Compare the industry-based ratios with your findings

Reference no: EM133672696

Accounting Information Systems

REPORT

PURPOSE
To assess the student's ability to produce the financial statements of the fictional company from Assessment 2 Part A and using the financial data from the financial statements, calculate and analyse the financial ratios and report the results in a written business report.

REQUIRED

1) Produce the Balance Sheet and Income statement of the fictional company from Assessment 2 Part A.

2) Using the Balance Sheet and Income Statement of the company obtained from Assessment 2 Part A, calculate the following ratios related with profitability, liquidity and solvency. Your written report should contain the detail calculations*.

Current ratio = Current Assets / Current Liabilities
Quick ratio = (Current Assets - Inventory) / Current Liabilities
Inventory turnover = Cost of Good Sold / Inventory
Gross profit Margin %= Gross Profit / Net Sales
Net profit Margin % = Net Profit / Net Sales
Return on Asset % = Net Profit / Total Assets
Debt to Asset Ratio = Total Liabilities / Total Assets

*Tabulate and show the ratio formula and detailed calculations and workings in an Appendix.

3) Industry related ratios are provided below. Compare the industry-based ratios with your findings in part 2 of this assignment. Discuss the findings/results of your financial analysis of each ratio, and include your recommendations for managerial actions in your report.

Industry Ratio
Current ratio = Current Assets / Current Liabilities	1.95:1
Quick ratio = (Current Assets - Inventory) / Current Liabilities	1.85:1
Inventory turnover = Cost of Goods Sold / Inventory	3.5
Gross profit Margin %= Gross Profit / Net Sales	15%
Net profit Margin % = Net Profit / Net Sales	7%
Return on Asset % = Net Profit / Total Assets	3%
Debt to Asset Ratio = Total Liabilities / Total Assets	16%

Reference no: EM133672696

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