ACC212 – Financial Statement Analysis

1. Bank of Gravahan has the following data: Current ratio 1.2

Assets P10,000 BEP ratio 13.33%
Profit margin 3.0% If Panacan Bank could streamline operations, cut operating costs, and
Tax rate 40% raise net income to P300 without affecting sales or the balance sheet (the
Debt ratio 60.0% additional profits will be paid out as dividends), by how much would its
Interest rate 10.0% ROE increase?
Total assets turnover 2.0
What is Bank of Gravahan’s ICR or Times Interest Earned (TIE ratio)? 6. A firm has a profit margin of 15 percent on sales of P20,000,000. If
the firm has debt of P7,500,000, total assets of P22,500,000, and an
2. Crossing Bank Inc., has P10 million in revenue. Its ROE is 15 after-tax interest cost on total debt of 5 percent, what is the firm’s
percent and its total assets turnover is 3.5. The company is 100 ROA?
percent equity financed. What is the company’s net income?
7. Bank of Uyanguren has P5 million in total assets. The company’s
3. Ecoland Bank of Commerce has an ROE of 15 percent, a debt ratio of assets are financed with P1 million of debt and P4 million of common
40 percent, and a profit margin of 5 percent. The company’s total equity. The company’s income statement is summarized below:
assets equal P800 million. What are the company’s sales? (Assume Operating income (EBIT) P1,000,000
that the company has no preferred stock.) Interest 100,000
Earnings before taxes (EBT) P 900,000
4. Bajada Bank recently reported the following information: Taxes (40%) 360,000
Net income P500,000 Net income P 540,000
ROA 10% The company wants to increase its assets by P1 million, and it plans to
Interest expense P200,000 finance this increase by issuing P1 million in new debt. This action will
The company’s average tax rate is 40 percent. What is the company’s double the company’s interest expense but its operating income will
basic earning power (BEP)? remain at 20 percent of its total assets, and its average tax rate will
remain at 40 percent. If the company takes this action, which of the
5. Panacan Bank has the following data: following will occur:
Net income P240 a. The company’s net income will increase.
Revenue P10,000 b. The company’s return on assets will fall.
Total assets P6,000 c. The company’s return on equity will remain the same.
Debt ratio 75% d. Statements a and b are correct.
TIE ratio 2.0

COMPREHENSIVE. The financial statements of Dumalag Bank appear below:

Dumalag BANK Dumalag BANK

Comparative Balance Sheet Income Statement
December 31, For the Year Ended December 31, 2019

Assets 2019 2018 Total Interest Income P360,000

Cash P 35,000 P 40,000 Total Interest Expense 198,000
Short-term investments 15,000 60,000 Net Interest Income 162,000
Loan receivable (net) 50,000 30,000 Expenses
Intangible Asset 50,000 70,000 Administrative expenses P59,000
Property, plant and equipment (net) 250,000 300,000 Provision for loan losses 40,000
Total assets P400,000 P500,000 Interest expense 12,000
Total expenses 111,000
Liabilities and stockholders' equity Income before income taxes 51,000
Demand Deposit P 10,000 P 30,000 Income tax expense 15,000
Short-term NOW Accounts 40,000 90,000 Net income P 36,000
Bonds payable 88,000 160,000
Common stock 160,000 145,000
Retained earnings 102,000 75,000
Total liabilities and stockholders' equity P400,000
P500,000

Additional information:
a. Cash dividends of P9,000 were declared and paid in 2019.
b. Weighted-average number of shares of common stock outstanding during 2019 was 30,000 shares.
c. Market value of common stock on December 31, 2019, was P21 per share.
d. Assume that loan receivables for 2019 is 20% noncurrent and 80% current, and for 2018 50% is current.
e. Bonds payable are still to mature on 2029.

PROVIDE THE FOLLOWING RATIOS:

1. Quick Ratio 5. Basic Earnings Power Ratio 10. Return on Assets
2. Cash balance to total liabilities 6. Equity Multiplier 11. Return on Equity
Ratio 7. Earnings per share 12. Price to Earnings Ratio
3. Debt to Equity Ratio 8. Gross Profit Margin
4. Tie Ratio 9. Net Profit Margin

Please note that for items with a numerator from income statement and a denominator from the balance sheet, average the denominator before
dividing. For example, net income divided by assets, that is P36,000 divided by ((P400,000+500,000) divided by 2)