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Acc501 Assignment

This document contains an assignment solution that calculates and analyzes various financial ratios for a company. It first calculates the current ratio, quick ratio, profit margin ratio, return on assets, and return on equity. It then provides an interpretation of the results, noting that the current ratio indicates good liquidity, the quick ratio shows low liquidity excluding inventory, the profit margin ratio shows fair profitability, the return on assets shows average expense control, and the return on equity shows shareholders are earning a good return.

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malik rehman
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37 views2 pages

Acc501 Assignment

This document contains an assignment solution that calculates and analyzes various financial ratios for a company. It first calculates the current ratio, quick ratio, profit margin ratio, return on assets, and return on equity. It then provides an interpretation of the results, noting that the current ratio indicates good liquidity, the quick ratio shows low liquidity excluding inventory, the profit margin ratio shows fair profitability, the return on assets shows average expense control, and the return on equity shows shareholders are earning a good return.

Uploaded by

malik rehman
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Assignment no.

ACC 501

ID: Bc220407213

NAME: Abdul Rehman

ANS: Solution:

1. Current ratio:
Current ratio= current assets /current liabilities
Current ratio=Rs. 61,003,334 / Rs. 43,858,463
Current ratio=1.39 times

2. Quick ratio:
Quick ratio=(current assets - stock in trade)/current liabilities
Current assets=Rs.61,003,334 - Rs.31,826,616 / Rs.43,858,463
Quick ratio=0.66 times

3. Profit margin ratio


Profit margin ratio= (profit after taxation/revenue)*100
Profit margin ratio=Rs. 10,311,674/ Rs.115,786,065*100
Profit margin ratio=Rs.0.089
Multiply by 100
Profit margin ratio=8.91%

4. Return on assets(ROA)
ROA RATIO= (profit after taxation/total assets) *100
First find value of total assets
Total assets=Current assets+ Non-current assets
Total assets=Rs.137,534,577
ROA= (Rs. 10,311,674 / Rs. 137,534,577)*100
ROA=Rs. 0.0749
Multiply by 100
Profit margin ratio=7.49%

5. Return on equity(ROE)
ROE ratio= (profit after taxation/share holders equity)*100
ROE= (Rs. 10,311,674/ Rs. 79,200,943)*100
ROE=13.01%
(b) Interpretation of results:

 Current Ratio:
Current ratio of 1.39 shows that the company has Rs.1.39 of current
assets available to repay each Rs.1 of Current liabilities. The ratio is Above 1,
which is normally considered acceptable and good liquidity position and it also
show that the company can meet its short-term duties.
 Quick Ratio:
The quick ratio of 0.66 shows that the company is not able and has
less chance to meet criteria of its short term obligations and must be depend and
engaged with inventory. It turns out that a company has low liquidity position
when excluding inventory.
 Profit margin Ratio:
The company's profit margin ratio is 8.91 % which indicates that the
company can earn round about 8.91% of profit of every of sales revenue. it shows
a fair level of profitability.
 Return on Assets(ROA):
The company ROA of 7.49% indicates that the company is generated a
profit of 7.49% for each of Rs.100 of assets invested. This ratio is average and
company has average control over its expenses.
 Return on Equity:
The company ROE shows that the company is capable to earn profit
13.01% for every rupee of share holder equity invested. This is a effective sign for
share holders as they are getting good amount in return of their investment.

THE END

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