Ratio Analysis

RATIO ANALYSIS

3.99 1

GROSS PROFIT RATIO = GROSS PROFIT * 100 SALES TRADING ACCOUNT

PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.To Opening Stock

To cost of production

To Gross Profit c/d

50,000

80,000

81,000

By Sales Less: Return

By Closing Stock

2,00,000

20,000 1,80,000

31,000

2,11,000 2,11,000

= 81,000 * 100 1, 80, 000

= 45 %

(ANS: GROSS PROFIT: RS,81, 000 , GROSS PROFIT RATIO : 45%)

3.99 GROSS PROFIT RATIO = GROSS PROFIT * 100 2 SALES

GROSS PROFIT = SALES – PRODUCTION SALES

X = 12 – 8 *100 = 4 * 100 = 33 .33 % 12 12

Y = 6 – 5 * 100 = 1 * 100 = 16 .67% 6 6

COMPANY = 18 – 13 * 100 = 5 * 100 = 27.78 % 18 18

(ANS: GROSS PROFIT RATIO: X: 33.33%, Y: 16.67% COMPANY: 27.78%)

3.100 NET PROFIT RATIO = NET PROFIT * 100 3 SALES

PROFIT AND LOSS ACCOUNT

PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.To Admin. Expenses

To Selling Expenses

To Preliminary Expenses Written Off

To Provision for Income Tax

To Net Profit c/d

50,000

40,000

5,000

15,000

1,50,000

By Gross Profit b/d 2,60,000

2,60,000 2,60,000

= 1,50,000 * 100 = 30 % 5,00,000 (ANS: NET PROFIT: Rs,1, 50,000 , NET PROFIT RATIO: 30%)

3.100 OPERATING PROFIT = GROSS PROFIT – OPERATING EXPENSES 4 = Rs. 3,00,000 - (10,000 + 20,000 + 6000) = Rs. 3,00,000 - 36,000

= Rs. 2,64,000

OPERATING PROFIT RATIO = OPERATING PROFIT * 100 SALES = 2,64,000 * 100 = 26.4% 10,00,000

COST OF GOODS SOLD = SALES – GROSS PROFIT

= Rs.10,00,000 – 3,00,000 = Rs. 7,00,000

OPERATING RATIO = CGS + OPERATING EXPENSES * 100 NET SALES

= 7,00,000 + 36000 * 100 = 73 .6% 10,00,000

(ANS: OPERATING PROFIT : Rs. 2,64,000 , OPERATING PROFIT RATIO : 26.4 % , OPERATING RATIO : 73 .6%)

3.100 OPERATING PROFIT = GROSS PROFIT – OPERATING EXPENSES 5 = Rs. 8,00,000 - (60,000 + 40,000)

= Rs. 8,00,000 - 1,00,000

= Rs. 7,00,000

OPERATING PROFIT RATIO = OPERATING PROFIT * 100 SALES = 7,00,000 * 100 = 35 % 20,00,000

COST OF GOODS SOLD = SALES – GROSS PROFIT = Rs. 20,00,000 - 8,00,000 = Rs. 12,00,000


= 12,00,000 + 1,00,000 * 100 = 65 % 20,00,000

(ANS: OPERATING PROFIT : Rs. 7,00,000 , OPERATING PROFIT RATIO : 35 % , OPERATING RATIO : 65%)

3.101 COST OF GOODS SOLD = SALES – GROSS PROFIT 6 = Rs. 85,000 - 34000 = Rs. 51,000


= 51,000 + 19500 * 100 = 82.94 % 85,000 (ANS: OPERATING RATIO : 82 .94%)

3.101 (A) GROSS PROFIT RATIO = GROSS PROFIT * 100 7 SALES = 2,01,000 * 100 = 35.89 % 5,60,000

(B) NET PROFIT RATIO = NET PROFIT * 100 SALES = 80,000 * 100 = 14.29 % 5,60,000

(C) OPERATING RATIO = CGS + OPERATING EXPENSES * 100 NET SALES

COST OF GOODS SOLD = SALES – GROSS PROFIT = Rs. 5,60,000 – 2,01,000 = Rs. 3,59,000

OPERATING RATIO = 3,59,000 + (20000 + 89000) * 100 = 83.57% 5,60,000

OPERATING PROFIT RATIO = OPERATING PROFIT * 100

SALES

OPERATING PROFIT = GROSS PROFIT –OPERATING EXPENSES

= Rs. 2,01,000 - 1,09, 000

= Rs. 92,000

OPERATING PROFIT RATIO = 92,000 * 100 = 16. 43 % 5,60,000

(ANS: GROSS PROFIT RATIO : 35.89% , NET PROFIT RATIO: 14.29%, OPERATING RATIO : 83.57% ,OPERATING PROFIT RATIO: 16.43% )

3.102 (A) GROSS PROFIT RATIO = GROSS PROFIT * 100 8 SALES

= 400 * 100 = 40% 1000

(B) RETURN ON TOTAL ASSETS = NET PROFIT AFTER TAX + INTEREST * 100TOTAL ASSESTS EXCEPT FITICOUS ASSETS

= 185 + 10 * 100 = 65 % 300

(C) RETURN ON EQUITY = NET PROFIT AFTER INTEREST, TAX & PREF. DIVIDEND * 100

EQUITY SHAREHOLDERS FUND

= 185 * 100 = 92.5 % 200 (D) AVG. INTEREST RATE = CREDITORS

INTEREST

= 100 = 10 % 10

(ANS: GROSS PROFIT RATIO : 40%,RETURN ON TOTAL ASSETS:65% RETURN ON EQUITY : 92.5%, AVG. INTEREST RATE : 10 % )

3.103 9 (A) OPERATING RATIO = CGS + OPERATING EXPENSES * 100 NET SALES

COST OF GOODS SOLD = SALES – GROSS PROFIT = Rs. 1,64,000 – 52,000 = Rs. 1,12,000

OPERATING RATIO = 1,12,000 + (4000+22800+1200) = 85.37 % 5,60,000

( B) RATIO OF OPERATING NET PROFIT = OPERATING PROFIT * 100 SALES

OPERATING PROFIT = GROSS PROFIT –OPERATING EXPENSES = Rs. 52,000 – 28000

= Rs. 24,000 = 24000 * 100 = 14.63 % 1,64,000

(C) GROSS PROFIT RATIO = GROSS PROFIT * 100 SALES

= 52,000 * 100 = 31.71% 1,64,000

( D) SELLING AND DISTRUBTION EXPENSES RATIO = SELLING AND DISTRUBTION *100 EXPENSES

NET SALES

= 4000 * 100 = 2.44% 1,64,000

(E) ADMINSTRATION EXPENSES RATIO = ADMINSTRATIVE EXPENSES * 100 NET SALES

= 22,800 * 100 = 13.90% 1,64,000 (ANS: OPERATING RATIO : 85.37%, OPERATING PROFIT RATIO: 14.63%, GROSS PROFIT RATIO : 31.71%, SELLING AND DISTRUBTION EXPENSES RATIO: 2.44%, ADMINSTRATION EXPENSES RATIO : 13.90%)

