Question 1 11,920,400o 2,079,579 1,529,231 107,123 Cost of Good Sold 14,947,152

Question

Question 1 11,920,400o 2,079,579 1,529,231 107,123 Cost of Good Sold 14,947,152 Gross proft on sales Repairs and maintenance Interest expense (a) Balance sheet 1,871,538 84,483 3,100 ,941,002 468 257 Total expenses Net 2,196,955 141,104 1,915,767 163,812 65,525 4,100 2,733,148 Net Income Other curment assets Total ourrent assets 4,140,539 LT. Assets Rigolo Inc, has paid $10,000 to its preferred shareholders in 2016 322,586 4,463,125 60.640 3,472,999 Total Assets Liabilities & Shareholders Equity y Tunover 276.556 1,834 858 151817 he Basic EPS 256,419 337,881 169,067 161,905 925.272 ) Compute the diluted EPS Note: Provide for each ratio: the financial meaning and the formula used for its computation. Do not just put numbers. 1,824.764 ,216,627 2,400,000 3.325,272 Bank loans Total liabilities Shareholders' equity Common stock 46.,499 199,999 46.499 101,228 147,727 3,472,999 s equity Total shareholders equity&b; 4,463.125 ?

Explanation / Answer

.(i) ROA=Return on asset= Net income/Total assets

Net Income=$98,771

Average total assets=(4483125+3472999)/2= $ 3,978,062

ROA=$98771/$3978062=0.0248=2.48%

ROA is indicator of profitability.

Sometimes ROA is referred as Return on Investment.

(ii)ROCE (Return on capital Employed)=EBIT/Capital Employed

EBIT=Earning Before Interest and Taxes.

It measures Profitability and efficiency of use of capital.

EBIT=141104+215246= 356350

Capital employed:Total assets – current liabilities=

Capital employed in 2016 end=4483125-2391863=2091262

Capital employed beginning of 2016=3472999-925272=2547727

Average capital employed=(2091262+2547727)/2=2319495

ROCE=356350/2319495=0.153633

ROCE=15.36%

(iii) . Accounts Receivable Turnover=( sales)/(Average accounts receivable)

Sales=17285211

Average accounts receivable=(2733148+1941002)/2=2337075

Accounts receivable turnover=17285211/2337075=7.396087

Accounts receivable turnover indicates efficiency of cash collection

It shows how many times working capital is converted into sales in a year

(iv) .Inventory turnover=Cost of goods sold/Average inventory

Cost of goods sold=14947152

Average inventory=(1389390+1468257)/2=1428824

Inventory turnover=14947152/1428824=10.46116

Inventory Turnover indicates operational efficiency of inventory management.

Higher the turnover , better is inventory management , because higher turnover indicates that we obtain higher sales with the same working capital

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