Scribd
Upload
122 views4 pages

Solution: - A) Gross Profit Net Sales-Cost of Sales 3,000,000-2,000,000

The document provides financial information for two years, 2017 and 2018. It lists net profit, debtors, outstanding rent, goodwill, prepaid insurance, and creditors for each year. To calculate cash flow from operating activities, net profit is added to increases in liabilities and rent outstanding, and reductions in prepaid expenses are subtracted from increases in debtors. For 2017, the cash flow from operating activities is Rs. 102,000, and for 2018 it is Rs. 236,000.

Uploaded by

Eyasu Desta
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
122 views4 pages

Solution: - A) Gross Profit Net Sales-Cost of Sales 3,000,000-2,000,000

The document provides financial information for two years, 2017 and 2018. It lists net profit, debtors, outstanding rent, goodwill, prepaid insurance, and creditors for each year. To calculate cash flow from operating activities, net profit is added to increases in liabilities and rent outstanding, and reductions in prepaid expenses are subtracted from increases in debtors. For 2017, the cash flow from operating activities is Rs. 102,000, and for 2018 it is Rs. 236,000.

Uploaded by

Eyasu Desta
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
You are on page 1/ 4

#1.

From the following data, calculate:-


a) Gross profit ratio,
b) Net profit ratio
c) Working capital turnover ratio,
d) Debt-equity ratio,
e) Proprietary ratio
Birr.
Net sales 3,000,000
Cost of sales 2,000,000
Net profit 300,000
Fixed assets 650,000
Current assets 600,000
Current liabilities 200,000
Paid-up share capital 500,000
Debentures 250,000

Solution: - a) Gross Profit=Net sales-Cost of sales =3,000,000-2,000,000

=1,000,000
Gross Profit
Then Gross Profit Ratio= x100%
Net sales

1,000,000
= x100
3,000,000

= 33.33%
Net Profit
b) Net profit Ratio= ∗100 %
Net Sales

300,000
= *100%
3,000,000

= 10%

Net Sales
c) Working Capital turnover ratio=
WorkingCapital

But, Working Capital =Current assets- Current liabilities


=600,000- 200,000

=400,000 birr

3,000,000
Working Capital turnover ratio= *100%
400,000

=7.5:1

Long−term Debt ’ s
d) Debt-equity ratio=
Share holder funds

Whereas, Long term Debt = Debentures + Long term loans

=250,000 birr

And Shareholders’ Funds = Equity Share Capital + Preference Share


Capital + Reserves and Surplus

=500,000 birr

250,000
Debt-equity ratio=
500,000

=0.5:1

Shareholders Funds
e) Proprietary ratio=
Total assets

Total asset=fixed asset + current asset- current liabilities

=650000+600000-200000

=1,050,000

Proprietary ratio=500000/1050000

=0.48:1

Question Two
Compute cash flow from operating activities from the following details:
Particulars 2017 2018
Br Br
Profit & Loss A/c 1,10,000 1,20,000
Debtors 50,000 62,000
Outstanding Rent 24,000 42,000
Goodwill 80,000 76,000
Prepaid Insurance 8,000 4,000
Creditors 26,000 38,000

Solution:-

Cash flow= P&L+Non-Cash Expenses- Increase in WC

Operating Cash Flow

In financial accounting, operating cash flow (OCF), cash flow provided by operations, cash flow
from operating activities (CFO) or free cash flow from operations (FCFO), refers to the amount
of cash a company generates from the revenues it brings in, excluding costs associated with long-
term investment on capital items or investment in securities.

Formula (When expressed in short form):

Operating Cash Flow = Net Income + Non-Cash Expenses – Increase in Working Capital

Formula (When it is extended):

Operating Cash Flow = Net Income + Depreciation + Stock Based Compensation + Deferred
Tax + Other Non-Cash Items – Increase in Accounts Receivable – Increase in Inventory +
Increase in Accounts Payable + Increase in Accrued Expenses + Increase in Deferred Revenue

Cash flow from Operating Activities

2017 0

Net Profit 110,000.00

Add

Outstanding Rent 24,000.00

Creditors 26,000.00

Total addition 50,000.00


Deduct

Debtors 50,000.00

Prepaid Insurance 8,000.00

Total Deduction -58,000.00

Net Cash inflow from operating Activities 102,000.00

Cash flow from Operating Activities

2018

Net Profit 120,000.009

i. Add

Net Cash Inflows in 2017 102,000.00

Increase in Outstanding Rent 18,000.00

Increase in Creaditors 12,000.00

Total Addition 132,000.00

Deduct

Increase in Debtors 12,000.00

Prepaid Insurance 4,000.00

Total Deduction 16,000.00

Net Cash inflow from operating Activities 236,000.00

You might also like