16)

Cost of sales = sales – gross profit = 2,00,000 - 70,000

= Rs.1,30,000

= 40,000 + 20,000 / 2 = Rs.30,000

= 4.33

17)

Credit sales = Total sales – Cash sales = 1,00,000 – 20,000

= Rs.80,000 Average A/c Receivables = (Op. Dr + Op. Bills Receivable) + (cl. Dr + cl. Bills receivable)/2

= (10,000 + 7,500) + (15,000 + 12,500) / 2 = 45,000 / 2 = Rs. 22,500

Debtors turnover ratio = 80,000 / 22,500 = 3.56

18)

Credit sales: Total sales 2,00,000 Less: Cash sales 40,000 Sales return 14,000 Credit sales 1,46,000

Average Accounts Receivables = 18,000+ 4,000 = 22,000 Debtors turnover ratio = 1,46,000 / 22,000 = 6.636 b) Average collection period = Days or months in the year / Drs Turnover Ratio Average collection in Days = 365 / 6.636 = 55 Average collection in months = 12 / 6.636 = 1.808

19)

Credit sales: 2006 2007 Total sales 5,80,000 6,90,000 Less: Cash sales 80,000 90,000 Credit sales 5,00,000 6,00,000

Debtors turnover ratio = 5,00,000/90,000 6,00,000/1,00,000 = 5.55 6 Average collection in Days = 365 / 5.55 365 / 6

= 65.76 60.83 Average collection in months = 12 / 5.55 OR 12 / 6 = 2.162 2

20) 1988 1987 a) Average Accounts receivables = 1,72,000 + 2,34,000/2 1,60,000+1,72,000/2 = 2,03,000 1,66,000 Debtors turnover ratio = 18,00,000/2,03,000 15,00,000/1,66,000 = 8.8669 9.036 b) Average age of debtors in days = 365/8.8669 365/9.036

= 41.15 40.38 Average age of drs in months = 12/8.87 12/9.04

= 1.35 1.33

21

Credit purchases = 3,00,000-30,000-51,000 = Rs. 2,19,000

Average accounts payable = Creditors + Bills payable = 1,05,000 + 60,000 = 1,65,000

Creditors turnover ratio = 2,19,000 / 1,65,000 = 1.3272

Average payment period = 12 / 1.3272 = 9.04 months = 365/ 1.3272 = 275 days

22)

Average accounts payable = (20,000+4,000) + (10,000+6,000) / 2 = 20,000

Creditors turnover ratio = 1,00,000/20,000= 5

Average age of accounts payable = 12/5 = 2.4months = 365/5 = 73 days

23)

Net working capital = 10,000+5,000+25,000+20,000-30,000 = 30,000 Working capital turnover ratio = 1,50,000 / 30,000

= 5

24) a) Working capital turnover ratio = SALES/ COST OF SALES NET WORKING CAPITAL

NET WORKING CAPITAL = CURRENT ASSESTS – CURRENT LIABILITIES = RS 200000 - 40000 = RS 160000 500000 = 3.125 (or) 400000 = 2.5 160000 160000

b) Fixed turnover ratio = COST OF SALES (or) SALES NET FIXED ASSETS NET FIXED ASSETS = 400000 (or) 500000 250000 250000 = 1.6 (or) 2

c) Capital turnover ratio = COST OF SALES (or) SALES CAPITAL EMPLOYED CAPITAL EMPLOYED = 400000 (or) 500000 400000 400000 = 1 (or) 1.25

25) a) Cash ratio = CASH AND BANK BALANCES + MARKETABLE SECURITIES CURRENT LIABILITIES

= 10000 166000 = 0.06 (OR) = INVESTMENT + CASH AND BANK BALANCES CURRENT LIABILITIES

= 70000 + 10000 166000 = 0.48

b) Liquidity ratio: = LIQUID (OR) QUICK ASSETS

CURRENT LIABILITIES QUICK ASSETS = CURRENT ASSETS – STOCK AND PREPAID

EXPENSES = 180000+ 70000+ 126000+ 10000+ 11000- 180000+ 11000 = 407000 – 191000 =RS 206000

= 206000 166000 =1.24

26) a) Current ratio = CURRENT ASSETS CURRENT LIABILITIES = 290000 72500 = 4 times

b) Liquidity ratio = LIQUID ASSETS CURRENT LIABILITIES LIQUID ASSETS = CURRENT ASSETS- STOCK – PREPAID EXPENSES = 290000- 80000-10000 = 200000 = 200000 72500 = 2.76 times

c) Absolute liquidity ratio = CASH & BANK BALANCES + MARKETABLE SECURITIES .

CURRENT LIABILITIES = 40000+ 60000+ 20000 72500 = 120000 72500 = 1.655 times

27) Current ratio = CURRENT ASSETS CURRENT LIABILITIES

1992 = STOCK+DEBTORS+CASH AT BANK CREDITORS+B.PAYABLE+PROVISION+ BOD = 25000+ 10000+ 5000 8000+ 2000+5000+5000 = 40000 20000

= 2 times

1993 = STOCK+DEBTORS+CASH AT BANK CREDITORS+B.PAYABLE+PROVISION+ BOD = 40000+16000+4000 15000+3000+7000+15000 = 60000 40000 = 1.5 times

28) Debt equity ratio = LONG TERM DEBTS SHARE HOLDERS FUNDS = DEBENTURES SHARE CAPITAL+ RESERVES+ PROFIT AND LOSS A/C = 500000 . 300000+ 1100000+200000+500000 = 500000 2100000 = 0.238

29) a) Debt equity ratio = LONG TERM DEBTS SHARE HOLDERS FUNDS

= SECURED LOANS . SHARE CAPITAL+ RESERVES+ P&L ACCOUNT

= 160000 . 200000+ 40000+ 60000 = .53

b) Fixed assets to current assets = FIXED ASSETS CURRENT ASSETS = 280000 200000 = 1.4 times

