You are required to calculate the following Ratios for the company and advise the company appropriately on their investment decision.

Here are the calculations for the requested ratios and break-even points. Part 1: Ratio Analysis First, let's identify the necessary components from the Balance Sheet and additional information. Current Assets: Stock (N 80,000) + Debtor (N 45,000) + Cash (N 17,000) + Misc. current assets (N 8,000) = N 150,000 Current Liabilities: Creditor (N 40,000) + Bills payable (N 20,000) + Other current liabilities (N 2,000) = N 62,000 Liquid Assets (Quick Assets): Current Assets - Stock = N 150,000 - N 80,000 = N 70,000 Proprietor's Fund (Equity): Share capital (N 200,000 - assuming this to match total liabilities) + Reserves and surplus (N 58,000) = N 258,000 External Liabilities: Debentures (N 100,000) + Current Liabilities (N 62,000) = N 162,000 Cost of Goods Sold (COGS): Sales (N 400,000) - Gross Profit (N 160,000) = N 240,000 i. Current ratio Step 1: State the formula and substitute values. Current Ratio = Current AssetsCurrent Liabilities = N 150,000N 62,000 Step 2: Calculate the ratio. Current Ratio ≈ 2.42:1 Advice: A current ratio of 2.42:1 indicates strong short-term liquidity, suggesting the company can comfortably meet its short-term obligations. ii. Inventory turnover Step 1: State the formula and substitute values (assuming closing inventory is average inventory). Inventory Turnover = Cost of Goods SoldAverage Inventory = N 240,000N 80,000 Step 2: Calculate the turnover. Inventory Turnover = 3 times Advice: An inventory turnover of 3 times suggests that the company sells and replaces its inventory three times a year, which needs to be compared to industry benchmarks for a full assessment. iii. Proprietor's fund to Liabilities Step 1: State the formula and substitute values. Proprietor's Fund to Liabilities = Proprietor's FundExternal Liabilities = N 258,000N 162,000 Step 2: Calculate the ratio. Proprietor's Fund to Liabilities ≈ 1.59:1 Advice: This ratio indicates that the owners' equity is significantly higher than external debt, suggesting a strong financial structure and lower financial risk for investors. iv. Quick or liquid ratio Step 1: State the formula and substitute values. Quick Ratio = Liquid AssetsCurrent Liabilities = N 70,000N 62,000 Step 2: Calculate the ratio. Quick Ratio ≈ 1.13:1 Advice: A quick ratio of 1.13:1 shows good immediate liquidity, meaning the company can cover its current liabilities without relying on inventory sales. v. Average collection period Step 1: State the formula and substitute values (assuming 365 days in a year). Average Collection Period = (Average DebtorsCredit Sales) × 365 days = (N 45,000N 400,000) × 365 days Step 2: Calculate the average collection period. Average Collection Period ≈ 41.06 days Advice: An average collection period of approximately 41 days indicates how long it takes to collect receivables, which should be evaluated against the company's credit terms. --- QUESTION THREE (3) 3a. Break-even analysis for a company that sales toy guns in Jos city Given: Sales = N 200,000 Variable cost = N 120,000 Fixed cost = N 30,000 First, calculate the Contribution Margin (CM) and P/V Ratio: CM = Sales - Variable Cost = N 200,000 - N 120,000 = N 80,000 P/V Ratio = CM / Sales = N 80,000 / N 200,000 = 0.4 a) Break-even point Step 1: State the formula and substitute values. Break-even Point (in Sales Value) = Fixed CostP/V Ratio = N 30,0000.4 Step 2: Calculate the break-even point. Break-even Point = N 75,000 b) New Break-even point if selling price is reduced by 10% Step 1: Calculate the new P/V Ratio. Original Variable Cost Ratio = Variable Cost / Sales = N 120,000 / N 200,000 = 0.6. If selling price is reduced by 10%, the new selling price per unit is 0.9 × Original SP. The variable cost per unit remains the same. New P/V Ratio = (0.9 × SP) - VC0.9 × SP = 0.9 × SP - 0.6 × SP0.9 × SP = 0.3 × SP0.9 × SP = (0.3)/(0.9) = (1)/(3) Step 2: Calculate the new break-even point. New Break-even Point = Fixed CostNew P/V Ratio = N 30,0001/3 New Break-even Point = N 90,000 c) New Break-even point if variable cost increases by 10% Step 1: Calculate the new variable cost and new P/V Ratio. New Variable Cost = N 120,000 × (1 + 0.10) = N 132,000 New Contribution Margin = N 200,000 - N 132,000 = N 68,000 New P/V Ratio = N 68,000 / N 200,000 = 0.34 Step 2: Calculate the new break-even point. New Break-even Point = Fixed CostNew P/V Ratio = N 30,0000.34 New Break-even Point ≈ N 88,235.29 d) New Break-even point if fixed cost increases by 10% Step 1: Calculate the new fixed cost. New Fixed Cost = N 30,000 × (1 + 0.10) = N 33,000 The P/V Ratio remains 0.4. Step 2: Calculate the new break-even point. New Break-even Point = New Fixed CostP/V Ratio = N 33,0000.4 New Break-even Point = N 82,500 --- 3b. Profitability data for a management consultant Given: Fixed expenses = N 4,000 Break-even point (Sales Value) = N 10,000 i. P/V ratio Step 1: State the formula and substitute values. P/V Ratio = Fixed ExpensesBreak-even Point (Sales Value) = N 4,000N 10,000 Step 2: Calculate the P/V Ratio. P/V Ratio = 0.4 or 40\% ii. Profit when sales are N 20,000 Step 1: State the formula and substitute values. Profit = (Sales × P/V Ratio) - Fixed Expenses Profit = (N 20,000 × 0.4) - N 4,000 Step 2: Calculate the profit. Profit = N 8,000 - N 4,000 = N 4,000 iii. New break-even point if selling price is reduced by 20% Step 1: Calculate the new P/V Ratio. Original P/V Ratio = 0.4, which means Variable Cost is 60% of Sales (1 - 0.4). Let original Selling Price per unit be SP and Variable Cost per unit be VC. So, VC = 0.6 × SP. If selling price is reduced by 20%, New SP = 0.8 × SP. Variable cost per unit remains the same. New P/V Ratio = New SP - VCNew SP = 0.8 × SP - 0.6 × SP0.8 × SP = 0.2 × SP0.8 × SP = 0.25 Step 2: Calculate the new break-even point. New Break-even Point = Fixed ExpensesNew P/V Ratio = N 4,0000.25 New Break-even Point = N 16,000 What's next? Send 'em! 📸