Financial Ratios for JGN Enterprises

A Paper Presented to
The Faculty of College of Business and Accountancy
University of St. La Salle
Bacolod City

On partial fulfillment of the subject requirements

For Fundamentals of Accountancy and
Business Management 2

Jhoana Geen Lima

Chloe Sayson
Imea Jauod
Luzelle Glee Malubay
May Nildred Delegero
Jeofrey Dequina
Kriszel Pearl Robiso
Kate Dianne Gonzaga

1
 Table of Contents
CHAPTER 1 3

History 4
Accomplishments 5
Financial Summary 6

CHAPTER 2 7

Income Statement 8
Balance Sheet 9

CHAPTER 3 10

Liquidity Ratios 11

CHAPTER 4 12

Solvency Ratios 13

CHAPTER 5 14

Profitability Ratios 15

CHAPTER 6 16

Horizontal Analysis 17

CHAPTER 7 18

Vertical Analysis 19

CHAPTER 8 20

Over all Conclusions and Recommendations 21

2
CHAPTER 1

3
HISTORY

4
ACCOMPLISHMENTS

5
 FINANCIAL SUMMARY

2014 2015
Sales 363,562 473,846
Profit 149,361 75,018
Total Assets 7,659,551 7,426,125
Total Liabilities 1,657,935 1,953,650
Total Equity 6,001,616 5,472,515

6
CHAPTER 2

7
JGN ENTERPRISES
STATEMENT OF INCOME (LOSS)
For the year ended

2014 2015

REVENUE
Sand and Gravel 191, 066 260,746
Beauty Salon 172,496 213,100

363,562 473,846

COST OF SALES (SAND AND GRAVEL)

Merchandise Inventory, Jan 1 388,128 443,299

Purchases 81,552 -
Goods Available for Sale 469,680 443,299
Mercandise Inventory, Dec. 31 443,299 265,991
Total 26,381 177,308
Direct Labor 25,820 59,520
52,201 236,828

COST OF SERVICES (BEAUTY SALON)

Rental Expense 162,000 162,000

Total Cost of Sales 162,000 162,000

Total Cost of Sales 214,201 398,828

GROSS PROFIT

OPERATING EXPENSES
Salaries and Wages 29,525 39,510
Rent Expense 73,600 73,600
Fuel, Oil and Lubricants 4,583 7,620
Communication, Light and Water 3,254 5,620
Taxes and Licences 5,842 15,010
Supplies 8,245 8,201
Depreciation Expense 36,750 36,750

Total Administrative Expenses 161,799 186,311

Net Income (Loss) before Tax (12,438) (111,293)
Provision for Income Tax - -
Net Income (Loss) after Tax (12,438) (111,293)

8
JGN ENTERPRISES
BALANCE SHEET
AS OF DECEMBER 2014 & 2015

ASSETS 2014 2015

Current Assets
Cash on Hand and in Banks 92,841 33,201
Accounts Receivables 27,355 30,917
Inventory 443,299 265,991
Leasehold and Improvements 26,056 26,056
Total Current Assets 589,551 356,165

Noncurrent Assets
Lot and Building 1,500,000 1,500,000
Furniture and Fixture 39,750 39,750
Office Equipment 79,500 79,500
Appliances and Jewelries 470,750 470,750
Service Vehicle 2,000,000 2,000,000
Delivery Truck 3,500,000 3,500,000
Accumulated Depreciation (520,000) (520,000)
Total Noncurrent Assets 7,070,000 7,070,000

TOTAL ASSETS 7,659,551 7,426,165

LIABILITIES and CAPITAL

Liabilities
Accounts Payable 62,935 215,010
Loan Payable 1,400,000 1,400,000
Long Term Payable 195,000 338,640
Total Liabilities 1,657,935 1,953,650

TOTAL LIABILITIES 1,657,935 1,953,650

CAPITAL

Nora D. Garcia Capital, Beginning 6,214,054 6,001,616

Add: Current Net Income (Loss) (12,438) (111,293)
Additional/Drawings (200,000) (417,808)
Capital 6,001,616 5,472,515

TOTAL LIABILITIES AND CAPITAL 7,659,551 7,426,165

9
CHAPTER 3

10
 LIQUIDITY RATIOS

Change in Ratio Evaluation

Ratio Formula 2014 2015 Increase or

Decrease
Current Ratio CA N/A N/A N/A The current ratio is
CL not applicable
because there are no
current liabilities on
both years.
Quick Ratio Cash+STI+TR 0.03 0.07 Increase The quick ratio is
CL very low which
means that it is not
good because the
liability is bigger
than the asset.
Receivable Turnover NCS N/A 16.26 N/A The efficiency of the
Avg TR times enterprise to collect
amount dues from
credit is 16.26 times
in 2015.
Average Collection Period 360days N/A 22.14 N/A We cannot say if the
TR Turnover days average collection
period is favorable
since we do not know
the terms of credit.
Inventory Turnover CoGS N/A 0.82 N/A The inventory
Avg. Inventory times turnover is low which
may be because the
products are not on
demand. The owners
should make certain
moves to advertise
the products or
services offered.
Average Sales Period 360 days N/A 439 N/A The average sales
IT days period is very high
which means that it
takes time for the
enterprise to sell it’s
products.
Working Capital CA-CL N/A N/A N/A The Working Capital
is not applicable
because there are no
current liabilities for
both years.

