FINMAN 1 Financial Ratios and Analysis
PROBLEMS. Round all computations to the second decimal places.
sheet.
1. Robyn Company has a Days Sales Outstanding (DSO)
of 40 days. The company’s annual sales are
P7,300,000. What is the level of its accounts
receivable? Assume there are 365 days in a year.
2. Robyn Company has a Return on Assets of 10%, a 2%
profit margin, and a return on equity equal to 15%.
What is the company’s Total Assets Turnover?
3. Robyn Company has P12 million in assets, and its tax
rate is 40%. The company’s Basic Earning Power
(BEP) ratio is 15%, and its Return on Assets (ROA) is
5%. What is Robyn’s Times-Interest-Earned (TIE)
Ratio?
4. Assume you are given the following relationships for
the Robyn Company:
Sales/total assets 1.5 times
Return on Assets (ROA) 3%
Return on Equity (ROE) 5%
Calculate Robyn’s Profit Margin.
5. Robyn Company has P1,312,500 in current assets
and P525,000 in current liabilities. Its initial inventory
level is P375,000, and it will raise funds as additional
notes payable and use them to increase inventory.
How much can Robyn’s short-term debt (notes
payable) increase without pushing its current ratio
below 2.0?
6. Robyn Company has P500,000 of debt outstanding,
and it pays an interest rate of 10% annually. Robyn’s
annual sales are P2 million, its average tax rate is
30%, and its net profit margin on sales is 5%. If the
company does not maintain a TIE ratio of at least 5
times, its bank will refuse to renew the loan, and
bankruptcy will result. What is Robyn’s TIE ratio?
7. Robyn Company has P30 million in total assets. The
company’s basic earning power (BEP) ratio is 20%,
and its times-interest-earned ratio is 8.0. Robyn’s
depreciation and amortization expense totals P3.2
million. It has P2 million in lease payments and P1
million must go toward principal payments on
outstanding loans and long-term debt. What is
Robyn’s EBITDA coverage ratio?
8. Robyn Company’s ROE last year was only 3%, but its
management has developed a new operating plan
designed to improve things. The new plan calls for a
total debt ratio of 60%, which will result in interest
charges of P300,000 per year. Management projects
an EBIT of P1,000,000 on sales of P10,000,000, and it
expects to have a total assets turnover ratio of 2.0.
Under these conditions, the tax rate will be 34%. If
September 2020
Use the spaces below and at the back as your answer
the changes are made, what return on equity will the
company earn?
9. Robyn Company has P6 million in Sales. Its Return
on Equity is 12% and its Total Assets Turnover is 3.2
times. The company is 50% equity financed. What is
the company’s Net Income?
10. Net Income was P500,000 in 2017, P460,000 in 2018,
and P519,800 in 2019. What is the percentage of
change from (a) 2017 to 2018, and (b) from 2018 to
2019? Is the change an increase or a decrease?
11. If Robyn Company had Net Income of P672,300 in
2019 and it experienced a 21% increase in net
income over 2018, what its 2018 Net Income?
12. Vertical analysis percentages for Robyn Company’s
sales, cost of goods sold, and expenses are listed
here:
2019 2018 2017
Sales 100.00% 100.00% 100.00%
Cost of Goods Sold 52.20% 62.40% 64.50%
Expenses 25.00% 26.60% 27.50%
Did Robyn’s Net Income as a percent of sales
increase, decrease, or remain unchanged over the 3-
year period? Provide numerical support for your
answer.
13. Horizontal analysis percentages for Robyn
Company’s sales, cost of goods sold, and expenses
are listed here:
2019 2018 2017
Sales 96.20% 106.80% 100.00%
Cost of Goods Sold 102.00% 97.00% 100.00%
Expenses 110.60% 95.40% 100.00%
Explain whether Robyn’s Net Income increased,
decreased, or remained over the 3-year period.
14. The following data are taken from the Financial
Statements of Robyn Company:
2019 2018
Accounts Receivable, net P 560,000 P 540,000
Net Sales on account 4,800,000 4,100,000
Terms for all sales are 1/10, n/45.
Compute for each year (a) the receivables turnover
ratio and (b) the average collection period. What
conclusions about the management of Accounts
Receivable can be drawn from these data? At the
end of 2017, Accounts Receivable was P490,000.
15. The following data were taken from the income
statements of Robyn Company:
2019 2018
Sales Revenue P6,420,000 P6,240,000
Beginning Inventory 960,000 837,000
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 Purchases 4,640,000 4,661,000
Ending Inventory 1,020,000 960,000
Compute for each year (a) the inventory turnover
ratio and (b) days in inventory. What conclusions
concerning the management of the inventory can be
drawn from these data?
16. Robyn Company is one of the largest suppliers of
natural sweetener in the Pacific Rim. It had Net
Income of P490.20 million and Net Sales of
P13,181.20 million in 2019. Its total assets were
P5,721.40 million at the beginning of the year and
P6,503.00 million at the end of the year. What is
Robyn’s (a) assets turnover ratio and (b) profit
margin ratio?
7 Purchased equipment for P25,000 cash.
11 Paid P3,000 for a 3-year insurance policy.
14 Paid accounts payable of P14,000.
18 Declared cash dividends, P6,000.
Additional Information: As of February 1, 2020,
current assets were P130,000 and current liabilities
were P40,000.
Instructions: Compute the current ratio as of the
beginning of the month and after each transaction.

17. Robyn Company has Stockholders’ Equity of

P400,000 and Net Income of P56,000. It has a Payout
Ratio of 20% and a Return on Assets Ratio of 16%.
How much did Robyn pay in cash dividends, and
what were its Average Total Assets?

18. Selected data taken from the 2019 Financial

Statements of trading company, Robyn Company,
are as follows (in millions):
Net Sales for 2019 P297.30
Current Liabilities, March 1, 2018 43.40
Current Liabilities, February 28, 2019 39.50
Net Cash Provided by Operating Activities 12.00
Total Liabilities, March 1, 2018 66.20
Total Liabilities, February 28, 2019 64.20

Compute these ratios at February 28, 2019: (a)

Current Cash Debt Coverage Ratio and (b) Cash Debt
Coverage Ratio.

19. Robyn Company operates department stores in

several countries in Asia. Selected financial
statements data (in millions) for fiscal year 2019 are
presented here:
End Beginning
Cash and Its Equivalents P 476.20 P 219.30
Accounts Receivables, net 633.90 639.60
Merchandise Inventories 901.60 953.10
Other Current Assets 443.70 276.00
Total Current Assets P 2,455.40 P 2,088.00
Total Current Liabilities P 1,049.50 P 885.10
For the year, net credit sales were P6,491.70 million,
cost of goods sold was P4,214.00 million, and cash
from operations was P573.20 million.

Compute the current ratio, current cash debt

coverage ratio, receivable turnover ratio, average
collection period, inventory turnover ratio, and days
in inventory at the end of the current year.

20. Robyn Company had the following transactions

involving current assets and current liabilities during
February 2020:
Feb. 3 Collected accounts receivables of P15,000.
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