Question

From the following information calculate the following ratios (up to two decimal places):
(i) Earning per share
(ii) Price Earning Ratio
(iii) Return on Investments
(iv) Working Capital Turnover Ratio
              Particulars                                                             Rs.

Net profit after interest and tax                                       2,40,000
Tax                                                                                    1,60,000
Net Fixed Assets                                                               10,00,000
Non-current Investments (Non-Trade)                             1,00,000
Equity Share Capital (face value ` 10 per share)               5,00,000
15% Preference Share Capital 1,00,000
Reserves and Surplus (including surplus of the               2,00,000
year under consideration)
10% Debentures                                                              4,00,000
Revenue from Operations                                               10,00,000
Working Capital                                                               1,00,000
Note: The market value of an equity share is Rs. 40.

Answer 1

`"Earning per share" = ("Net Profit after Tax and Preference Dividend")/("Number of Equity Shares")`

                               ` = (2 ,40, 000 − 15, 000) / (50,000)`

                                `= (2,25,000)/(50,000) = Rs. 4.5`

`"Price Earning Ratio" = "Market value of an Equity Share"/"Earning per Share"`

                                   ` = 40/(4.5) = 8.89` times

`"Return on Investments" = "Netprofit before Interest and Tax"/"Capital Employed" xx 100`

                                         `= (2,40,000 +1,60,000 +40,000) /(11,00,000)  xx 100`

                                         `= (4,40,000)/(11,00,000) xx 100 = 40%`

`"Working Capital Turnover Ratio" = "Revenue from Operations"/"Working Capital"`

                                                             `= (10,00,000)/(1,00,000) =10` times