Online Help, Guidance and Solutions for Virtual University of Pakistan Students
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we are required to calculate the missing values (e.g. Cash, accounts receivable, Inventory, Plant and Equipment, total assets, long-term debt and total liabilities and shareholder’s equity) by using rations which are given in the assignment and show complete balance sheet of “Fahad Stiching Unit”.
Has anyone solved this yet, could he/she be kind enough to share the solution plz ... ?
Answer Part 1:
Fahad stitching unit
As on 31st December 2014
Liabilities and Owner's Equity
Notes and Payables
Long term debt (W-1)
Plant and Equipment(Balance Figure)
Total Liabilities and shareholder's Equity(W-2)
Long-term debt/ Equity = 0.5
Long-term debt = 100,000
Total liabilities and shareholders' equity = 400,000
So, Total assets = 400,000
Assets turnover ratio is:
Sales/ Total assets = 2.5
Sales = 1,000,000
Since Gross Profit Margin is 10%
CGS=90% of sales
Now, Inventory turnover ratio is
Cost of goods sold/ Inventory = 9
Average Collection period is:
Accounts Receivable x 360 days/Sales = 18 days
Accounts Receivable x 360 days/100,000 = 18 days
Accounts Receivable = 50,000
Acid test Ratio is:
Cash + 50,000/100,000 = 1
Thanks a lot Seemna
Thanks Seema,,,This helped a lot,,Jazaq Allah