Business studies

Essay by maree11High School, 12th gradeA, March 2005

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FINANCIAL PLANNING AND MANAGEMENT ASSESSMENT 3

[A]

i) Current Ratio = $ 200 000

100 000

= 2:1

ii) Quick Liquidity Ratio = $ 200 000 - 10 000

100 000 - 20 000

= 2.38:1

iii) Debt to Equity Ratio = $ 200 000

3 000 000

= 0.07:1

iii) Gross Profit = $ 500 000 - $ 200 000

= $ 300 000

Gross Profit Ratio = $ 500 000 - 200 000 X 100

50 000

= 60:1

v) Net Profit Ratio = $ 50 000 X 100

500 000

= 10:1

vi) Return on Assets = $ 50 000

100 000

= 50:1

[B]

i) Balance Sheet - See Over Page

ii)

iii)

[C]

i) Accounting Equation is Owners Equity = Assets - Liabilities

$11 090m = $26470m - $15391m

ii) Total assets have increased overall by $612 million, from 1997 to 1998.

Although current assets decreased $599 million, non current assets increased $1 211 million.

Total liabilities decreased overall by $529 million from 1997 to 1998. The biggest decrease was $1634 million in borrowings.

Total shareholders equity increased by $1141 million. Retained profits were the most significant contributor to this increase.

iii) Current Ratio (1998) = $ 4510m

8546m

= 0.53:1

iv) Debt to Equity Ratio (1997) = 15920m

9938m

= 1.6:1

Debt to Equity Ratio (1998) = 15391m

11079m

= 1.39:1

Telstra's debt to equity has changed to a slightly better financial position

from 1997 to 1998. In 1998 the total non-current liabilities declined by

$1 811million and retained profits were main reason for the increase in

total shareholders' equity.

[D]

i) Cash generated from operations = $5635 million.

ii) The main sources of this increase were receipts from trade and other debtors.

iii) The main source of cash for Telstra is receipts from trade and other debtors.

iv) Payments of accounts payable and payments to employees use most of this cash.

v) The increase in Telstra's cash proportion over the year was $218 million.