
Cash and cash equivalents Br. 842,000,000
Receivables 3,599,000
Inventories 702,000,000
Film and television costs 1,162,000
Other 1,258,000
Total current costs 7,563,000
Film and television costs 5,339,000
Investments 2,270,000
Theme parks, resorts, and other property, at cost
Attractions, buildings, and equipment 16,160,000
Accumulated depreciation (6,892,000)
9,718,000
Project in process 1,995,000
Land 597,000,000
Intangibles assets, net 16,117,000
Other assets 1,428,000
Total assets 25,027,000
Liabilities and stockholders’ equity
Accounts payable and accrued liabilities 5,161,000
Current portion of borrowing 2,502,000
Unearned royalties 739,000,000
Total current liabilities 8,402,000
Borrowings 6,959,000
Deferred income taxes 2,833,000
Other long-term liabilities 2,377,000
Minority interest 356,000,000
Common shareholders’ equity
Common shares ($.01 par value) 12,101,000
Retained earnings 12,767,000
Cumulative translation and other adjustments (28,000)
Treasury shares (740,000) 24,100,000
Total liabilities and stockholders’ equity 45,0270000
• Net income, Br. 920,000,000
• Cost of goods sold, Br. 21,321,000
• Net sales, Br. 25,402,000
• Inventory on 2021 September 30, Br. 796,000,000
• Total interest expense for the year, Br. 598,000,000
Calculate the following ratios and show your computations. For calculations normally involving averages, such as average stockholders’ equity, use year-end amounts unless the necessary information is provided.
1. Current ratio.
2. Net income to average common stockholders’ equity.
3. Inventory turnover.
4. Number of days’ sales in accounts receivable (assume 365 days in 2021).
5. EPS of common stock (ignore treasury stock).
6. Times interest earned ratio.
7. Equity ratio.
8. Net income to net sales.
9. Total assets turnover.
10. Acid-test ratio.