Ratio Analysis: (Ans: Gross Profit: RS, 81, 000, Gross Profit Ratio: 45%)

RATIO ANALYSIS
3.99
1
GROSS PROFIT RATIO = GROSS PROFIT * 100
SALES
TRADING ACCOUNT
PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.

To Opening Stock 50,000 By Sales 2,00,000
To cost of production 80,000 Less: Return 20,000

1,80,000
To Gross Profit c/d 81,000 By Closing Stock 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 50,000 By Gross Profit b/d 2,60,000
To Selling Expenses 40,000
To Preliminary Expenses 5,000

Written Off
To Provision for Income Tax 15,000
To Net Profit c/d 1,50,000
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

SALES
= 7,00,000 * 100 = 35 %
20,00,000
= Rs. 20,00,000 - 8,00,000
= Rs. 12,00,000
NET SALES
= 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

NET SALES
= 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
= Rs. 5,60,000 – 2,01,000
= Rs. 3,59,000
OPERATING RATIO = 3,59,000 + (20000 + 89000) * 100 = 83.57%

5,60,000

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 * 100
TOTAL 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
= 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) 1.89
c) Liquidity ratio = LIQUID ASSETS
CURRENT LIABILITIES
= CURRENT ASSETS – STOCK
CURRENT LIABILITIES
= 170000- 50000
90000
= 120000
90000
= 1.333
32/3.114
a. 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 assets- current 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 assets- stock- 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

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

CURRENT LIABILITIES
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 LIABILITY
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

CURRENT LIABILITIES
= 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.25,000

Stock Turnover Ratio = Rs.2, 50,000
Rs.25,000
= 10

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 LIABILITY

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
= 2.16
ii)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

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

Rs.50,000
= 3.48

Net Credit Sales = Rs.2,52,000
= Rs.42,000 + Rs.15,000
= Rs.57,000

Rs.57,000
= 4.42
FOR 1988

CURRENT LIABILITY

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

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

Rs.60,000
= 2.93

Net Credit Sales = Rs.3,65,000
= Rs.63,000 + Rs.20,000
= Rs.83,000

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 1988
Current assets
Stock 60000 120000
Debtors 80000 160000
Cash and bank balance 60000 4000
200000 284000
Current Liabilities
Bank overdraft 0 40000
Creditors 60000 180000
Provision for tax 68000 26000
proposed dividend 20000 30000
148000 276000
Current Ratio 1.351351 1.028986
b) Quick ratio = Liquid Assets / Current liabilities

1987 1988
Liquid assets
Debtors 80000 160000
140000 164000
Current Liabilities
Bank overdraft 0 40000
Creditors 60000 180000
Provision for tax 68000 26000
proposed dividend 20000 30000
148000 276000
Current Ratio 0.945946 0.594203
c) Debt Equity ratio = Long term debt / Share holders' fund
1987 1988
Long term debt
Debentures 220000 160000
interest 17600 44000
237600 204000
Share holders' fund

Equity Shares 200000 200000
Profit 68000 26000
268000 226000
Debt equity ratio 0.886567 0.902655
d) Proprietary ratio = Share holders' funds / Total tangible assets
1987 1988
Share holders' fund
Equity Shares 200000 200000
reserves and surplus 48000 44000
248000 244000
Total tangible assets

Fixed assets 416000 396000
Stock 60000 120000
Debtors 80000 160000
616000 680000
Proprietary ratio 0.402597 0.358824
Interest coverage ratio = Profit before interest and taxes / Fixed interest
e) charges
1987 1988
Profit before interest and taxes 140800 61600
Fixed interest charges 17600 12800
Interest coverage ratio 8 4.8125
Return on share holders' funds = net profit after interest, tax / Equity share holders'
g) 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 debt
Debentures 500000
Share holders' fund

Equity Shares 1500000
reserves and surplus 600000
2100000
Debt equity ratio 0.238095
b) Current ratio = Current assets \ current liabilities
Amount
Current assets
stock 910000
book debts 1240000
investments 160000
cash 40000
2350000
Current liabilities
bank overdraft 200000
sundry creditors 1200000
1400000
Current ratio 1.678571
c) Proprietary ratio = Share holders' funds / Total tangible assets
Amount
Share holders' fund
Equity Shares 1500000
reserves and surplus 600000
2100000
Total tangible assets

