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NATIONAL OPEN UNIVERSITY OF NIGERIA

UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
JUNE 2013 EXAMINATION

Course Code: ENT 415                                                                       Credit Unit: 2.

Course Title: Analysis of Financial Statement

Time Allowed: 2 Hours.

Instructions: 1. Attempt Question 1 and any other two (2) Questions.

     2. Question 1 is compulsory and carries 30 marks

   while the other 2 Questions carry 20 marks each.

                       3. Present all your points in coherent and orderly manner.

 

  1. Using the financial statement below, compute the ratios requested below and express in note form what each indicates:
    1. Current
    2. Quick
    3. Debt
    4. Inventory Turnover
    5. Net Operating margin
    6. Return on Total Asset

_______________________________________________________________

Statement-1 EUA Co. Ltd -Balance Sheet as at December 31, 2010                                                               

Assets                                               N                          Liabilities                                   N

Cash                                                  70,000                  Accounts payable                 150,000

Marketable securities                      30,000                  Note payable to bank (8%)    200,000

Accounts receivable, net                 450,000                              Accruals                    20,000

Inventories                                       350,000                Income tax payable                 80,000

Total current assets                         900,000               Total current liabilities          450,000

                                                                                      Mortgage Bonds (6%)           150,000

Gross plant and equipment            2,100,000                           Debenture (7%)                     400,000

Allowance for depreciation            (500,000)                            Total liabilities     1,000,000

Net plant and equipment 1,600,000                                                                                                                

 

Shareholder’s equity

        Ordinary Shares                              500,000

       Retain earnings                                1,000,000

        Shareholder’s equity                      1,500,000

Total assets                                    2,500,000        Liabilities plus equity                            2,500,000

 

The annual sinking fund contribution is N25,000

 

 

Statement-2 EUA Co. Ltd –Income Statement for the year ended December 31, 2010 =======================================================          

                                                          N                          N                          N                 N

Net Sales                                                                                                                  5,400,000

Cost of goods sold                                                                                    4,400,000

Gross Margin on sales                                                                                            1,000,000

Operating expenses:

Selling                                               400,000

General and Administrative           130,000

Lease payment                                    20,000

Total operating expenses                                                                         550,000

  1. Operating income                                                                                                   450,000

Other revenues- Interest on Marketable Securities + royalties                                3,000

Operating income plus other revenues                                                                 453,000

  Less other expenses:

              Interest on bank note                                    16,000

              Interest on mortgage                                       9,000

              Interest on debentures                                 28,000

   Total interest                                                                                                        53,000

Net income before taxes                                                                          400,000

Income taxes (at 50%)                                                                                             200,000

Net after tax income available to ordinary shareholders (net profit)          200,000

Dividends                                                                                                                   30,000

Increase in retained earnings                                                                                 170,000

 

                                                                                                                                  (30 marks)

 

2. Explain cash flow statement and discuss three basic elements and the uses.  (20 marks)

3. Discuss financial statement as a tool for management decision making in a business organization.

                                                                                                                                                (20 marks)

 

4. In Receivable management, “receivables expect cash in future”. Explain.               (20 marks)

5. Explain the steps of cash management of business enterprise.                           (20 marks)


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