30) a) Current Ratio = CURRENT ASSETS CURRENT LIABILITIES = STOCK+ B. RECEIVABLES+BANK + DEBTORS+ M. SECURITIES

. TAX PROVISION+ B .PAYABLE+ BOD+CREDITORS = 600000+30000+ 200000+150000+20000 176000+ 124000+ 20000+ 80000 = 1000000 400000 = 2.5

b) Quick ratio = QUICK ASSETS CURRENT LIABILITIES = CURRENT ASSETS – STOCK & PREPAID EXPENSES CURRENT LIABILITIES = 1000000- 600000 400000 = 400000 400000 = 1

c) Proprietary Ratio = SHAREHOLDERS FUNDS TOTAL TANGIBLE ASSETS = EQUITY S CAPITAL+ PREF CAPITAL+ DEBENTURES TOTAL ASSETS – GOODWILL = 1000000+ 500000+500000 2900000- 500000 = 2000000 2400000 = .833

31) a) Debt equity ratio = LONG TERM DEBTS SHARE HOLDERS FUNDS = DEBENTURES EQUITY SHARE CAPITAL+ PREF CAPITAL+ P&L ACC = 100000 200000+ 100000+40000 =100000 340000 = 0.29

b) Current ratio = CURRENT ASSETS CURRENT LIABILITIES = STOCK + DEBTORS + BANK + BILLS RECEIVABLE CREDITORS = 50000+110000+6000+4000 90000 = 1.888 (or) 1.89c) Liquidity ratio = LIQUID ASSETS CURRENT LIABILITIES = CURRENT ASSETS – STOCK CURRENT LIABILITIES = 170000- 50000

90000 = 120000 90000 = 1.33332/3.114a. Current ratio =Current assets/Current liabilities =Stock+Debtors+Cash/Bank o/d+Creditors =500000+200000+100000/100000+200000 =2.67 b. Liquid ratio = Liquid assets/Current liabilities =current assets-sock/Current liabilities =800000-500000/300000 =1 c. Debt Equity ratio =Long term debts/Shareholders funds = 6Debentureses/Share capital+Reserves =1100000/500000+300000 =1.375 d. proprietary ratio =Shareholders funds/total tangible assets =800000/2200000 =0.36 33) a. liquid ratio =Current assets-stock-prepaid expenses = debtors+ cash/Creditors+ bank o/d =100000+27500/75000+25000 =127500/100000 =1.275 b. Proprietary ratio =Shareholders funds/Total tangible assets =Equity shares + Preference shares + Reserves /

(Building + machinery+ stock + debtors ) =250000+100000+150000/300000+250000+120000+100000+27500 =500000/797500 =0.626 c. debt equity ratio =long term funds/shareholders funds =debentures/equity share capital + Preference share capital+ reserves =200000/350000+150000 =0.4 d. capital gearing ratio =long term loans + debentures + preference share capital/equity Shareholders capital + reserves =200000+100000/250000+150000 =300000/500000

=0.75 34) a. current ratio =current assets/ current liabilities =cash + bank +b/r +investments +debtors +stock/ bank o/d +creditors + o/s creditors =2000+10000+30000+20000+70000+40000/ 40000+60000+7000+10000+20000 =172000/137000 =1.26 b. liquidity ratio=current assets-stock/current liabilities =172000-40000/137000 =0.96 c. debt equity ratio =long term funds/ shareholders funds =debentures+ public debt / equity capital+ reserves+ preference capital =40000+20000/100000+100000+150000 = 1.7 d. fixed assets ratio =fixed assets/long term fund =furniture + machinery +land& building / equity capital+ Preference Capital+7% debentures + 8% public debt + reserves + P&L a/c- preliminary expenses =300000+100000+220000/100000+100000+40000+20000+150000+ 20000+150000+20000-10000 =350000/420000 =0.83 e. fixed charges cover ratio =profit before interest and tax/ fixed charges = p & l a/c balance +last years profit + interest/ debentures Interest + debt interest =20000+15000+4400/2800+1600 =39400/4400 =8.94 35) a. working capital = current assetscurrent liabilities = stores + debtors + cash + bank + stock – (proposed Dividend + provision for taxation + creditors) = 2000+1000+500+2500+4000-1000-1000-2000 =6000

b. net capital employed = equity capital + preference capital + reserves + debentures+ bank loan- Preliminary expenses- brokerage on shares = 25000+5000+4000+8000+4000-8000-2000 =46000-10000 =36000 c. current ratio =current assets/ current liabilities = 10000/4000 =2.5 d. acid test ratio = current assetsstock- stores/current liabilities =10000-4000-2000/4000 =4000/4000 =1 e. debt equity ratio = long term funds / shareholders funds =debentures + bank loan /equity capital + pref. capital + reserves =8000+4000/25000+5000+4000 =3.53 f. fixed assets ratio = fixed assets/ long term funds- fictious assets =30000/25000+5000+4000+8000-8000-2000 =30000/36000 =0.833 36) Solvency ratios Short term solvency ratio Current ratio = current assets / current liabilities = stock + debtors + investments +cash/ creditors + b/p + Outstanding expenses = 60000+40000+30000+10000/12000+20000+2000+26000 = 140000/60000 = 2.33 =140000-60000/ 60000 =8/6 =1.33 Long term solvency ratio Debt equity ratio = long term debts/ shareholders funds

= debentures/ equity capital + preference capital + reserves =140000/100000+20000+80000 =0.7 Proprietary ratio = Shareholders funds/ tangible assets = 200000/260000+60000+40000+30000 =200000/400000 =0.5 Fixed assets ratio = fixed assets/ long term funds = 260000/ 100000+20000+80000+140000 =260000/340000 =0.76 Fixed charges ratio = Net profit before interest and tax/ interest on debentures = 40000+8400/8400 = 5.76 37. Solvency ratio for 3 years 1978 1979 1980 Liabilities side 2000000 1600000 1250000 So assets side 2000000 1600000 1250000 Solvency ratio = total debts/ total assets = current liabilities + fixed liabilities / total assets 1978 1979 1980 = 500000+400000/2000000 400000+400000/1600000 200000+400000/1250000 = 0.45 0.5 0.48

43.

i) GROSS PROFIT RATIO = GROSS PROFIT x 100 SALES

Gross Profit = Sales – Cost of Goods sold

= Rs. 25, 20,000 – Rs. 19, 20,000

= Rs. 6, 00,000

Gross Profit Ratio = Rs. 6, 00,000 x 100

Rs. 25, 20,000

= 23.81%

ii) NET PROFIT RATIO = NET PROFIT x 100 SALES

= Rs. 3, 60,000 x 100 Rs. 25, 20,000

= 14.29%

iii) RETURN ON TOTAL = NET PROFIT AFTER TAX + INTEREST x 100 ASSETS TOTAL ASSETS – FICTIOUS ASSET

Total Assets = Inventory + Other current assets + Fixed assets

= Rs. 8, 00,000 + Rs. 7, 60,000 + Rs. 14, 40,000

= Rs. 30, 00,000

Return on Total asset = Rs. 3, 60,000 + Rs. 0 x 100 Rs. 30, 00,000 – Rs. 0

= 12%

iv) INVENTORY TURNOVER = COST OF GOODS SOLD AVERAGE INVENTORY

= Rs. 19, 20,000 Rs. 8, 00,000

= 2.4 Times

v) WORKING CAPITAL TURNOVER = COST OF GOODS SOLD NET WORKING CAPITAL Net working Capital = Current Asset – Current Liabilities

