FIN621 - Financial Statement Analysis Assignment No. 01 Solution and Discussion Fall 2013 Due Date: February 11, 2014

SEMESTER FALL 2013

FIN621- Financial Statement Analysis

ASSIGNMENT NO. 01 (NON-GRADED)

DUE DATE: February 11, 2014

LEARNING OBJECTIVES:
After attempting this assignment whole-heartedly, the students will be able to:
 Calculate the accounting ratios based on missing data
 Interpret the financial ratios
Question:
Mr. X is running a profitable retail and wholesale store in the Lahore for last 7 years.
He believes that his retail business is one of the effectively managed stores in the
city due to this reason Mr. X is considering to open several new stores in the
different locations of the city. In the beginning when Mr. X started his first store; he
managed the required capital from his own pocket and remaining by loans from his
friends. Now for the expansion of the business he must have to go for debt financing
from bank.
Mr. X also knows that before issuance of loan the loan office will demand the
financial statements of the business and compares the financial ratios with his
competitor. Mr. X gathered the incomplete information given below.
Financial Ratio/Data Mr. X business Competitor Business
Net Sales Rs. 480,000 Rs. 550,000
Net income Rs. 12,000 ---------
Net profit margin --------- 4.28%
Total Debt --------- ---------
Total Equity --------- ---------
Total asset --------- ---------
Return on Equity 12.45% 12.95%
Asset turnover 1.65 1.60
Debt-to-equity ratio 2.02 ---------
a) Mr. X requested you to complete the missing values as mentioned in the table.
b) After analyzing the Profitability and Debt to Equity ratios, critically comment that if Business
owned by Mr. X is working efficiently and is up to the mark if we compared it with bench mark
(i.e. competitor’s business).
IMPORTANT:
24 hours extra / grace period after the due date is usually available to overcome uploading
difficulties. This extra time should only be used to meet the emergencies and above mentioned
due dates should always be treated as final to avoid any inconvenience.
IMPORTANT INSTRUCTIONS:
 Complete calculations are required for every part of the problem.
 All the students are recommended to attempt the assignment their own.
 This assignment will be a non-graded assignment, which means that the marks of this
assignment will not be included in your final grades.
OTHER IMPORTANT INSTRUCTIONS:
DEADLINE:
 Make sure to upload the solution file before the due date on VULMS.
 Any submission made via email after the due date will not be accepted.
FORMATTING GUIDELINES:
 Use the font style “Times New Roman” or “Arial” and font size “12”.
 It is advised to compose your document in MS-Word format.
 You may also compose your assignment in Open Office format.
 Use black and blue font colors only.
Note related to load shedding: Please be proactive
Dear students!
As you know that Post Mid-Term semester activities have started and load shedding problem is
also prevailing in our country. Keeping in view the fact, you all are advised to post your activities
as early as possible without waiting for the due date. For your convenience; activity schedule has
already been uploaded on VULMS for the current semester, therefore no excuse will be
entertained after due date of assignments, quizzes or GDBs.