SSCE HSC Business Studies Financial management strategies: Balance Sheet for Chalker Pty Lt

Balance Sheet for Chalker Pty Ltd as at year ending 30 June 2012 Current Assets Cash $ 8 000 Receivables 12 000 Inventories 15 000 Non-Current Assets Property, Plant and Equipment 33 000 Total Assets 68 000 Current Liabilities Creditors 14 000 Non-Current Liabilities Loan 20 000 Owners Equity Capital 15 000 Retained Net Profit 19 000 Total Liabilities and Owners Equity 68 000 (a) Calculate the current ratio (current assets ÷ current liabilities) of this business - HSC - SSCE Business Studies - Question 22 - 2012 - Paper 1

Question 22

Balance-Sheet-for-Chalker-Pty-Ltd---as-at-year-ending-30-June-2012----Current-Assets---Cash---$-8-000---Receivables---12-000---Inventories---15-000----Non-Current-Assets---Property,-Plant-and-Equipment---33-000----Total-Assets---68-000----Current-Liabilities---Creditors---14-000----Non-Current-Liabilities---Loan---20-000----Owners-Equity---Capital---15-000---Retained-Net-Profit---19-000----Total-Liabilities-and-Owners-Equity---68-000----(a)-Calculate-the-current-ratio-(current-assets-÷-current-liabilities)-of-this-business-HSC-SSCE Business Studies-Question 22-2012-Paper 1.png

Balance Sheet for Chalker Pty Ltd as at year ending 30 June 2012 Current Assets Cash $ 8 000 Receivables 12 000 Inventories 15 000 Non-Current As... show full transcript

Worked Solution & Example Answer:Balance Sheet for Chalker Pty Ltd as at year ending 30 June 2012 Current Assets Cash $ 8 000 Receivables 12 000 Inventories 15 000 Non-Current Assets Property, Plant and Equipment 33 000 Total Assets 68 000 Current Liabilities Creditors 14 000 Non-Current Liabilities Loan 20 000 Owners Equity Capital 15 000 Retained Net Profit 19 000 Total Liabilities and Owners Equity 68 000 (a) Calculate the current ratio (current assets ÷ current liabilities) of this business - HSC - SSCE Business Studies - Question 22 - 2012 - Paper 1

Step 1

Calculate the current ratio (current assets ÷ current liabilities) of this business. Show all working.

96%

114 rated

Answer

To calculate the current ratio, use the formula:

Current Ratio = \frac{Current Assets}{Current Liabilities}

First, find the total current assets:

Cash: $8,000
Receivables: $12,000
Inventories: $15,000

Total Current Assets = $8,000 +$ 12,000 + $15,000 =$ 35,000

Now, the current liabilities are given as:

Creditors: $14,000

Now we can substitute these values into the formula:

Current Ratio = \frac{35,000}{14,000} \approx 2.5

Thus, the current ratio of the business is approximately 2.5.

Step 2

Calculate the debt to equity ratio (total liabilities ÷ total equity) of this business. Show all working.

99%

104 rated

Answer

To calculate the debt to equity ratio, use the formula:

Debt\, to\, Equity\, Ratio = \frac{Total\, Liabilities}{Total\, Equity}

First, compute total liabilities:

Current Liabilities (Creditors): $14,000
Non-Current Liabilities (Loan): $20,000

Total Liabilities = $14,000 +$ 20,000 = $34,000

Next, compute total equity:

Capital: $15,000
Retained Net Profit: $19,000

Total Equity = $15,000 +$ 19,000 = $34,000

Now, substitute these values into the formula:

Debt\, to\, Equity\, Ratio = \frac{34,000}{34,000} = 1

Thus, the debt to equity ratio of the business is 1.

Calculate the current ratio (current assets ÷ current liabilities) of this business. Show all working.

Calculate the debt to equity ratio (total liabilities ÷ total equity) of this business. Show all working.

Join the SSCE students using SimpleStudy...