Fixed assets 1650000
Stock 910000
Debtors 1240000
Cash and bank balance 40000
investment 160000
4000000
Proprietary ratio 0.525
d) Gross profit ratio = Gross profit / net sales *100
Amount
Gross profit 744000
Net sales 7440000
Gross profit ratio 10%
e) Debtors turn over ratio = net credit sales / average receivables
Amount
Net credit sales 7440000
average receivables 1240000
Debtors turn over ratio 6
f) Stock turn over ratio = Cost of goods sold / average inventory
Amount
Cost of goods sold 6696000
(7440000-744000)
Stock 910000
Stock turnover ratio 7.358242
50)
a) Current ratio = current assets / current liabilities
Amount
Current assets
stock 74500
debtors 35500
cash 15000
125000
Current liabilities
Current liabilities 65000
Current ratio 1.923077
b) Operating ratio = (cost of goods sold+ operating expenses) / net sales *100
Amount
(49750+272625-74500+7125)
Operating expenses
administration expenses 75000
selling & distribution expenses 15000
other operating expenses 7500
97500
Total 352500
Net sales 425000
Operating profit 82.94118
c) Return on networth = net profit after interest, tax / Equity share holders' funds * 100
Amount
Net
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 *100
Amount
Net
profit 75000
Tangible assets
Land and building 75000
plant and machinery 40000
stock 74500
sundry debtors 35500
cash 15000
240000
Return on total resources 31.25
e) Stock turnover ratio = cost of goods sold / average inventory

Amount
cost of goods sold 255000
Average inventory 62125
Stock turnover ratio 4.104628
f) Turnover of fixed assets = Cost of goods sold / net fixed assets

Amount
Net fixed assets 115000

(75000+40000)
Turnover of fixed assets 2.217391
51)
a) Gross profit ratio = Gross profit / net sales*100

Amount
Gross profit 68000
Net sales 170000
Gross profit ratio 40
b) Debt equity ratio = external equities / internal equities

Amount
External equities 26000
Internal equities 70000
Debt equity ratio 0.371429
c) Liquidity ratio = liquid assets / current liabilities

Amount
Liquid assets 22000
(14000+2000+6000)
Current liability 26000

(6000+16000+4000)
Liquidity ratio 0.846154
d) Fixed assets turnover = sales / net fixed assets

Amount
Sales 170000
Net fixed assets 46000

(30000+16000)
Fixed assets turnover 3.695652
e) Operating net profit ratio = net profit / sales*100
Amount
Operating 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 * 100

Amount
(500000-200000)
Operating expenses 65000
365000
Net sales 500000
Operating ratio 73
c) Operating profit ratio = operating profit / net sales * 100

Amount
Operating profit 135000

(150000+5000-20000)
Net sales 500000
27
d) Net profit ratio = net profit /net sales X100
Amount
Net
profit 150000
Net sales 500000
Net profit ratio 30
e) Expenses ratio = specific expenses / net sales*100
specific expenses
administrative 40000
selling and distribution 25000
loss on sale of assets 5000
net sales 500000
Expenses ratio administrative 8

selling &
distribution 5
loss on sale of assets 1
f) Stock turnover ratio = cost of goods sold/ average inventory

Amount
average inventory 87500
stock turnover
ratio 3.428571
Return on total resources = (net profit after tax and interest/ (total assets-ficticious
g) assets))*100
Amount
net 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 assets

Amount
net fixed assets 230000
Turnover of fixed assets 1.304348
i) Turnover of total assets = net sales/ total assets

Amount
net sales 500000
total assets 500000
Turnover of total assets 1
61.) Given Current Ratio=2.5

Given 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
=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

=2.5–1 = 1.5
Working capital = 75000

1.5=75000
Total Current assets = 75000*2.5

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

= 125000-75000
= 50000
Stock 50000
Cash-in-hand 1000
Other current assets(balancing figure) 74000
Total current assets(found) 125000

=2.5-1=1.5

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 = 240000
Proprietor’s funds = 240000
(-) reserves & surplus = 40000
Capital 200000
Fixed assets = 240000*.75

= 180000
66.) Given ratio = 2 i.e. 2/1

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

Current liabilities = 80000*1 = 80000
Liquid assets = 1.4*80000=112000

= 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 = 25000
Capital = 50000
Fixed assets = 75000*.6 = 45000
PARTICULARS AMOUNT AMOUNT
Proprietors funds:
Share capital 50000
Reserves and surplus 25000
75000
Proprietors funds represented by:
Fixed assets(A) 45000
Current assets:
Stock 48000
Other current assets 112000 160000
Less: current liabilities 80000

Working capital(B) 80000
Capital employed = A + B 125000

Less: long-term loan 50000
Proprietors funds 75000
70)
LIABILITIES RS ASSETS RS
Capital 500,000.00 Fixed Assets 600,000.00
Reserves and Surplus 250,000.00 Current Assets
Current 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
Workings
Calculation of C.A & C.L
Current ratio= 2.5 (or) 2.5/1
Current ratio= current assets/current liabilities
When current liabilities are 1, current assets are 2.5
Working capital= C.A-C.L
=2.5 -1 =1.5
Working capital = 300000= 1.5
Therefore C.A = 300000*2.5/1= 500000
C.L= 300000*1/1.5= 200000
Liquid assets and Stock

