A Increase Capital Decrease Bank.
B Increase Fixed Assets Decrease Bank.
C Decrease Current Assets Increase Capital.
D Decrease Current Assets Decrease Capital.
Answers to fixed asset questions
B Increase fixed assets and decrease bank
This is because the cost of the van is assumed
to be by cheque and the van is not purchased for the purposes of resale
(as for instance it would be by a van retailer). It is therefore the purchase
of a fixed asset by bank.
2 Gross Profit Ratio
= Gross Profit x 100 = %
Sales
3 Net Profit Ratio
= Net Profit x 100
= %
Sales
Efficiency Ratios
4 Stock Turnover Ratio
= Cost of Goods Sold = No of times
Average Stock
5 Fixed Assets Turnover Ratio = Sales
= No of times
Fixed Assets at NBV
6 Debtor Collection Period
= Average debtors x 365 = No
of days
Sales
x 52 = No of weeks
x 12 = No of months
7 Suppliers Payment Period =
Creditors
x 365 = No of days
Purchases
x 52 = No of weeks
x 12 = No of months
8 Asset Turnover
= Sales
= No of Times
Capital Employed
Liquidity Ratios
9 Current Ratio
= Current Assets
= Expressed as a
Current Liabilities Factor
10 Quick or Acid Test
= Current Assets - Stock [Also expressed as a Factor]
Current Liabilities
Investment Ratios
11. Gearing
= Preference Shares + Long Term Loans X
100%
Shareholders funds + Long Term Loans
A Note of caution:
Ratio Analysis is all about comparing one set of ratios with another.
This can mean comparing one year with another, or comparing the
performance of one company with another or with its budgets.
To achieve greater confidence in the conclusions you draw, you really
need to compare more values than just two. You also need to bear in mind
that there is some flexibility in the accounting treatments adopted by
accountants when preparing the financial statements and so differences
observed in performance might in part be due to differences in the way
items have been treated in the accounts rather than differences in performance.
Now test your understanding by attempting to calculate
the fixed asset turnover ratio from our own figures.
First you need to know whether to examine the
trading, profit and loss account or the balance sheet.
If you make a mistake you may return here, for another try, by pressing
your internet return button. You must return to this point in any event
if you wish to take a peep at the answer
Trading, profit and loss account
Balance sheet
answers to fixed asset turnover question
fixed asset turnover = sales
= 2,000 (note 1)
= 1.3 times
fixed assets
1,545 (note 2)
This means that each pound of fixed assets earns the business £1.30p
in sales
note 1. This is seen on the top of the trading , profit and loss
account.
note 2. This figure can be found on the top section of the balance
sheet.