Question

You have been provided with the Balance Sheet and Income Statement for OSR Pty Ltd as...

You have been provided with the Balance Sheet and Income Statement for OSR Pty Ltd as at 30 June 2020 with 2019 comparatives to prepare an analysis for the performance of OSR Pty Ltd:

OSR Pty Ltd

   Account Balance

  As at 30 June

2020

2019

Assets

$

$

Cash

$30,000

$19,200

Accounts receivable

$49,200

$44,100

Inventory

$84,000

$82,800

Property, plant and equipment

$312,000

$312,000

Total Assets

$475,200

$458,100

Liabilities

Accounts Payable

$57,000

$67,200

Mortgage payable

$120,000

$120,000

Total Liabilites

$177,000

$187,200

Equity

Share Capital – Ordinary

$120,000

$120,000

Retained earnings

$178,200

$150,900

Total Equity

$298,200

$270,900

Income

Net sales revenue

$660,000

Total Income

$660,000

Expenses

Cost of sale

$421,200

Selling and distribution

$85,200

Administrative

$59,640

Interest

$18,720

Income Tax

$22,896

Total expenses

$607,656

Required: Calculate the following ratios for OSR Pty Ltd for 2020. Please show ALL your workings.

Ratio

Express as

1) Return on Assets

Profit (before tax) + Interest

Average Total Assets

x%

2) Return on Equity

Profit (available to owners)

Average Owner’s Equity

x%

3) Quick Ratio

Current Assets – Inventory

Current Liabilities

x:1

4) Debt Ratio

Total Liabilities

Total Assets

x%

Homework Answers

Answer #1

1.Return on Assets = ( Profit (before tax) + Interest ) / Average Total Assets = 93960 / 466650 = 20.14%

Profit (before tax) + Interest = 660000 - 421200 - 85200 - 59640 = 93960

Average Total Assets = ( 475200 + 458100 ) / 2 = 466650

2.Return on Equity = Profit (available to owners) / Average Owner’s Equity = 52344 / 284550 = 18.40%

Profit (available to owners) = 660000 - 421200 - 85200 - 59640 - 18720 - 22896 = 52344

Average Owner’s Equity = ( 298200 + 270900 ) / 2 = 284550

3.Quick Ratio = (Current Assets – Inventory) / Current Liabilities = 79200 / 57000 = 1.39

(Current Assets – Inventory) = 30000 + 49200 = 79200

4.Debt Ratio = Total Liabilities / Total Assets = 177000 / 475200 = 37.25%

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