Accounting Test Question No IFS: Interpretation of Financial Statements

November 7th, 2006 /

Accounting Test Question No IFS 1 : Interpretation Of Financial Statements

Accounting Test Question No IFS 1:

Details of financial performance of Company XYZ

For year 2005 Income Statement:

Net Sales - $ 7 million,

Cost of Goods sold -$ 3 million

Net Income - $1.2 million

Balance Sheet ($’000):-

Assets	2005	2004
Cash	200	240
Accounts Receivable	810	620
Inventory	830	710
Property, plant and equipment ( net)	2,590	2,420
Total Assets	4,430	3,990

Liabilities & Shareholders’ Equity
Current liabilities	710	640
Notes payable	550	990
Paid-in capital	1,500	1,500
Retained earnings	1,670	860
Total Liabilities & Shareholders’ Equity	4,430	3,990

The average industry for Company’s line of business are:

Inventory Turnover 5 times

Average Collection period 45 days

Asset Turnover 2 times

Required:

Evaluate Company XYZ’s asset management relative to its industry.

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