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NATIONAL OPEN UNIVERSITY OF NIGERIA
UNIVERSITY VILLAGE, PLOT 91, CASDASTRAL ZONE, NNAMDI AZIKIWE EXPRESS WAY, JABI, ABUJA.
FACULTY OF MANAGEMENT SCIENCES
MARCH/APRIL 2015 EXAMINATION
COURSE CODE: ACC316
CREDIT UNIT: 3
COURSE TITLE: ANALYSIS OF FINANCIAL STATEMENT
TIME ALLOWED: 21/2 HOURS
Instruction: 1. Attempt question Number one (1) and any other three (3).
2. Question number 1 is compulsory and carries 25 marks, while the other questions carry 15 marks each.
3. Present all your points in coherent and orderly manner.
- Using the financial statement below, compute the ratios requested below and express in note form what each indicates:
- Current 5 marks
- Debt 5 marks
- Inventory Turnover 5 marks
- Net Operating margin 5 marks
- Return on Total Asset 5 marks
_______________________________________________________________
Statement-1 UMO Co. Ltd -Balance Sheet as at December 31, 2010
Assets N Liabilities N
Cash 70,000 Accounts payable 150,000
Marketable securities 30,000 Note payable to bank (8%) 200,000
Accounts receivable, net 450,000 Accruals 20,000
Inventories 350,000 Income tax payable 80,000
Total current assets 900,000 Total current liabilities 450,000
Mortgage Bonds (6%) 150,000
Gross plant and equipment 2,100,000 Debenture (7%) 400,000
Allowance for depreciation (500,000) Total liabilities 1,000,000
Net plant and equipment 1,600,000
Shareholder’s equity
Ordinary Shares 500,000
Retain earnings 1,000,000
Shareholder’s equity 1,500,000
Total assets 2,500,000 Liabilities plus equity 2,500,000
The annual sinking fund contribution is N25,000
Statement-2 EUA Co. Ltd –Income Statement for the year ended December 31, 2010 =======================================================
N N N N
Net Sales 5,400,000
Cost of goods sold 4,400,000
Gross Margin on sales 1,000,000
Operating expenses:
Selling 400,000
General and Administrative 130,000
Lease payment 20,000
Total operating expenses 550,000
- Operating income 450,000
Other revenues- Interest on Marketable Securities + royalties 3,000
Operating income plus other revenues 453,000
Less other expenses:
Interest on bank note 16,000
Interest on mortgage 9,000
Interest on debentures 28,000
Total interest 53,000
Net income before taxes 400,000
Income taxes (at 50%) 200,000
Net after tax income available to ordinary shareholders (net profit) 200,000
Dividends 30,000
Increase in retained earnings 170,000
(25 marks)
2. Discuss cash flow statement of a business organization. Name three basic elements of Cash flow statement and their uses. (15 marks)
3. Financial statement is a tool for management decision making in an enterprise. Discuss. (15 marks)
4. What are the basic elements of income statement? (15 marks)
5. Explain the steps of cash management of business enterprise. (15 marks)
6. List five different types of leverage and briefly explain their purposes. (15 marks)
