Name:- jamal Ali Osman class 5B

Part One: Answer the following questions (5%)

1) What are the three types of business organisations and explain their core differences?
a) Proprietorship is a business owned by one individual. This person is responsible for the firm’s policies
,owns all its assets,and is personally liable for its debts.
b) Partnership is similar to a proprietorship, except that it has more than one owner. Most partnerships are
established by a written contract between the partners.
c) Corporation is a legal entity created under provincial or federal law. It is separate from its owners and
managers.
2) Explain the primary role of engineers in business and non-business organisations?
 the primary role of engineers in business:- :- Create and Design-------Analyse ----- Evaluate
 non-business organizations
3) What are most important engineering economic decisions?
 Equipment or process selection
 Equipment replacement
 new product or product expansion
 cost reduction
 improvement in service or quality

4) Explain the engineering economic principle that states marginal revenue/benefit

must exceed marginal cost?
 marginal revenue :- benefit/revenue from the change made.
 Marginal cost :- cost attached to the change made.
5) Why most of the local construction companies don’t prepare financial statements?

6) What is the difference between these terms

a. Profit Margin, Operating Profit and Net Profit
 Profit margin:- is calculated by dividing operating income by net sales or revenue.
Operating Profit:- only covers the gross profit but do not cover taxes paid.
 Net Profit:- is the amount of money that the company has added.
b. Notes payable and accounts payable
 Notes payable:- represents a loan from bank or any other finance institution against a security.
 A ccounts payable:- refers to the amount of money which is owed by a business to it's supplier
c. Inventory and Equipment
 Inventory :- is what you sell, your merchandise.
 Equipment :- is the machinery and other equipment you use in your business
7) Explain why Assets are equal to liabilities plus equity?
 Means, any change in the amount of total assets is necessarily accompanied by an equal change on
the other side of the equation—that is, by an increase or decrease in either the liabilities or the
owners’ equity.
8) what do these statemnents tell about the business in the fiscal year?
a. Balance Sheet :-financial position of the business.
b. Income statement :-profitability of the business
c. Statement of retained earnings :-what & how did the company / business use it’sprofits
d. Statement of Cashflow :-how much cash did the business generate and spend in the fiscal year.
Name:- jamal Ali Osman class 5B

9) what is the difference between owner's equity and Stockholder's equity?

 owner's equit:- is amount received by the owner after all bedts are paid.
 Stockholder's equity:- the amount that is available to the owners after all other debts have been paid.
10) why investors, creditors and managers use financial ratios in businesses and who uses which?

Part two:-

1) How much percentage of liability Dhisme Construction Company invested in its assets in 2017?
𝑇𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦 78250
𝐷𝑒𝑏𝑡 𝑟𝑎𝑡𝑖𝑜 = = 261300 =29.9%≈ 30%
𝑇𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
2) How many times can Dhimse Construction Company pay its annual interest payment in 2017?
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑖𝑛𝑐𝑜𝑚𝑒 $38104
= = $18
𝐴𝑛𝑢𝑎𝑙 𝑖𝑛𝑡𝑟𝑒𝑠𝑡 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 $2100
3)how many times can Dhisme construction company cover its current liabilities in 2017?
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡 $167,500
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 = = = 3𝑡𝑖𝑚𝑒𝑠.
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 $54,750

4)How many times can Dhisme construction company cover its short-term liability without liquidating its inventory in
2017?
𝑪𝒖𝒓𝒓𝒆𝒏𝒕 𝒂𝒔𝒔𝒆𝒕−𝒊𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒊𝒆𝒔 𝟏𝟔𝟕,𝟓𝟎𝟎−𝟐𝟏𝟎𝟎𝟎
Quik ratio= = = 𝟐. 𝟔𝟕
𝒄𝒖𝒓𝒓𝒆𝒏𝒕 𝒍𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔 𝟓𝟒𝟕𝟓𝟎

5) how many days it takes Dhisme construction company to collect its account receivables in 2017?
𝑟𝑒𝑣𝑒𝑛𝑢𝑒 = $253,600

𝑎𝑐𝑐𝑜𝑢𝑛𝑡 𝑟𝑒𝑐𝑖𝑣𝑎𝑏𝑙𝑒 = $33,000

$253,600 $33000
= $695= =48
365 695

It takes 48days to collect account receivable of that business.

6) how well did Dhisme contruction utilized its assets for the revenue it earned in 2017?
𝑆𝑎𝑙𝑒𝑠 $253,600
Total assets turnover ratio𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 = $261,300 = 0.97=97%
Name:- jamal Ali Osman class 5B

7) how much profit did Dhisme construction get per Dollar of revenue earned in 2017?

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 $43,776

= = 0.17
𝑟𝑒𝑣𝑒𝑛𝑢𝑒 $253600
There is 0.17 profit per dollar of revenue earned in 2017.
8) how well did Dhisme Construction company utilized its assets for the profit it earned in 2017?

𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒(1 − 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒)

𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

𝑡𝑜𝑎𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝑡ℎ𝑒 𝑝𝑟𝑖𝑣𝑖𝑜𝑢𝑠 𝑦𝑟 + 𝐴𝑠𝑠𝑒𝑡𝑠 𝑜𝑓 𝑡ℎ𝑖𝑠 𝑦𝑟

𝐴𝑣𝑤𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 =
2
$261,300+$237,566
= = $249,433
2

$43,776+$2,100(1−0.1)
𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡 = =18%
$249,433

9) how much profit did the money invested in the company by its owners generate per dollar of profit earned by the
company in 2017?

10) How much percentage did the owners of Dhisme Construction Company invested in the assets of the company in
2017?