= (Rs.8, 00,000+Rs.7,60,000) –Rs.6,00,000

= Rs. 9, 60,000

Working Capital Turnover = Rs. 19, 20,000 Rs. 9, 60,000

= 2.625 Times

vi) NET WORTH OF DEBT = NET WORTH DEBT = Rs. 15, 00,000 Rs. 9, 00,000

= 1.67

44.i) CURRENT RATIO = CURRENT ASSET CURRENT LIABILITY

Current asset = Stock - Rs. 30,000

Debtors - Rs. 20,000

Bills Receivable - Rs. 15,000

Cash in hand - Rs. 5,000

Rs.70,000

Current Liabilities = Creditors - Rs. 14,000

Bills Payable - Rs. 6,000

Bank Overdraft - Rs. 10,000

Rs. 30,000

Current Ratio = Rs.70,000 Rs.30,000 = 2.33

ii) LIQUID RATIO = QUICK ASSET CURRENT LIABILITIES

Quick Asset = Current Asset – Stock

= Rs.70,000 – Rs.30,000

= Rs.40,000

Current Liabilities = Rs.30,000

Liquid Ratio = Rs. 40,000 Rs. 30,000 = 1.33

iii) INVENTORY TURNOVER = COST OF GOODS SOLD RATIO AVERAGE INVENTORY

AVERAGE INVENTORY = Opening Stock + Closing Stock 2

= Rs. 20,000 + Rs. 30,000 2

= Rs. 50,000 2

= Rs. 25,000

Inventory Turnover ratio = Rs. 2,50,000 Rs. 25,000

= 10

iv) AVERAGE COLLECTION = DAYS IN A YEAR PERIOD DEBTOR TURNOVER RATIO Debtor Turnover ratio = Credit Sales Average Receivables Average Receivables = Rs. 20,000 + Rs. 15,000

= Rs. 35,000

Debtors Turnover Ratio = Rs.3,00,000 Rs.35,000

= 8.57

Average Collection Period = 360

8.57

= 42 Days

v) DEBT EQUITY RATIO = TOTAL LONG TERM DEBT SHAREHOLDERS FUND

Total Long Term Debt = Rs. 70,000

Shareholder’s Fund = Rs. 60,000 + 4,000

= Rs. 1,00,000

Debt equity ratio = Rs. 70,000 Rs. 1,00,000

= 0.70

45.

FIRM A

i) INVENTORY TURNOVER = COST OF GOODS SOLD AVERAGE INVENTORY

= Rs.60, 00,000 Rs.10,00,000

= 6 Times

ii) NET PROFIT = SALES – COST OF GOODS SOLD – MANAGEMENT EXPENSES = Rs.66,00,000 – Rs.60,00,000 – Rs.5,00,000

= Rs. 1,00,000

FIRM B

i) INVENTORY TURNOVER = COST OF GOODS SOLD AVERAGE INVENTORY

= Rs. 75, 00,000

Rs. 15, 00,000 = 5 Times

ii) NET PROFIT = SALES – COST OF GOODS SOLD –MANAGEMENT EXPENSES

= Rs. 83,25,000 – Rs.75,00,000 – Rs.7, 50,000

= Rs. 75,000

COMMENT

Firm A is more efficient due to higher Inventory Turnover Ratio, lower inventories & higher profits.

46.

FOR 1988

i) CURRENT RATIO = CURRENT ASSET CURRENT LIABILITY

Current Assets = Stock + Debtors + Bills Receivable + Advances + Cash

= Rs. 10,000 + Rs. 20,000 + Rs. 10,000 + Rs. 2,000 + Rs. 18,000.

= Rs. 60,000

Current Liabilities = Creditors + Bills payable

= Rs. 25,000 + Rs. 15,000 = Rs. 40,000

Current Ratio = Rs. 60,000 Rs. 40,000 = 1.5


Quick Assets = Current Assets – Stock

= Rs. 60,000 – Rs.10,000

= Rs. 50,000

Liquid Ratio = Rs.50,000 Rs.40,000

= 1.25

iii) STOCK TURNOVER RATIO = COST OF GOODS SOLD AVERAGE INVENTORY

Cost of goods sold = Sales – Gross Profit

= Rs.3,50,000 – Rs.70,000 = Rs.2, 80,000

Average inventory = Rs.10,000

Stock Turnover Ratio = Rs.2,80,000 Rs.10,000

= 28

iv) DEBTOR TURNOVER = NET CREDIT SALES RATIO AVERAGE RECEIVABLES Net Credit Sales = Rs.3, 50,000

Average Receivables = Debtors + Bills Receivables

= Rs.20,000 + Rs.10,000 = Rs.30,000

Debtor Turnover Ratio = Rs.3,50,000 Rs.30,000

= 11.67

iv) GROSS PROFIT RATIO = GROSS PROFIT X 100 NET SALES

= Rs.70,000 x 100 Rs.3,50,000

= 20 %

v) STOCK WORKING = STOCK . CAPITAL RATIO WORKING CAPITAL

= Rs.10,000 Rs.20,000

= 0.5

FOR 1989


Current Assets = Stock + Debtors + Advances + Cash = Rs.25,000 + Rs.20,000 + Rs.5,000 + Rs.15,000

= Rs.65,000

Current Liabilities = Creditors + Bills payable + Bank OD

= Rs.30,000 + Rs.20,000 + Rs.2000

= Rs.52,000

Current Ratio = Rs.65,000/ Rs.52,000 = 1.25



= Rs.65, 000 – Rs.25,000

= Rs.40,000

Liquid Ratio = Rs.40,000

Rs.52,000

= 0.77

iii) STOCK TURNOVER = COST OF GOODS SOLD RATIO AVERAGE INVENTORY


= Rs.3, 00,000 – Rs.50,000

= Rs.2, 50,000

Average Inventory = Rs.25,000Stock Turnover Ratio = Rs.2, 50,000 Rs.25,000

= 10

iv) DEBTOR TURNOVER = NET CREDIT SALES RATIO AVERAGE RECEIVABLES

Net Credit Sales = Rs.3, 00,000


= Rs.20,000 + Rs.5,000

= Rs.25,000

Debtor Turnover Ratio = Rs.3, 00,000 Rs.25,000 = 12

iv) GROSS PROFIT RATIO = GROSS PROFIT X 100 NET SALES

= Rs.50,000 x 100 Rs.3,00,000

= 16.67 %

v) STOCK WORKING = STOCK .

