Formative Assessment 7: SO2 AC2, 3, 4 & 5 US 252040

Study the following Statement of Comprehensive Income (Income Statement) and Statement of Financial Position (balance sheet), before answering the questions that follow:

Electrical Products International

Statement of Comprehensive Income (Income Statement)

For the year ended Dec. 31, 2XX6 (R 000’s)

• Statement of Comprehensive Income (Income Statement) restates all expenses as a percentage of sales
• Analysts can quickly see which expenses have increased or decreased relative to sales

Electrical Products International

Statement of Financial Position (balance sheet)

As of Dec. 31, 2XX6 (R 000’s)

·       Statement of Financial Position (balance sheet) restates all assets and liabilities as a percentage of total assets

·       Analysts can quickly see which accounts have increased or decreased relative to total assets

7.1 Complete the Statement of Comprehensive Income (Income Statement) and Statement of Financial Position (balance sheet) by filling in the missing figures.

7.2

a)   Calculate the Current Ratio (CR) for EPI for 20X6.

b)   What does the CR tell you about EPI’s liquidity?

7.3

a)   Calculate the Acid/ Quick Ratio (QR) for EPI for 20X6.

b)   What does the QR tell you about EPI’s liquidity?

7.4

a)   Calculate the Inventory Turnover Ratio (QR) for EPI for 20X6.

b)   What does the Inventory Turnover Ratio tell you about EPI’s efficiency?

7.5

a)   Calculate the Debtors collection period for EPI for 20X6.

b)   What does this result tell you about EPI’s efficiency?