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Presentation/PPT
27/08/2022
CMA / P2 / Sec. A / HW-2 / Class 7
1
CMA Part 2
Financial Decision Making
Financial Statement Analysis
Sec. A (Homework – 2)
1. Indicate the effects of transactions listed in the following table on total current assets, current ratio,
and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either
no effect or an indeterminate effect. Be prepared to state any necessary assumptions, and assume an
initial current ratio of more than 1.0. (Note: A good accounting background is necessary to answer
some of these questions; if yours is not strong, just answer the questions you can handle.)
Total Effect
Current Current on Net
Assets Ratio Income
a. Cash is acquired through issuance of
additional common stock.
b. Merchandise is sold for cash.
c. Federal income tax due for the
previous year is paid.
d. A fixed asset is sold for less than
book value.
e. A fixed asset is sold for more than
book value.
f. Merchandise is sold on credit.
g. Payment is made to trade creditors
for previous purchases.
h. A cash dividend is declared and paid.
i. Cash is obtained through short-term
bank loans.
j. Short-term notes receivable are sold at
a discount.
k. Marketable securities are sold below
cost.
l. Advances are made to employees.
m. Current operating expenses are paid.
n. Short-term promissory notes are issued
to trade creditors in exchange for past due
accounts payable.
o. Ten-year notes are issued to pay off
accounts payable.
p. A fully depreciated asset is retired.
q. Accounts receivable are collected.
r. Equipment is purchased with short-term
.
s. Merchandise is purchased on credit.
t. The estimated taxes payable are increased.
2. Balance sheet analysis Complete the balance sheet and sales information that follows using the
following financial data:
Debt ratio: 50%
Current ratio: 1.8 X
Total assets turnover: 1.5 X
Days sales outstanding: 36.5 days a
Gross profit margin on sales: (Sales – Cost of goods sold)/Sales = 25%
Inventory turnover ratio: 5 X
a Calculation is based on a 365- day year.
Balance Sheet
Cash Accounts payable
Accounts receivable Long-term debt 60 , 000
Inventories Common Stock
Fixed Assets Retained earnings 97 , 500
Total Assets $300,000 Total liabilities and equity
Sales Cost of goods sold
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