CAPITAL RATIO WORKING CAPITAL

= Rs.25,000 Rs.13,000

= 1.92

47.FOR 1987


Current Assets = Stock + Debtors + Bills Receivable +

Bank + Cash + Marketable securities

= Rs. 53,000 + Rs. 42,000 + Rs. 15,000 +

Rs. 8,000 + Rs. 10,000 + Rs.8,000

= Rs. 1,36,000

Current Liabilities = Creditors + Bills payable + provision

= Rs. 32,000 + Rs.29,000 + Rs. 2,000 = Rs. 63,000

Current Ratio = Rs. 1,36,000 Rs. 63,000 = 2.16ii)ACID TEST RATIO = QUICK ASSET CURRENT LIABILITIES


= Rs. 1,36,000 – Rs.53,000

= Rs. 83,000

Acid Test Ratio = Rs.83,000 Rs.63,000

= 1.32



= Rs.2,52,000 – Rs.78,000 = Rs.1,74,000



= 3.48

iv) DEBTOR TURNOVER = NET CREDIT SALES RATIO AVERAGE RECEIVABLES Net Credit Sales = Rs.2,52,000


= Rs.42,000 + Rs.15,000 = Rs.57,000


= 4.42

FOR 1988


Current Assets = Stock + Debtors + Bills Receivable +

Bank + Cash + Marketable securities

= Rs. 67,000 + Rs. 63,000 + Rs.20,000 +

Rs. 10,000 + Rs. 15,000 + Rs.8,000

= Rs. 1,83,000

Current Liabilities = Creditors + Bills payable + provision

= Rs. 35,000 + Rs.30,000 + Rs. 3,000 = Rs. 68,000

Current Ratio = Rs. 1,36,000 Rs. 68,000 = 2.69

ii)ACID TEST RATIO = QUICK ASSET CURRENT LIABILITIES


= Rs. 1,83,000 – Rs.67,000

= Rs. 1,16,000

Acid Test Ratio = Rs.1,16,000 Rs.68,000

= 1.69



= Rs.3,65,000 – Rs.1,89,000 = Rs.1,76,000



= 2.93

iv) DEBTOR TURNOVER = NET CREDIT SALES RATIO AVERAGE RECEIVABLES Net Credit Sales = Rs.3,65,000


= Rs.63,000 + Rs.20,000 = Rs.83,000


= 4.40

COMMENT

Current ratio of 2.16 and 2.69 and also liquid ratios of 1.32 and 1.69 indicate high liquidity. It may be necessary to reduce liquid ratio to avoid excess idle liquid funds.

48) a) Current ratio = Current assets / Current liabilities

1987 1988Current assetsStock 60000 120000Debtors 80000 160000Cash and bank balance 60000 4000

200000 284000

Current LiabilitiesBank overdraft 0 40000Creditors 60000 180000Provision for tax 68000 26000proposed dividend 20000 30000

148000 276000

Current Ratio 1.351351 1.028986

b) Quick ratio = Liquid Assets / Current liabilities

1987 1988Liquid assetsDebtors 80000 160000Cash and bank balance 60000 4000

140000 164000

Current LiabilitiesBank overdraft 0 40000Creditors 60000 180000Provision for tax 68000 26000proposed dividend 20000 30000

148000 276000

Current Ratio 0.945946 0.594203

c) Debt Equity ratio = Long term debt / Share holders' fund

1987 1988Long term debtDebentures 220000 160000interest 17600 44000

237600 204000

Share holders' fundEquity Shares 200000 200000Profit 68000 26000

268000 226000

Debt equity ratio 0.886567 0.902655

d) Proprietary ratio = Share holders' funds / Total tangible assets

1987 1988Share holders' fundEquity Shares 200000 200000reserves and surplus 48000 44000

248000 244000

Total tangible assetsFixed assets 416000 396000Stock 60000 120000Debtors 80000 160000Cash and bank balance 60000 4000

616000 680000

Proprietary ratio 0.402597 0.358824

e) Interest coverage ratio = Profit before interest and taxes / Fixed interest charges

1987 1988

Profit before interest and taxes 140800 61600

Fixed interest charges 17600 12800

Interest coverage ratio 8 4.8125

g)Return on share holders' funds = net profit after interest, tax / Equity share holders' funds * 100

1987 1988

e) Earnings per share = net profit after interest, tax / no. of equity shares

1987 1988

Net profit 68000 28000

No. of equity shares 2000 2000

EPS 34 14

49)a) Debt Equity ratio = Long term debt / Share holders' fund

Amount Long term debtDebentures 500000

Share holders' fundEquity Shares 1500000 reserves and surplus 600000

2100000

Debt equity ratio 0.238095

b) Current ratio = Current assets \ current liabilities

AmountCurrent assetsstock 910000book debts 1240000investments 160000cash 40000

2350000

Current liabilitiesbank overdraft 200000sundry creditors 1200000

1400000

Current ratio 1.678571

c) Proprietary ratio = Share holders' funds / Total tangible assets

AmountShare holders' fundEquity Shares 1500000reserves and surplus 600000

2100000

Total tangible assets

Fixed assets 1650000Stock 910000Debtors 1240000Cash and bank balance 40000investment 160000

4000000

Proprietary ratio 0.525

d) Gross profit ratio = Gross profit / net sales *100

AmountGross profit 744000

Net sales 7440000

Gross profit ratio 10%

e) Debtors turn over ratio = net credit sales / average receivables

AmountNet credit sales 7440000

average receivables 1240000

Debtors turn over ratio 6

f) Stock turn over ratio = Cost of goods sold / average inventory

AmountCost of goods sold 6696000(7440000-744000)

Stock 910000

Stock turnover ratio 7.358242

50)

a) Current ratio = current assets / current liabilities

Amount

Current assetsstock 74500debtors 35500cash 15000

125000

Current liabilitiesCurrent liabilities 65000

Current ratio 1.923077

b) Operating ratio = (cost of goods sold+ operating expenses) / net sales *100

AmountCost of goods sold 255000(49750+272625-74500+7125)

Operating expensesadministration expenses 75000selling & distribution expenses 15000other operating expenses 7500

97500Total 352500

Net sales 425000

Operating profit 82.94118

c) Return on networth = net profit after interest, tax / Equity share holders' funds * 100