11
CHAPTER 4

12
 SOLVENCY RATIOS

Change in Ratio Evaluation

Ratio Formula 2014 2015 Increase or

Decrease
Debt Ratio TL 0.22 0.26 Increase The debt ratio is lower
TA than 50 so it is good. It
simply means that the
enterprise’s assets are not
mostly owned by the
creditors.
Equity Ratio TE 0.74 0.78 Increase It is favorable for the
TA owner because the equity
ratio is high. The owner
owns 74% of the total
assets in the year 2014
and it increased by 78%
in 2015.
Debt to Equity Ratio TL 0.28 0.36 Increase It is favorable for the
TE owner because it is far
from the optimal fair
ratio which is 1. It means
that the owner has more
investments than the
creditors.
Times Interest Earned Income b4 Interest and N/A N/A N/A The times interest earned
Taxes ratio is not applicable
Interest Expense because the income
before interest and taxes
was not stated on both
financial statements.

13
CHAPTER 5

14
 PROFITABILITY RATIOS

Change in Evaluation
Ratio
Ratio Formula 2014 2015 Increase or
Decrease
Gross Profit Ratio Gross Profit 0.41 0.15 Decrease The gross profit ratio
Net Sales decreased which means
that the percentage of
peso sales earned
decrease and the
operating income is
much lesser.
Operating Profit Operating Income N/A N/A N/A This is not appicable
Margin Net Sales because the operating
income was not stated in
both financial statements
for both years.
Net Profit Margin Net Income (0.03) (0.23) Increase The ratio increases which
Net Sales means that the enterprise
should continue to
increase sales and cut on
expenses for them to
have an improvement on
their net income.
Return on Assets Net Income N/A 0.27 N/A The assets of the
Avg Total Assets enterprise during the year
2015 was not fully
untilized to its extent for
the business to generate
income.

15
CHAPTER 6

16
 HORIZONTAL ANALYSIS

ASSETS 2014 2015 Increase Decrease

(Amount) (%)

Current Assets
Cash on Hand and in Banks 92,841 33,201 (59,640) (64.2)
Accounts Receivables 27,355 30,917 3,562 13
Inventory 443,299 265,991 (177,308) (40)
Leasehold and Improvements 26,056 26,056 0 0
Total Current Assets 589,551 356,165 (233,386) (40)

Noncurrent Assets
Lot and Building 1,500,000 1,500,000 0 0
Furniture and Fixture 39,750 39,750 0 0
Office Equipment 79,500 79,500 0 0
Appliances and Jewelries 470,750 470,750 0 0
Service Vehicle 2,000,000 2,000,000 0 0
Delivery Truck 3,500,000 3,500,000 0 0
Accumulated Depreciation (520,000) (520,000) 0 0
Total Noncurrent Assets 7,070,000 7,070,000 0 0

TOTAL ASSETS 7,659,551 7,426,165 (233,386) (40)

LIABILITIES and CAPITAL

Liabilities
Accounts Payable 62,935 215,010 152,075 2.42
Loan Payable 1,400,000 1,400,000 0 0
Long Term Payable 195,000 338,640 143,640 73.7
Total Liabilities 1,657,935 1,953,650 295,715 17.8

TOTAL LIABILITIES 1,657,935 1,953,650 295,715 17.8

CAPITAL

Nora D. Garcia Capital, Beginning 6,214,054 6,001,616 (212,438) (3.4)

Add: Current Net Income (Loss) (12,438) (111,293) (98,855) 794.7
Additional/Drawings (200,000) (417,808) (217,808) 108
Capital 6,001,616 5,472,515 (529,101)8.8

TOTAL LIABILITIES & CAPITAL7,659,551 7,426,165 (233,386) 40

17
CHAPTER 7

18
 VERTICAL ANALYSIS

ASSETS 2014 Percent 2015 Percent

Current Assets
Cash on Hand and in Banks 92,841 1.21 33,201 0.45
Accounts Receivables 27,355 0.36 30,917 0.42
Inventory 443,299 5.79 265,991 3.58
Leasehold and Improvements 26,056 0.34 26,056 0.35
Total Current Assets 589,551 7.70 356,165 4.80

Noncurrent Assets
Lot and Building 1,500,000 19.58 1,500,000 20.20
Furniture and Fixture 39,750 0.52 39,750 0.54
Office Equipment 79,500 1.04 79,500 1.07
Appliances and Jewelries 470,750 6.15 470,750 6.34
Service Vehicle 2,000,000 26.11 2,000,000 26.93
Delivery Truck 3,500,000 45.69 3,500,000 47.13
Accumulated Depreciation (520,000) 6.79 (520,000) 7
Total Noncurrent Assets 7,070,000 92.30 7,070,000 95.20

TOTAL ASSETS 7,659,551 100 7,426,165 100

LIABILITIES and CAPITAL

Liabilities
Accounts Payable 62,935 0.82 215,010 2.90
Loan Payable 1,400,000 18.28 1,400,000 18.85
Long Term Payable 195,000 2.55 338,640 4.65
Total Liabilities 1,657,935 21.65 1,953,650 26.31

TOTAL LIABILITIES 1,657,935 21.65 1,953,650 26.31

CAPITAL

Nora D. Garcia Capital, Beg. 6,214,054 81.13 6,001,616 80.82

Add: Current Net Income (Loss) (12,438) 0.16 (111,293) 1.50
Additional/Drawings (200,000) 2.61 (417,808) 7.63
Capital 6,001,616 78.35 5,472,515 73.69

TOTAL LIABILITIES&CAPITAL 7,659,551 100 7,426,165 100

19
CHAPTER 8

20
OVER-ALL CONCLUSIONS AND RECOMMENDATIONS

21