Question

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%

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%