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Question
Debt to Capital Employed ratio is 0.3:1. State whether the following transaction, will improve, decline or will have no change on the Debt to Capital Employed Ratio. Also give a reason for the same.
Tax Refund of ₹ 50,000 during the year.
Options
Ratio will improve.
Ratio will decline.
Ratio has no change.
Solution
Ratio will decline.
Reason – Capital Employed will increase but Debt will remain the same.
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Long Answer Question
What are important profitability ratios? How are these worked out?
Current liabilities of a company are Rs 75,000. If current ratio is 4:1 and liquid ratio is 1:1, calculate value of current assets, liquid assets and inventory.
Current Assets are ₹ 7,50,000 and Working Capital is ₹ 2,50,000. Calculate Current Ratio.
State giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2:1:
(a) Cash paid to Trade Payables.
(b) Bills Payable discharged.
(c) Bills Receivable endorsed to a creditor.
(d) Payment of final Dividend already declared.
(e) Purchase of Stock-in-Trade on credit.
(f) Bills Receivable endorsed to a Creditor dishonoured.
(g) Purchases of Stock-in-Trade for cash.
(h) Sale of Fixed Assets (Book Value of ₹50,000) for ₹45,000.
(i) Sale of FIxed Assets (Book Value of ₹50,000) for ₹60,000.
From the following information, calculate Debt to Equity Ratio:
| ₹ | |
| 10,000 Equity Shares of ₹ 10 each fully paid | 1,00,000 |
| 5,000; 9% Preference Shares of ₹ 10 each fully paid | 50,000 |
| General Reserve | 45,000 |
| Surplus, i.e., Balance in Statement of Profit and Loss | 20,000 |
| 10% Debentures | 75,000 |
| Current Liabilities | 50,000 |
On the basis of the following information, calculate Total Assets to Debt Ratio:
|
Particulars |
₹ |
Particulars |
₹ | ||
|
Capital Employed |
50,00,000 |
Share Capital |
35,00,000 | ||
|
Current Liabilities |
20,00,000 |
10% Debentures |
10,00,000 | ||
| Land and Building | 60,00,000 | General Reserve | 3,00,000 | ||
| Trade Receivable | 4,00,000 | Surplus, i.e., Balance in Statement of Profit and Loss | 2,00,000 | ||
| Cash and Cash Equivalents | 5,00,000 | ||||
|
Investment (Trade) |
1,00,000 |
|
|||
From the following information, calculate Total Assets to Debt Ratio:
| ₹ | ₹ | |||
| Fixed Assets (Gross) | 6,00,000 | Accumulated Depreciation | 1,00,000 | |
| Non-current Investments | 10,000 | Long-term Loans and Advances | 40,000 | |
| Current Assets | 2,50,000 | Current Liabilities | 2,00,000 | |
| Long-term Borrowings | 3,00,000 | Long-term Provisions | 1,00,000 |
₹ 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is ₹ 7,000 more than that in the beginning.
Revenue from Operations: Cash Sales ₹ 5,00,000; Credit Sales ₹ 6,00,000; Sales Return ₹ 1,00,000. Current Assets ₹ 3,00,000; Current Liabilities ₹ 1,00,000. Calculate Working Capital Turnover Ratio.
Compute Gross Profit Ratio from the following information:
Revenue from Operations, i.e., Net Sales = ₹4,00,000; Gross Profit 25% on Cost.
Calculate Gross Profit Ratio from the following data:
Average Inventory ₹3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables ₹4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.
Opening Inventory ₹80,000; Purchases ₹4,30,900; Direct Expenses ₹4,000; Closing Inventory ₹1,60,000; Administrative Expenses ₹21,100; Selling and Distribution Expenses ₹40,000; Revenue from Operations, i.e., Net Sales ₹10,00,000. Calculate Inventory Turnover Ratio; Gross Profit Ratio; and Opening Ratio.
Ratio analysis provide analysis of the _________.
Interest Coverage Ratio can be calculated as ______?
Debtors (Receivables) Turnover Ratio can be calculated as ______?
The ______ may indicate that the firm is experiencing stock outs and lost sales.
Read the following information and answer the given question:
X Ltd. made a profit of 5,00,000 after consideration of the following items:
| ₹ | ||
| (i) | Goodwill written off | 5,000 |
| (ii) | Depreciation on Fixed Tangible Assets | 50,000 |
| (iii) | Loss on Sale of Fixed Tangible Assets (Machinery) |
20,000 |
| (iv) | Provision for Doubtful Debts | 10,000 |
| (v) | Gain on Sale of Fixed Tangible Assets (Land) | 7,500 |
Additional information:
| Particulars | 31.3.2019 (₹) |
31.3.2018 (₹) |
| Trade Receivables | 78,800 | 52,000 |
| Prepaid Expenses | 3,000 | 2,000 |
| Trade Payables | 51,000 | 30,000 |
| Expenses Payable | 20,000 |
What will be the amount of Trade payables added to get the Cash flow from operations?
The ______ is useful in evaluating credit and collection policies.
Which of the following is a profitability ratio?
Debt to Capital Employed ratio is 0.3:1. State whether the following transaction, will improve, decline or will have no change on the Debt to Capital Employed Ratio. Also give reasons for the same.
Sale of Equipment costing ₹ 10,00,000 for ₹ 9,00,000.