Liquid Ratio=1.5 (or) 1.5/1
Liquid Ratio= Liquid Assets/ C.L
L.A= Liquid Ratio*C.L= 1.5*200000= 300000
L.A= C.A- Stock
300000=500000- Stock
Stock= 200000
Fixed Assets
Stock turn over ratio= cost of goods sold/ avg. stock
6= cost of goods sold/ 200000
Cost of goods sold =6*200000= 1200000
Fixed Assets turn over ratio= Cost of goods sold/ Fixed assets
2= 1200000/F.A
F.A= 1200000/2= 600000
Capital and Reserves

Reserves to Capital=0.5/1
Net Worth= 0.5=1= 1.5
Capital= 7.5*(1/1.5) = 500000
Reserves= 7.5*(0.5/1.5) = 250000
71)
Capital 200,000.00 Fixed Assets 225,000.00
Reserves and Surplus 100,000.00 Current Assets
Bank 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
Workings
Calculation of C.A & C.L
Current Ratio=1.75/1
Current Ratio=C.A/ C.L
Working Capital= 75000= 1.75-1=0.75
C.A= 75000*(1.75/0.75) = 175000
C.L= 75000*(1/1.75) = 100000
Liquid assets and Stock

Liquid Ratio=1.15 (or) 1.15/1
Liquid Ratio= Liquid Assets/ C.L
L.A= Liquid Ratio*C.L= 1.15*100000= 115000
L.A= C.A- Stock
115000=175000- Stock
Stock= 60000
If Proprietor’s funds are assumed as ‘x’

x+ C.L= 0.75x +C.A
x+ 100000= 0.75x +175000
0.25x =75000; x= 300000
Fixed asset = 300000 *0.75= 225000
Capital= 300000- 100000= 200000
72)
Net worth(Capital+Reserves and Surplus) 300,000.00 Fixed Assets 180,000.00
Current Liabilities 150,000.00 Current Assets
Long 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
Sales=1500000
Net worth= 1500000/5 =300000
C.L =150000 (50% of net worth)
Fixed assets = 180000 (60% of net worth)
Stock = 1500000/10= 150000
Debtors’ 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 =300000
Total debt =180000 (60% of net worth)
Long term debt= 180000-150000= 30000
73)
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
Workings
Sales= 3600000
Total 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 = 60,000
Current 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 Cash 60,000
Long-term debt 36,000 Inventory 40,000
Total debt 60,000 Total current assets 1,00,000
Owner’s equity 1,00,000 Fixed assets 60,000
_______ _________
Total equity 1,60,000 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 = ----------------------------
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, 00,000
Debtors = ------------------
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, 42,000
average 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, 40,000

Fixed asset = 30,000
Cost of sales
Stock turnover ratio : ------------------------------
Average stock
2, 40,000
8 : ---------------
Average stock
Average stock = 30,000

/ \
Average stock: 31,000 29,000
Sales
capital 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 1,00,000 Fixed assets 30,000
Reserves & surplus 28,000 Debtors 75,000
Bills payable 2,000 Other current asset 27,333
Creditors 38,333 Stock 31,000
bills receivables 5,000
_______ _________
Total liabilities 1,68,333 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 1
Current liabilities = ----
1
= Rs.4, 00,000
Calculation of debtors :
Debt collection period = 1.5 months
Days in year
Debts = --------------------------
12
1.5 times = -----------
12
Debtor’s turnover ratio = -------- = 8 times
1.5
24, 00,000
Fixed 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, 00,000
8 = ---------------
Average receivables
Debtor’s = 3,00,000
Gross 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
= 6
Total 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

capital 4,20,000 Fixed assets 6,00,000
Reserves & surplus 80,000 Debtors 3,00,000
Borrowings 5,00,000 Other current asset 2,00,000
Current liabilities 4,00,000 Stock 3,00,000
________ _________
________ __________
77. CALCULATION
Value of fixed asset = 10, 50,000

Fixed asset turnover ratio = sales
____________
Fixed asset
2 = sales
________
10, 50,000
Sales = 21, 00,000
Debtors = 21, 00,000 . X 2
12
= 3, 50,000
Stock of raw material = 21, 00,000 x 25%
=5, 25,000
Cost of goods sold = 21, 00,000 – 5, 25,000
= 15, 75,000
Consumption of raw material = 15, 75,000 x 40%
= 6, 30,000
6, 30,000
----------- x 4
12
Stock of raw material = 2, 10,000
Stock of finished goods = 15, 75,000 x 20%

