Ethio Selam Company Consolidated Balance Sheet For 2021, September 30 (ETB millions) Assets Cash and cash equivalents Br. 842,000,000 Receivables 3,599,000 Inventories 702,000,000 Film and television costs 1,162,000 Other 1,258,000 Total current costs 7,563,000 Film and television costs 5,339,000 Investments 2,270,000 Theme parks, resorts, and other property, at cost Attractions, buildings, and equipment 16,160,000 Accumulated depreciation (6,892,000) 9,718,000 Project in process 1,995,000 Land 597,000,000 Intangibles assets, net 16,117,000 Other assets 1,428,000 Total assets 25,027,000 Liabilities and stockholders’ equity Accounts payable and accrued liabilities 5,161,000 Current portion of borrowing 2,502,000 Unearned royalties 739,000,000 Total current liabilities 8,402,000 Borrowings 6,959,000 Deferred income taxes 2,833,000 Other long-term liabilities 2,377,000 Minority interest 356,000,000 Common shareholders’ equity Common shares ($.01 par value) 12,101,000 Retained earnings 12,767,000 Cumulative translation and other adjustments (28,000) Treasury shares (740,000) 24,100,000 Total liabilities and stockholders’ equity 45,0270000 • Net income, Br. 920,000,000 • Cost of goods sold, Br. 21,321,000 • Net sales, Br. 25,402,000 • Inventory on 2021 September 30, Br. 796,000,000 • Total interest expense for the year, Br. 598,000,000 Calculate the following ratios and show your computations. For calculations normally involving averages, such as average stockholders’ equity, use year-end amounts unless the necessary information is provided. 1. Current ratio. 2. Net income to average common stockholders’ equity. 3. Inventory turnover. 4. Number of days’ sales in accounts receivable (assume 365 days in 2021). 5. EPS of common

Many people receive and analyze financial information about business firms. These people include managers, employees, directors, customers, suppliers, owners, lenders, potential investors, potential creditors, brokers, regulatory authorities, among others.

Financial reporting provides useful information to users of accounting information.

Many of the users of accounting information do employ certain ratios to analyze and interpret the financial statement presented to them to enable them take decision.

This question reveals some of such ratios. Let's calculate each of them for the given company given the information provided:

1. Current Ratio: This is the ratio that shows the relationship between current assets and current liability.

Given:

Current Assets = Br. 1,547,599,000

Current Liabilities = Br. 8,402,000

Current Ratio = [tex]\frac{Current . Asset}{Current. Liabilities}[/tex]

Therefore:

Current Ratio = [tex]\frac{1,547,599,000}{8,402,000} = 184.19[/tex]

Therefore, current Ratio = 184.2 : 1

2. Net Income to Average Stakeholders' Equity: This measures success of a business in reaching this goal.

Given:

Net income = Br. 920,000,000

Common Shares = 12,101,000

Thus:

Net income/common stakeholders' equity x 100 = [tex]\frac{920,000,000}{12,101,000} \times 100 = 7602.7 \%[/tex]

3. Inventory Turnover: This measures how long a company holds merchandise inventory before selling it.

Inventory Turnover = lost of goods sold / Average Inventory

Given:

Cost of goods sold = Br. 21,321,000

Average Inventory = [tex]\frac{702,000,000 + 796,000,000}{2} = 749,000,000[/tex]

Therefore,

Inventory Turnover = [tex]\frac{21,321,000}{749,000,000} =[/tex] 0.03 times

4. Number of Day's Sales in Account Receivable: This measures how frequently a company collects its accounts.

No. of day's sales in account receivables = account receivable / Credit Sales x 365 days

Given:

Account Receivables = 3,599,000

Credit Sales (Net Sales) = 25,402,000

Thus:

No. of day's sales in account receivables = [tex]\frac{3,599,000}{25,402,000} \times 365[/tex] = 51.7 days.

5. EPS of Common Stakeholders' Equity: This measures the return on common stakeholders' equity.

EPS (Equity Per Share) of Common Share = Net Income / Average Common Stakeholders Equity

Given:

Net Income = Br. 920,000,000

Average Common Stakeholders' Equity = 12,101,000

Therefore:

EPS = [tex]\frac{920,000,000}{12,101,000}[/tex]

= Br. 76.0.

Therefore, applying the knowledge of financial reporting, using the given information for Ethio Selam Company Consolidated Balance Sheet, for 2021:

1. The current Ratio = 184.2 : 1

2. Net Income to Average Stakeholders' Equity = 7602.7%

3. Inventory Turnover = 0.03 times

4. Number of Day's Sales in Account Receivable = 51.7 days.

5. EPS (Equity Per Share) = Br. 76.0.

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