Financial Stability Of The Assessment Answer

Assignment Task:

Learning Outcomes 1-2 

1. Interpret financial statements for a business entity.

2. Analyze critically and evaluate business performance and position using information contained in financial statements. 
This assessment consists of two parts. Both parts to be uploaded to Canvas on 22 November 2019. 

Part 1 
Question 1 
The following details concern the business of A. Andreza, who is worried about the profitability and financial structure of her business at 31 March 2016, especially since the bank is requiring repayment of her overdraft. 

Required: 
1.1 Calculate the following ratios for 2015 and 2016. 

1.1.1 Gross profit margin.

1.1.2 Operating profit margin.

1.1.3 Rate of return on owners' equity.

1.1.4 Current ratio.

1.1.5 Acid test ratio. 

1.1.6 Gearing ratio. 

1.1.7 Accounts receivable turnover period. 

1.1.8 Accounts payable turnover period (assume all purchases on credit]. 

1 . 1 .9 Inventory, turnover period.

1.2 Write a short report to the owner. In your report:

1.2.1 Critically analyze the profitability of the business (6 marks and provide recommendations to Andreza. 

1.2.2 Critically analyze the financial stability of the business [6 marks] and provide recommendations to Andreza.

(*once 1.2.3 Critically analyze asset utilization in the business [6 marks] and provide recommendations to Andreza. 

Question 2
As explained in class the Balance Sheet provides a summary of the assets, liabilities, and equity. Managers use this summary for economic decisions. However, one could say that there are some factors that negatively impact the usefulness of the Balance Sheet. 
Required: 
Do you agree with the above statement? Briefly discuss with three supporting points. 
fig As explained in class the Balance Sheet shows Fixed and Current assets. Can you explain the importance of this separation? Support your answer with two key points. 

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