AmountNet profit 75000

Equity shareholders' funds 240000(100000+45000+65000+30000)

Return on net worth 31.25

d) Return on total resources = net profit after tax and interest / tangible assets *100Amount

Net profit 75000

Tangible assetsLand and building 75000plant and machinery 40000stock 74500sundry debtors 35500cash 15000

240000

Return on total resources 31.25

e) Stock turnover ratio = cost of goods sold / average inventoryAmount

cost of goods sold 255000

Average inventory 62125

Stock turnover ratio 4.104628

f) Turnover of fixed assets = Cost of goods sold / net fixed assetsAmount

Cost of goods sold 255000

Net fixed assets 115000(75000+40000)

Turnover of fixed assets 2.217391

51)

a) Gross profit ratio = Gross profit / net sales*100Amount

Gross profit 68000

Net sales 170000

Gross profit ratio 40

b) Debt equity ratio = external equities / internal equities

AmountExternal equities 26000

Internal equities 70000

Debt equity ratio 0.371429

c) Liquidity ratio = liquid assets / current liabilitiesAmount

Liquid assets 22000(14000+2000+6000)

Current liability 26000(6000+16000+4000)

Liquidity ratio 0.846154

d) Fixed assets turnover = sales / net fixed assetsAmount

Sales 170000

Net fixed assets 46000(30000+16000)

Fixed assets turnover 3.695652

e) Operating net profit ratio = net profit / sales*100

AmountOperating net profit(30000+3000+800-1200-600) 32000

Sales 170000

Operating net profit ratio 18.82353

52)

a) Gross profit ratio = Gross profit / net sales * 100

Amount

Gross profit 200000

Net sales 500000 Gross profit ratio 40

b) Operating ratio = (cost of goods sold+ operating expenses)/net sales * 100Amount

Cost of goods sold 300000(500000-200000)Operating expenses 65000

365000

Net sales 500000

Operating ratio 73

c) Operating profit ratio = operating profit / net sales * 100Amount

Operating profit 135000(150000+5000-20000)

Net sales 500000

27

d) Net profit ratio = net profit /net sales X100

AmountNet profit 150000

Net sales 500000

Net profit ratio 30

e) Expenses ratio = specific expenses / net sales*100

specific expenses administrative 40000

selling and distribution 25000loss on sale of assets 5000

net sales 500000

Expenses ratio administrative 8selling & distribution 5loss on sale of assets 1

f) Stock turnover ratio = cost of goods sold/ average inventoryAmount


average inventory 87500

stock turnover ratio 3.428571

g)Return on total resources = (net profit after tax and interest/ (total assets-ficticious assets))*100

Amountnet profit after tax and interest 150000

total assets - ficticious assets 500000

Return on total resources 30

h) Turnover of fixed assets = cost of goods sold/ net fixed assetsAmount


net fixed assets 230000

Turnover of fixed assets 1.304348

i) Turnover of total assets = net sales/ total assetsAmount

net sales 500000

total assets 500000

Turnover of total assets 1

61.) Given Current Ratio=2.5Given Current Assets=2, 50,000

So, (a.)Current liabilities = 2, 50,000 2.5

=1, 00,000

Given acid test ratio=1.7

1.7 = liquid assets 100000 Liquid assets = 1.7*100000 = 170000 (b) Inventory Liquid assets = current assets – stock 170000 = 250000 – stock Stock (inventory) = 80000

62.) Given current ratio = 2.5, i.e. 2.5/1 =2.5-1 = 1.5 Given working capital = 90000 1.5 = 90000

Current assets = 90000*2.5 1.5 = 150000 Current liabilities = 90000* 1 2.5 = 60000 Liquid assets = 1.5*60000 = 90000

Stock = current assets-liquid assets 150000-90000 = 60000

63.) Given current ratio = 2.8, i.e. 2.8/1 =2.8-1 = 1.8

Given working capital = 162000 1.5 = 162000

Current assets = 162000*2.8 1.8 = 252000

Current liabilities = 162000* 1 1.8 = 90000

Liquid assets = 1.5*90000 = 135000

Stock = current assets – liquid assets = 252000-135000 = 117000

64.) Given current ratio = 2.5, i.e. 2.5/1 =2.5–1 = 1.5

Working capital = 75000 1.5=75000

Total Current assets = 75000*2.5 1.5 = 125000Current liabilities = 75000*1 1.5 = 50000Liquid assets = 1.5*50000 = 75000

Stock = current assets – liquid assets = 125000-75000 = 50000

Stock 50000Cash-in-hand 1000Other current assets(balancing figure) 74000Total current assets(found) 125000

65.) Given current ratio = 2.5, i.e. 2.5/1

=2.5-1=1.5 Working capital = 60000 1.5 = 60000

Current assets = 60000*2.5 = 100000 1.5 Current liabilities = 60000*1 1.5 = 40000

Liquid assets = 1.5*40000=60000

Stock = current asset – liquid asset = 100000-60000 = 40000

Fixed assets:

Given proprietary ratio = .75

FORMULA: Proprietary funds + current liabilities = fixed assets + current assets

X + 40000 = .75x + 100000 X - .75x = 100000 – 40000 .25x = 60000 x = 240000Proprietor’s funds = 240000(-) reserves & surplus = 40000Capital 200000

Fixed assets = 240000*.75 = 180000

66.) Given ratio = 2 i.e. 2/1 = 2-1=1Working capital = 80000 1 = 80000

Current assets = 80000*2 = 160000Current liabilities = 80000*1 = 80000

Liquid assets = 1.4*80000=112000

Stock = current assets – liquid assets

= 160000 – 112000 = 48000

CALCULATION OF FIXED ASSETS AND CAPITAL

Proprietor’s funds + current liabilities = fixed assets + current assets

X + 130000(80000 + 50000(long term loan) = .6x + 160000

.4x = 30000 x = 75000

Proprietors funds = 75000(-) reserves & surplus = 25000Capital = 50000

Fixed assets = 75000*.6 = 45000

PARTICULARS AMOUNT AMOUNT

Proprietors funds: Share capital Reserves and surplus

Proprietors funds represented by: Fixed assets(A)

Current assets: Stock 48000 Other current assets 112000

Less: current liabilities Working capital(B)

Capital employed = A + BLess: long-term loan

Proprietors funds

50000 25000

45000

160000

80000 80000

125000 50000

75000

75000

70)

RS RSCapital 500,000.00 Fixed Assets 600,000.00 Reserves and Surplus 250,000.00 Current AssetsCurrent Liabilities 200,000.00 Stock 200,000.00 Long Term Loans (Bal Fig) 150,000.00 Debtors+Others 300,000.00

