VU WORLD: MGT201 1st ASSIGNMENT Solution LAST DATE NOVEMBER 27th 2015

Friday, 27 November 2015

	*Answer Part 1:*	Fahad stitching unit
		Balance sheet
		As on 31st December 2014

Assets	Rs.	Liabilities and Owner's Equity	Rs.
Cash(W-5)	50,000	Notes and Payables	100,000
Accounts Receivable(W-4)	50,000	Long term debt (W-1)	100,000
Inventory(W-3)	100,000	Common Stock	100,000
Plant and Equipment(Balance Figure)	200,000	Retained Earnings	100,000
Total Assets(W-2)	400,000	Total Liabilities and shareholder's Equity(W-2)	400,000

Workings:

W-1:

Long-term debt/ Equity = 0.5

Long-term debt/200,000=0.5

Long-term debt = 100,000

W-2:

Now,

Total liabilities and shareholders' equity = 400,000

So, Total assets = 400,000

W-3:

Assets turnover ratio is:

Sales/ Total assets = 2.5

Sales/400,000=2.5

Sales = 1,000,000

Since Gross Profit Margin is 10%

So,

CGS=90% of sales

=900,000

Now, Inventory turnover ratio is

Cost of goods sold/ Inventory = 9

900,000/Inventory =9

900,000/9= Inventory

100,000= Inventory

W-4:

Average Collection period is:

Accounts Receivable x 360 days/Sales = 18 days

Accounts Receivable x 360 days/100,000 = 18 days

Accounts Receivable = 50,000

W-5:

Acid test Ratio is:

Cash + 50,000/100,000 = 1

Cash +50,000=100,000

Cash =50,000

Solution of Fall MGT 201 Assignment No.1

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