14.1 Introduction of Chapter 14.2 Liquidity Ratios (Formulas) Chapter 14 Accounting Ratios 14.3 Liquidity Ratios (Questions) [Ill. 1, 4, 11, 20, 22] Ill. 1 From the following, compute the Current Ratio and give your comments on it: Non-current Investment Current Investment Inventories (including Loose Tools of ) 2,80,000 Trade Receivables Sundry Debtors 1, Bills Receivables Trade Payables Sundry Creditors 1, Bills Payables Long-term Borrowings Short-term Borrowings Short-term Provision (Provision for Tax) Cash and Bank Balance 30,000 Ill. 4 Calculate Current Ratio and Quick Ratio from the following particulars and also give your comments about the same: Cash and Cash Equivalents Inventory : Raw Materials 1, Work-in-Progress 30,000 Finished Goods 1, Loose Tools Machinery Computer Software Trade Payables Trade Receivables Long-term Investments Short-term Investments Liability for current taxation Liability for future taxation Bank overdraft Dividend payable Outstanding expenses Prepaid expense Ill. 11 Calculate Current Ratio from the followings: Working Capital 45,000; Total Debt and Long-term Debt 70,000. 46,000 1, 1,70,000 2, 30,000 Ill. 20 A firm has current ratio of 3.5 : 1 and quick ratio of 2 : 1. Assuming inventory at 24,000, find out total current assets and total current liabilities. 1 Contact No. 77930-11198
Ill. 22 From the following data, calculate Quick Ratio: Working Capital 2,; Total Debts ; Long-term Debt 3,; Inventory ; Prepaid Expense. 14.4 Solvency Ratios (Formulas) 14.5 Solvency Ratios (Questions) [Ill. 38, 39, 33, 34, 41] Ill. 38 Calculate (i) Debt-Equity Ratio and (ii) Proprietary Ratio from the following data: Equity share capital 1 General reserve Profit and Loss balance () 6% Debentures Loan from ICICI 7,00,000 Current liabilities Goodwill Other Non-current assets 2 Current assets 18,00,000 Ill. 39 From the following compute: (i). Debt to Equity Ratio (ii). Total Assets to Debt Ratio (iii). Proprietary Ratio Long-term Borrowings Long-term Provisions Current Liabilities Non-current assets Current assets Ill. 33 Calculate Total Assets to Debt Ratio from the following information: 25,000 1,80,000 45,000 Shareholder s Fund Total Debts Current liabilities Ill. 34 Calculate Total Assets to Debt Ratio from the following information: Long-term Borrowings Long-term Provision Trade Payables 18,00,000 Share capital Security premium reserve General reserve Surplus i.e., Balance in Statement of P & L 1 16,00,000 () Ill. 41 From the following details obtained from the financial statements of Jeev Ltd. calculate Interest Coverage Ratio: Net Profit after tax 1, 12% Long-term Debt 20,00,000 Tax Rate 40% 2 Contact No. 77930-11198
14.6 Activity Ratios [Formulas] 14.7 Inventory Turnover Ratio [Ill 45, 47, 48, 51, 55, 59] Ill. 45 Calculate (i) Inventory Turnover Ratio (ii) Average Age of Inventory from the following: Statement of Profit and Loss for the year ended 31 st March, 2015 Note No. I. Revenue from Operation II. Expenses (i). Purchase of Stock in Trade (ii). Change in Inventories of Stock in Trade (iii). Employee Benefit Exp. (iv). Other Expenses Total Expense III. Profit before Tax (I II) 1 2 3 2, (8,000) 90,000 48,000 3,80,000 1, Notes of Accounts: 1. Change in Inventories of Stock in Trade Opening Inventory Less: Closing Inventory 2. Employee Benefit Exp. Wages Salaries 3. Other Expenses Carriage Inwards Carriage outwards Miscellaneous expense 68,000 (8,000) 58,000 32,000 90,000 15,000 13,000 48,000 Ill. 47 Opening Inventory 29,000; Closing Inventory 31,000; Revenue from Operation 3,; Gross Profit Ratio 25% on Revenue from Operations. Calculate (i) Inventory Turnover Ratio (ii) Average age of Inventory. Ill. 48 From the following, calculate Inventory Turnover Ratio: Opening Inventory 28,000 Closing Inventory 52,000 Revenue from Operation 6,00,000 Gross Profit 25% on cost of revenue from operations Ill. 51 From the following information, calculate inventory turnover ratio: Revenue from Operation 16,00,000; Average Inventory 2,; Gross Loss Ratio 5%. Ill. 55 Cash Revenue from Operations Credit Revenue from Operations 3 Contact No. 77930-11198
Gross Profit Inventory Turnover Ratio 5 Times Calculate the value of Opening and Closing Inventory in each of the following alternatives cases: 1. If closing inventory was 80,000 in excess of opening inventory. 2. If closing inventory was 3 times that in the beginning. 3. If closing inventory was 3 times more than that in the beginning. 4. If opening inventory was 1/3rd of inventory at the end. Ill. 59 Following information is given to you: I. Inventory Turnover ratio 5 times. II. Inventory at the end is 5,000 more than the inventory in the beginning. III. Revenue from operation (all credit). IV. Gross profit ratio ¼ on cost. V. Current liabilities. VI. Quick Ratio 0.75. Calculate (i) Cost of Revenue from Operation (ii) Opening Inventory and Closing Inventory, and (iii) Quick Assets and Current Assets. 