1,100,000.00 1,100,000.00

LIABILITIES ASSETS

WorkingsCalculation of C.A & C.LCurrent ratio= 2.5 (or) 2.5/1Current ratio= current assets/current liabilitiesWhen current liabilities are 1, current assets are 2.5Working capital= C.A-C.L =2.5 -1 =1.5Working capital = 300000= 1.5Therefore C.A = 300000*2.5/1= 500000C.L= 300000*1/1.5= 200000

Liquid assets and StockLiquid Ratio=1.5 (or) 1.5/1Liquid Ratio= Liquid Assets/ C.LL.A= Liquid Ratio*C.L= 1.5*200000= 300000L.A= C.A- Stock300000=500000- StockStock= 200000

Fixed AssetsStock turn over ratio= cost of goods sold/ avg. stock6= cost of goods sold/ 200000Cost of goods sold =6*200000= 1200000Fixed Assets turn over ratio= Cost of goods sold/ Fixed assets2= 1200000/F.AF.A= 1200000/2= 600000

Capital and ReservesReserves to Capital=0.5/1Net Worth= 0.5=1= 1.5Capital= 7.5*(1/1.5) = 500000Reserves= 7.5*(0.5/1.5) = 250000

71)

RS RSCapital 200,000.00 Fixed Assets 225,000.00 Reserves and Surplus 100,000.00 Current AssetsBank OD 60,000.00 Stock 60,000.00 Other Current Liabilities 40,000.00 Debtors+Others 115,000.00

400,000.00 400,000.00

LIABILITIES ASSETS

WorkingsCalculation of C.A & C.LCurrent Ratio=1.75/1Current Ratio=C.A/ C.LWorking Capital= 75000= 1.75-1=0.75C.A= 75000*(1.75/0.75) = 175000C.L= 75000*(1/1.75) = 100000

Liquid assets and StockLiquid Ratio=1.15 (or) 1.15/1Liquid Ratio= Liquid Assets/ C.LL.A= Liquid Ratio*C.L= 1.15*100000= 115000L.A= C.A- Stock115000=175000- StockStock= 60000

If Proprietor’s funds are assumed as ‘x’x+ C.L= 0.75x +C.Ax+ 100000= 0.75x +1750000.25x =75000; x= 300000Fixed asset = 300000 *0.75= 225000Capital= 300000- 100000= 200000

72)RS RS

Net worth(Capital+Reserves and Surplus) 300,000.00 Fixed Assets 180,000.00 Current Liabilities 150,000.00 Current AssetsLong Term Loans 30,000.00 Stock 150,000.00

Debtors 100,000.00 Other Current assets 50,000.00

480,000.00 480,000.00

LIABILITIES ASSETS

Sales=1500000Net worth= 1500000/5 =300000C.L =150000 (50% of net worth)Fixed assets = 180000 (60% of net worth)Stock = 1500000/10= 150000Debtors’ velocity = net credit sale/ avg. receivables

9= 900000/ avg. receivables (net credit sale= 60% of sales)C.A= 2*C.L (Current Ratio = 2:1)C.A= 2*150000 =300000Total debt =180000 (60% of net worth)Long term debt= 180000-150000= 30000

73)RS RS

Net worth(Capital+Reserves and Surplus) 480,000.00 Fixed Assets 720,000.00 Long Term Loans 480,000.00 Inventories 180,000.00 Current Liabilities 240,000.00 Debtors 240,000.00

Liquid Assets(others) 60,000.00

1,200,000.00 1,200,000.00

LIABILITIES ASSETS

WorkingsSales= 3600000Total Assets= 1200000 (1/3 times of sales)Fixed Assets = 720000 (1/5 times of sales)C.A = 480000 (1/7.5 times of sales)Inventories = 180000 (1/20 times of sales)Debtors = 240000 (1/15 times of sales)C.L = 4.8/ 2 =240000 (Current Ratio =2)Net worth = 480000 (1/2.5 times of Total assets)Long term debt = 480000 (debt/ equity=1)

74. CALCULATION

ASSET:-

Cash = 1, 00,000 x 0 .60 = 60,000

Inventory = 1, 00,000 x 0.40 = 40,000

Total current assets = cash + inventory = 60,000+40,000 =1, 00,000

Fixed asset = 1, 00,000 x 0.60 = 60,000

Total asset = total current asset + total fixed asset = 1, 00,000 + 60,000 =1, 60,000

LIABILITIES:-

Current debt = x ____________ = 0.6 1, 00,000 Total debt = 60,000Current debt = 60,000 x 0.4 = 24,000

Long term debt = Total debt – Current debt = 60,000 - 24,000 = 36,000

Total debt = 1, 00,000 x 0.60 = 60,000

Owners equity = 1, 00,000

Total equity = Total debt + Owners equity = 60,000 + 1, 00,000 =1, 60,000

Balance Sheet

EQUITIES Rs. ASSETS Rs Current debt 24,000 Long-term debt 36,000Total debt 60,000Owner’s equity 1,00,000 _______Total equity 1,60,000 ________

Cash 60,000Inventory 40,000Total current assets 1,00,000Fixed assets 60,000 _________Total assets 1,60,000 _________

-------------------------------------------------------------------------------------------------------75) Calculation

G.P Ratio 25 % G.P: 80000 80000 Sales: --------- 25%Sales = Rs.3, 20,000

Cost of sales = sales – gross profit = 3, 20,000- 80,000

Cost of sales = Rs. 2, 40,000

Debtor’s collection period : 3 months

Debt collection period = days in the year or months -------------------------------- Debtor’s turnover ratio

12 3 = ---------------------------- Debtor’s turnover ratio

12 Debtor’s turnover ratio = ----- = 4 times 3 Credit sales Debtor’s turnover ratio = ------------------------------ Debtors + bills receivables 3, 20,000 4 = -------------------- Debtors + 5000 20,000 + 4 debtors = 3, 20,000 4 debtors = 3, 00,000 3, 00,000Debtors = ------------------ 4 Debtors: Rs.75, 000 bills receivable: 5,000

Creditor’s collection period : 2 months

12 2 = --------------------------- Creditors turnover ratio

Creditors turnover ratio = 6 times

Cost of sales = opening stock + purchases – closing stock 2, 40,000 = 29,000 + purchases – 31,000 Purchases = 2, 42,000

Credit purchase Creditor’s turnover ratio = ------------------------------ Creditor’s + bills payable

2, 42,000 6 = ------------------------------ Creditor’s + bills payable

2, 42,000average payable = --------------- 6 Average payable = 40333 Average payable – bills payable = creditors 40,333 – 2,000 = 38333 Creditors = 38333

