Questions

Scenario:

1. You have just been appointed for the job of finance executive of a company that is involved in the hypermarket industry, Tisku. Using the Tisku’s financial income and balance sheet provided here, you are required to analyze the financial performance and financial position using ration analysis.

Based on the information given in the income statement and balance sheet, calculate the following ratio for both years 2012 and 2013 and compare them to access the financial performance of Tisku.

2. As the finance executive, propose the TEN axioms if finance to your management that would affect their decision, in the relation and examples of hypermarket industry.

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Task 1

Scenario:

You have just been appointed for the job of finance executive of a company that is involved in the hypermarket industry, Tisku. Using the Tisku’s financial income and balance sheet provided here, you are required to analyze the financial performance and financial position using ration analysis.

Based on the information given in the income statement and balance sheet, calculate the following ratio for both years 2012 and 2013 and compare them to access the financial performance of Tisku.

Introduction

Ratio

In mathematics, ration is a relationship between the numbers of the same kind. A financial ratio (or accounting ratio) is a relative magnitude of two selected numerical values taken from an enterprise’s financial statements. There are many standards of ration used to try to evaluate the overall financial condition of an corporation or other organization.

Financial ratio may be used by mangers within a firm, potential shareholders (owner) of a firm and by a firm’s creditors. Financial ratio is also used to compare the strength and weakness in various companies. Values used in calculating financial ratio are taken from the balance sheet and income statement. The statements data is based on the accounting method and accounting standards used by the organization.

Types of Ratio

There are four basic types of financial ratio used to measure a company’s performance. They are:-

1. Liquidity ratio

This is the most common ratio of current assets to current liabilities. This ratio indicates a company’s ability to pay its short term bills.

1. Current assets = currents asset/ current liability
2. Acid test ratio= currents asset – inventory/ current liability
3. Return of capital employed = net profit/capital employed× 100

2. Profitability ratio

Profitability ratio indicates management ability to convert sales dollars into profit and cash flow. Gross profit = gross profit/sales×100 , net profit/sales×100