Financial Management 501 Frederick Alfred D.

Abao, CPA
Gordon College Exercises 2

Problem 1
Mailene Corp. provided you the following data for your review:

Cash on hand P 100,000

Building 5,000,000
Cash in Bank (BPI) (Plant Expansion) 550,000
Suppliers’ Debit Total Balance 100,000
Cash in Bank (PNB) 600,000
Total Postdated Checks to Suppliers (included in Cash PNB but not in Accounts P.) 50,000
Accounts Payable 800,000
Inventories 1,500,000
Prepaid Rent 150,000
Trade Accounts Receivable 350,000
Cash in Bank (BDO) - Overdraf (140,000)
Customers’ Credit Total Balance 200,000

Required:
1. Current Ratio
2. Quick Asset Ratio

Problem 2
The following information were provided by Claire Company to retrieve missing data needed in financial reporting:

Current Ratio 3:1 Building (Net) 1,500,000

Quick Ratio 1.5:1 Machinery (Net) 800,000
Long-term liabilities 1,000,000 Equipment (Net) 350,000
Cash 400,000 Current liabilities 500,000
Net Income 350,000
Debt to Equity Ratio 50%
Additional data:
 Total noncurrent assets include Building, Machinery, Equipment and Computers.
 Number of days in receivables ratio is 10 days. Average credit sales per day is P25,000.
 Computers’ accumulated depreciation is P150,000 which is already 3 years of service in company. Useful life is 10 years.
 Current assets consist of Cash, Accounts receivable, Inventories, and Marketable securities.

Required:
1. Inventories
2. Accounts receivable
3. Marketable securities
4. Debt Ratio

Problem 3
Financial data on December 31, 2015 from Mapa-Abao Company are presented below:

Long-term liabilities (3%) 1,500,000

Retained earnings 1,000,000
Preference shares 5% 1,500,000
Share Premium – Ordinary 800,000
Net income 450,000
Ordinary Shares 2,700,000
Total sales for the current year 9,000,000
Total Assets 5,000,000

Required:
1. Return on Total Assets (ROA)
2. Return on Equity
a. Cumulative Preference Shares
b. Non-cumulative Preference Shares

Problem 4
Below are data extracted from the financial records of PinkyClaire Corporation on December 31, 2015:

2015 2014
Cash 350,000 600,000
Accounts receivable (net) 1,300,000 1,800,000
Inventories 1,500,000 1,900,000
PPE (net) 6,000,000 5,500,000
Total liabilities 4,000,000 3,300,000
Retained earnings 1,200,000 800,000
Sales 20,500,000 18,000,000

Additional data:
 Outstanding ordinary shares by year-end is 50,000 shares. Cumulative Preference Shares Capital with fixed rate of return of 5%
amounted to P1,000,000 and these shares were purchased way back 2013 at a 30% premium.
 2015 net income is P750,000.
 Current market price in stock exchange is P70 per share. Total Asset Turnover for 2015 and 2014 are 2 times and 1.8 times,
respectively. Total asset at the end of 2013 is equal to 2014 year-end total asset balance.

Required:
1. ROA
2. ROE
3. Earnings per share
4. Dividend yield ratio
5. Dividend payout ratio
6. Price earnings ratio

Problem 5
The following ratio are extracted from Mapa Company to determine below required information:
ROA 8% Retained earnings 1,800,000
Price earnings ratio 10 times Shareholders’ equity 4,000,000
Dividend payout ratio 0.40 Outstanding shares 20,000 shares
Asset turnover 2 times
Cash 450,000
Debt/Equity ratio 50%

Required:
1. Net income
2. Dividends per share
3. Market price per share