University Finance Assignment: Ratio Analysis and Time Value of Money

This finance assignment solution addresses key concepts in business finance, including ratio analysis and time value of money calculations. The solution begins with a detailed calculation of various financial ratios, such as current ratio, acid test ratio, debt ratio, and profitability ratios, using provided balance sheet and income statement data. It then proceeds to solve market value ratio problems, calculating the price per share and price-to-book ratio. The assignment also covers future value, present value, and compound annuity calculations, providing formulas and solutions for various scenarios. These calculations involve different interest rates, compounding periods, and investment terms. The assignment is designed to provide students with a comprehensive understanding of fundamental finance concepts, including how to apply the time value of money and perform ratio analysis to assess a company's financial health.

Running Head: BUSINESS AND CORPORATION LAW 0
Fundamental of business finance
2/10/2020
Student’s Name

Fundamental of Business Finance
1
Question 1
Ratio Analysis
Formula Name Formula Calculation
Calculated
Ratio
Current ratio = Current Assets /Current
Liabailties 1775000/655000 2.71
Acid test ratio = Quick Assets/Current Liabailties 1125000/655000 1.72
Debt ratio = Total Debt/Total asstes 950000/2465000 0.39
Operating profit
margin = Operating Profit/Sales 1700000/9550000 18%
Operating return on assets = Operating income/assets 1700000/2465000 69%
Return on equity = Net Profit/Shareholder Equity 993000/860000 115%
Times interest earned
=
Earnings before interest and
tax/interest 1700000/45000 37.78
Average collection period = Average Debtors/cost of
sales * 365
725000/4866000*
365 54.38 days
Inventory turnover = Average inventory/cost of sales *
365
650000/4866000*
365 48.76 days
Fixed asset turnover
= Net Sales/Average Fixed assets 9550000/690000 13.84
Total asset turnover
= Sales/Total assets 9550000/2465000 3.87
Question 2
Market Value Ratios
Market Price Per
Share Price earning Ratio* Earning per share 11*42 462
Price/book ratio
Market Price Per Share/Book value per
share 462/17.40 26.55

Fundamental of Business Finance
2
Question 3
Future Value Calculation
Formula Calculation Future Value
FV=PV(1+r/m)^mt <=-FV(5%,5,,80000) SAR 1,02,102.53
FV=PV(1+r/m)^mt <=-FV(4%,12,,60000) SAR 7,65,293.40
FV=PV(1+r/m)^mt <=-FV(12%,4,,35500) SAR 55,859.94
FV=PV(1+r/m)^mt <=-FV(7%,15,,97000) SAR 2,67,626.06
Question 4
Present Value Calculation
Formula Calculation Present Value
PV = C1/ (1+R)^N <=-PV(5%,5,,900000)
SAR
7,05,173.55
PV = C1/ (1+R)^N <=-PV(4%,12,,478000)
SAR
2,98,557.39
PV = C1/ (1+R)^N <=-PV(12%,4,,279000)
SAR
1,77,309.54
PV = C1/ (1+R)^N <=-PV(7%,15,,440000)
SAR
1,59,476.25
Question 5
Compound annuity calculation (Future value)
Formula Calculation Future Value
P((1+r)^n)-1)/r)) <=-FV(5%,5,20000)
SAR
1,10,512.63
P((1+r)^n)-1)/r)) <=-FV(4%,12,42000)
SAR
6,31,083.83
P((1+r)^n)-1)/r)) <=-FV(12%,4,8000)
SAR
38,234.62
P((1+r)^n)-1)/r)) <=-FV(7%,15,19500)
SAR
4,90,015.93

Fundamental of Business Finance
3
Question 6
Compound annuity calculation (Present value)
Formula Calculation Future Value
P((1-(1+r)^-n)/r)) <=-PV(12%,5,20000)
SAR
72,095.52
P((1-(1+r)^-n)/r)) <=-PV(5%,12,42000)
SAR
3,72,256.57
P((1-(1+r)^-n)/r)) <=-PV(4%,4,8000)
SAR
29,039.16
P((1-(1+r)^-n)/r)) <=-PV(2%,5,19500)
SAR
91,912.46
Question 7
Formula Calculation Future Value
A = P (1+R/N)^NT FV(3%,10,,20000)
SAR
26,878.33
A = P (1+R/N)^NT FV(1%,48,,42000)
SAR
67,713.50
A = P (1+R/N)^NT FV(1%,48,,8000)
SAR
12,897.81