Financial Ratios

Test Yourself—Problems and Solutions

Q 1. Following are the financial statements of AB Ltd. for 2010.

From the aforementioned table, calculate the following:

1. Current ratio
2. Liquid ratio
3. Receivables turnover ratio and collection period
4. Inventory turnover and holding period
5. Fixed assets turnover
6. Total assets turnover
7. Debt ratio
8. D/E ratio
9. Interest coverage ratio
10. PAT margin
11. ROA
12. ROE
13. EPS
14. D/P ratio
15. P/E ratio
16. Book value per share

Solution:

1. Current Ratio

The current ratio is 2.2.

where:

Total current assets = $1,100

Total current liabilities = $500 ...