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Sample Problems On Financial Ratios: Property of STI

This document contains 3 sample problems related to financial ratios. The first problem involves evaluating the performance of 3 divisions of a company based on operating profit and average assets. The second problem involves calculating the return on assets for a construction company given its net income and change in assets over a year. The third problem involves calculating the debt ratio for a guitar shop owner applying for a new loan by examining the balance sheet.

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2K views

Sample Problems On Financial Ratios: Property of STI

This document contains 3 sample problems related to financial ratios. The first problem involves evaluating the performance of 3 divisions of a company based on operating profit and average assets. The second problem involves calculating the return on assets for a construction company given its net income and change in assets over a year. The third problem involves calculating the debt ratio for a guitar shop owner applying for a new loan by examining the balance sheet.

Uploaded by

arisu
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
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GE1715

SAMPLE PROBLEMS ON FINANCIAL RATIOS

1. The management of International Heal Medical Company is evaluating the performance of its three
(3) divisions. The Booboo Division had operating profit of ₱24,950 and on average used assets with a
book value of ₱311,900. The Splint Division had an operating profit of ₱17,500 and used average
assets of
₱177,950. The Intensive Care Division had an operating profit of ₱28,500 and average assets of
₱475,000. The company is planning to award the Intensive Care Division relying on its high operating
profit. Should the management continue with this decision? Justify your answer.

2. Charlie’s Construction Company is a growing construction business that has a few contracts to build
storefronts in Pasay. Charlie’s balance sheet shows beginning assets of ₱1,000,000 and an ending
balance of ₱2,000,000 of assets. During the current year, Charlie’s company had a net income of
₱20,000,000. Compute for the company’s return on assets and interpret the results.

3. Dave’s Guitar Shop is thinking about building an addition onto the back of its existing building for
more storage. Dave consults with his banker about applying for a new loan. The bank asks for Dave’s
balance to examine his overall debt levels. Compute for Dave’s debt ratio.

Rubric for checking:


CRITERIA POINTS
Complete solution with correct answer 5
Last two (2) major steps of the solution are incorrect 4
Half of the solution is correct 3
First two (2) major steps of the solution are correct 2
First major step of the solution is correct 1

07 Activity 2 *Property of STI


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