Cost of sales Fixed asset: ----------------- Fixed asset 2,40,000 8: --------------- Fixed asset

8 fixed asset = 2, 40,000Fixed asset = 30,000

Cost of salesStock turnover ratio : ------------------------------ Average stock

2, 40,000 8 : --------------- Average stock

Average stock = 30,000

/ \Average stock: 31,000 29,000

Salescapital turnover ratio = -------------------- Capital employed 3, 20,000 2.5 = -------------------- Capital employed

3, 20,000 Capital employed : -------------- 2.5 = 1, 28,000

Capital = Capital employed - reserve and surplus = 1, 28,000 - 28,000 = 1, 00,000

Balance Sheet

LIABILITIES Rs. ASSETS Rs capital 1,00,000Reserves & surplus 28,000 Bills payable 2,000Creditors 38,333 _______Total liabilities 1,68,333 ________

Fixed assets 30,000Debtors 75,000Other current asset 27,333 Stock 31,000 bills receivables 5,000 _________Total assets 1,68,333 __________

76) Calculation of current assets and current liabilities

Current ratio given : 2 times

current asset Current ratio: ------------------ current liabilities

When current asset is 2 when current liabilities is 1

Working capital = current asset - current liabilities = 2 - 1

= 1

Working capital : 4, 00,000 = 1

400000 x 2 Current asset = ----- 1 = Rs.8, 00,000

400000 x 1Current liabilities = ---- 1 = Rs.4, 00,000

Calculation of debtors : Debt collection period = 1.5 months Days in year Debts = -------------------------- Debtor’s turnover ratio

121.5 times = ----------- Debtor’s turnover ratio

12Debtor’s turnover ratio = -------- = 8 times 1.5

24, 00,000Fixed asset turnover= ------------- = 4 times 6, 00,000

Fixed asset turnover ratio = sales ____________ Fixed asset

4 = sales ________ 6, 00,000

24,00,000 = sales

Gross profit 25%

25 ------ x 24,00,000 = 6, 00,000 100

Cost of sales: sales – gross profit : 24, 00,000- 6, 00,000 = 18, 00,000

Credit sales Debtor’s turnover ratio = ------------------------------ Average receivables 24, 00,0008 = --------------- Average receivables

Debtor’s = 3,00,000Gross profit = 25%, cost of goods sold = 75% sales = 18,00,000 x 100 ------- 75 = 24, 00,000

LIABILITIES

Net profit = 5% of turnover of sales = 5% of 24, 00,000 = 1, 20,000

Reserve = 2/3 of net profits = 2/3 of 1, 20,000 =Rs. 80,000

Sales Capital turnover = -------------------- Capital employed

24, 00,000 = -------------- 4, 00,000 = 6Total assets – current liabilities = capital employed

14, 00,000 - 4, 00,000 =10, 00,000

Share holders funds Capital gearing 1:1 = ------------------------------- Long term borrowings 5, 00,000 ------------- =1 5, 00,000

Balance Sheet

LIABILITIES Rs. ASSETS Rs capital 4,20,000Reserves & surplus 80,000 Borrowings 5,00,000 Current liabilities 4,00,000 ________Total liabilities 14,00,000 ________

Fixed assets 6,00,000Debtors 3,00,000Other current asset 2,00,000 Stock 3,00,000 _________Total assets 14,00,000 __________

77. CALCULATION

Value of fixed asset = 10, 50,000Fixed asset turnover ratio = sales ____________ Fixed asset 2 = sales ________ 10, 50,000

Sales = 21, 00,000

Debtors = 21, 00,000 . X 2

12= 3, 50,000Stock of raw material = 21, 00,000 x 25% =5, 25,000Cost of goods sold = 21, 00,000 – 5, 25,000 = 15, 75,000Consumption of raw material = 15, 75,000 x 40% = 6, 30,000

6, 30,000----------- x 412Stock of raw material = 2, 10,000

Stock of finished goods = 15, 75,000 x 20% = 3, 15,000Other current asset = 10, 50,000- 5, 25,000- 2, 10,000- 3, 15,000 = 1, 75,000

Current ratio = current asset -------------------- Current liabilities

2 = 10, 50,000 -------------------- Current liabilities

2Current liabilities = 10, 50,000

Current liabilities = 5, 25,000 Long term loans = long term loan 1 ------------------- = ---- Current liabilities 3 Long term loans 1= ------------------- =------- 525,000 3

= 525000 ------------- 3=1, 75,000

Total Asset – current liability = capital employed

= 21, 00,000 -5, 25,000- 175,000=14, 00,000

14, 00,000 ---------------- x 5 =capital = 10,00,000

7

14, 00,000 ---------------- x 2 = reserves = 4,00,000 7Balance Sheet LIABILITIES Rs. ASSETS Rs Share capital 10,00,000Reserves 4,00,000Long term loans 1,75,000Current liabilities 5,25,000

_______Total liabilities 21,00,000 ________

Fixed assets 10,50,000Debtors 3,50,000Stock of raw material 2,10,000Stock of finished goods 3,15,000Other current asset 1,75,000 _________Total assets 21,00,000 _________

78) Calculation of cost of sales: a) Fixed asset turnover ratio = cost of sales Net fixed assets 2 times = cost of sales 1050000 2 = cost of sales 1 1050000

Cost of sales = Rs 2100000

b) Finished goods turnover Ratio = cost of sales Finished goods 6 = 2100000 F G 6 = 2100000 1 F G Finished goods = 2100000 6Finished goods = Rs 350000

c) Cost of sales = sales - gross profit ratio2100000 = x - 25%Sales = 2100000 75% (100- 25%)Sales = Rs 2800000

d) Materials consumed = sales x materials consumed 2800000 x 30% Rs 840000

Materials consumed = 8400000 x 3/12 Materials consumed = 210000

e) Current ratio = 2.4 When current assets are 2.4 current liabilities will be 1

So current assets – current liabilities = 1.41.4x = stock of raw materials + stock of finished goods1.4x = 210000 + 350000X = 560000/ 1.4X = 400000 Current liabilities = 400000

f) Debentures = 400000

BALANCE SHEET AS ON

LIABILITIES Rs. ASSETS Rs capital 10,00,000reserves 2,10,000debenture 4,00,000Current liabilities 4,00,000

_______Total liabilities 20,10,000 ________

Fixed assets 10,50,000Debtors 3,50,000Stock of raw material 2,10,000Stock of finished goods 3,50,000Other liquid asset 50,000 _________Total assets 20,10,000 _________

Ratio Analysis

Documents

Transcript of Ratio Analysis