14.8 Receivables Turnover Ratio [Ill. 62, 66, 67] Ill. 62 Calculate trade receivables turnover ratio from the following data: Total Revenue from Operations for the year Cash Revenue from Operations for the year Trade Receivables at the beginning of the year Trade receivables at the end of the year Ill. 66 from the following particulars, determine the trade receivables at the end of the year: Credit Revenue from Operations 17,52,000 Trade Receivables Turnover Ratio 6 times Trade receivables at the beginning of the year 2,84,000 Ill. 67 A firm made credit revenue from operations of 5, during the year. If the trade receivables turnover ratio is 9 times, calculate opening and closing trade receivables, if the closing trade receivables are more by 8,000 then the opening trade receivables. 14.9 Trade Payables Turnover Ratios [Ill. 73] Ill. 73 Calculate Trade Payables Turnover Ratio from the following information: Credit purchase during the year Purchase returns (out of credit purchase) Opening creditors Closing creditors Opening Bills Payable Closing Bills payable 6, 1, 25,000 35,000 4 Contact No. 77930-11198
14.10 Working Capital Turnover Ratios [Ill. 75, 77] Ill. 75 Compute Working Capital Turnover Ratio from the following information: Cash revenue from operations 1,30,000; credit revenue from operations 3,80,000; revenue from operations returns ; liquid assets 1,; current liabilities 1,05,000 and inventory 90,000. Ill. 77 Calculate Working Turnover Ratio from the following information: Current Assets Current Liabilities Cost of Revenue from Operations Gross Profit 1,80,000 30,000 20% of Cost 14.11 Profitability Ratios [Formulas] 14.12 Profitability Ratio (Gross Profit Ratio) [Ill. 83, 85] Ill. 83 Calculate Gross profit ratio from the following information: Opening inventories Purchases Return outwards Wages Revenue from operations Closing inventories Ill. 85 Calculate Gross profit ratio from the following information: Credit Revenue from Operations Cash Revenue from Operations (being 25% of Total revenue from operation) Purchases Excess of closing inventory over opening inventory 14.13 Profitability Ratio (Operating Ratio) [Ill. 91, 93] Ill. 91 Calculate Operating Ratio from the following information: Revenue from Operations Revenue from Operations Return Cost of Revenue from Operations Selling expenses Administrative expense Ill. 93 Calculate Operating Ratio from the following information: Net Revenue from Operations Cash Revenue from Operations Gross Profit Ratio Office & Selling expenses 5 Contact No. 77930-11198 1, 2, 3, 2, 1, 8,00,000 20%
Depreciation Loss on sale of plant 14.14 Profitability Ratio (Operating Profit Ratio) [Ill. 96, 98] Ill. 96 Calculate Operating Profit from the following information: Cash Revenue from Operations Net purchases Credit Revenue from Operations Carriage inward Finance cost Administrative expenses Profit on sale of fixed assets Discount received 2,97,000 3,000 5,000 7,000 Ill. 98 Calculate (i) G.P. Ratio, (ii) Operating Ratio (iii) Operating profit ratio and (iv) Net profit ratio from the following: Opening Inventory Closing Inventory Purchases Wages Carriage inwards Administrative exp. Selling exp. Income tax Profit on sale of fixed assets Revenue from operations 14.15 Return on Investment [Formulas] 14.16 Return on Investment Question [Ill. 105, 106, 107] Ill. 105 Calculate Return on Investment from the following details:- 4, 1 3,70,000 1, 84,000 36,000 2 Share Capital: Equity Preference General Reserve 10% Debentures Current Liabilities Net Profit (after debenture interest and Income Tax) Rate of Tax 2,70,000 80,000 50% Ill. 106 A company has a loan of 20,00,000 as part of its capital employed. The interest payable on loan is 15% and the ROI of the company is 25%. The rate of income tax is 40%. What is the gain to the shareholders due to the loan raised by the company? 6 Contact No. 77930-11198
Ill. 107 Following particulars are obtained from the books of X Ltd. as at 31 st March, 2012: Equity Shares of 10 each 12% Preference Share Capital 1, Reserve Profit & Loss Balance 15% Long Term Borrowings Long term Provisions Net Profit for the current year after payment of Interest and Tax amounted to 2,04,000. Tax rate is 40%. You are required to calculate Return on Investment (R.O.I.). 14.17 Increase/Decrease/No Change [Ill. 7, 30] Ill. 7 The Current Ratio of a company is 2 : 1. State, giving reasons which of the following transactions would (i) improve, (ii) reduce or (iii) not alter, the current ratio; (i). Repayment of a current liability. (ii). Purchasing goods on credit (iii). Sale of an office equipment for 4,000 (Book value 5,000) (iv). Sale of goods for 11,000 (Cost ) (v). Payment of dividend already declared. Ill. 30 The Debt-Equity Ratio of a company is 1 : 2. Which of the following would increase, decrease or not change it? (i). Repayment of long term borrowings of. (ii). Purchased a fixed asset for on long-term deferred payment basis. (iii). Issued new equity shares of 75,000. (iv). Declaration of final dividend already declared. (v). Goods purchased on Credit. (vi). Payment to Trade Payables. 7 Contact No. 77930-11198