= 3, 15,000
Other 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
7
Balance Sheet
Share capital 10,00,000 Fixed assets 10,50,000
Reserves 4,00,000 Debtors 3,50,000
Long term loans 1,75,000 Stock of raw material 2,10,000
Current liabilities 5,25,000 Stock of finished goods 3,15,000
Other current asset 1,75,000
_______ _________
________ _________
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
FG
6 = 2100000
1 FG
Finished goods = 2100000

6
Finished goods = Rs 350000
c) Cost of sales = sales - gross profit ratio

2100000 =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 = 1.4

1.4x = stock of raw materials + stock of finished goods
1.4x = 210000 + 350000
X = 560000/ 1.4
X = 400000
Current liabilities = 400000
f) Debentures = 400000
BALANCE SHEET AS ON

capital 10,00,000 Fixed assets 10,50,000
reserves 2,10,000 Debtors 3,50,000
debenture 4,00,000 Stock of raw material 2,10,000
Current liabilities 4,00,000 Stock of finished goods 3,50,000
Other liquid asset 50,000
_______ _________
________ _________

Ratio Analysis: (Ans: Gross Profit: RS, 81, 000, Gross Profit Ratio: 45%)

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Ratio Analysis: (Ans: Gross Profit: RS, 81, 000, Gross Profit Ratio: 45%)

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RATIO ANALYSIS

PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.

To cost of production 80,000 Less: Return 20,000

To Gross Profit c/d 81,000 By Closing Stock 31,000

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

3.99 GROSS PROFIT RATIO = GROSS PROFIT * 100

GROSS PROFIT = SALES – PRODUCTION

X = 12 – 8 *100 = 4 * 100 = 33 .33 %

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

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

3.100 NET PROFIT RATIO = NET PROFIT * 100

PROFIT AND LOSS ACCOUNT

PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.

To Selling Expenses 40,000

To Preliminary Expenses 5,000

To Provision for Income Tax 15,000

To Net Profit c/d 1,50,000

(ANS: NET PROFIT: Rs,1, 50,000 , NET PROFIT RATIO: 30%)

3.100 OPERATING PROFIT = GROSS PROFIT – OPERATING EXPENSES

= Rs. 3,00,000 - 36,000

= 2,64,000 * 100 = 26.4%

COST OF GOODS SOLD = SALES – GROSS PROFIT

OPERATING RATIO = CGS + OPERATING EXPENSES * 100

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

(ANS: OPERATING PROFIT : Rs. 2,64,000 , OPERATING PROFIT

3.100 OPERATING PROFIT = GROSS PROFIT – OPERATING EXPENSES

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

OPERATING PROFIT RATIO = OPERATING PROFIT * 100

COST OF GOODS SOLD = SALES – GROSS PROFIT

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

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

(ANS: OPERATING PROFIT : Rs. 7,00,000 , OPERATING PROFIT

3.101 COST OF GOODS SOLD = SALES – GROSS PROFIT

OPERATING RATIO = CGS + OPERATING EXPENSES * 100

= 51,000 + 19500 * 100 = 82.94 %

(ANS: OPERATING RATIO : 82 .94%)

3.101 (A) GROSS PROFIT RATIO = GROSS PROFIT * 100

= 2,01,000 * 100 = 35.89 %

(B) NET PROFIT RATIO = NET PROFIT * 100

= 80,000 * 100 = 14.29 %

COST OF GOODS SOLD = SALES – GROSS PROFIT

= Rs. 5,60,000 – 2,01,000

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

OPERATING PROFIT RATIO = OPERATING PROFIT * 100

OPERATING PROFIT = GROSS PROFIT –OPERATING EXPENSES

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

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

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

= 400 * 100 = 40%

= 185 * 100 = 92.5 %

(D) AVG. INTEREST RATE = CREDITORS

(ANS: GROSS PROFIT RATIO : 40%,RETURN ON TOTAL ASSETS:65%

COST OF GOODS SOLD = SALES – GROSS PROFIT

= Rs. 1,64,000 – 52,000

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

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

OPERATING PROFIT = GROSS PROFIT –OPERATING EXPENSES

= Rs. 52,000 – 28000

= 24000 * 100 = 14.63 %

(C) GROSS PROFIT RATIO = GROSS PROFIT * 100

( D) SELLING AND DISTRUBTION EXPENSES RATIO = SELLING AND

= 4000 * 100 = 2.44%

X = 12 – 8 100 = 4 100 = 33 .33 %