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Question
From the following Balance Sheet and other information, calculate following ratios: (i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio
Balance Sheet as at March 31, 2017
| Particulars | Note No. | Rs. |
| I. Equity and Liabilities: | ||
| 1. Shareholders’ funds | ||
| a) Share capital | 10,00,000 | |
| b) Reserves and surplus | 9,00,000 | |
| 2. Non-current Liabilities | ||
| Long-term borrowings | 12,00,000 | |
| 3. Current Liabilities | ||
| Trade payables | 5,00,000 | |
| Total | 36,00,000 | |
| II. Assets | ||
| 1. Non-current Assets | ||
| a) Fixed assets | ||
| Tangible assets | 18,00,000 | |
| 2. Current Assets | ||
| a) Inventories | 4,00,000 | |
| b) Trade Receivables | 9,00,000 | |
| c) Cash and cash equivalents | 5,00,000 | |
| Total | 36,00,000 |
Additional Information: Revenue from Operations Rs. 18,00,000
Solution
1) Debt-Equity Ratio
Debt Equity Ratio = `"Debt"/"Equity"`
=`"12,00,000"/"19,00,000"`
= 0.63 : 1
Debt = Long Term Borrowings = Rs 12,00,0000
Equity = Share Capital + Reserve and Surplus
= 10,00,000 + 9,00,000
= Rs 19,00,000
2. Working Capital Turnover Ratio
Working Capital Turnover Ratio = `"Ravenue From Operation"/"Working Capital"`
= `"18,00,000"/"13,00,000"`
= 1.39 times
Revenue from Operations = Rs 18, 00,000
Working Capital = Current Assets – Current Liabilities
= 18,00,000 – 5,00,000
= Rs 13,00,000
3. Trade Receivables Turnover Ratio
Trade Receivables Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`
= `[18,00,000]/[9,00,000]`
= 2 times
Net Credit Sales = Rs 18,00,000
Average Trade Receivables = Rs 9,00,000
Notes:
1. Revenue from Operations are assumed to be revenue generated from credit sales.
2. The amount of trade receivables given in the Balance Sheet is assumed to be Average Trade Receivables.
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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.
Compute Gross Profit Ratio, Working Capital Turnover Ratio, Debt Equity Ratio and Proprietary Ratio from the following information:
|
|
Rs |
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Paid-up Share Capital |
5,00,000 |
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Current Assets |
4,00,000 |
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Revenue from Operations |
10,00,000 |
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13% Debentures |
2,00,000 |
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Current Liabilities |
2,80,000 |
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Cost of Revenue from Operations |
6,00,000 |
Debt to Equity Ratio of a company is 0.5:1. Which of the following suggestions would increase, decrease or not change it:
(i) Issue of Equity Shares:
(ii) Cash received from debtors:
(iii) Redemption of debentures;
(iv) Purchased goods on Credit?
From the following Balance Sheet of ABC Ltd. as at 31st March, 2019, Calculate Debt to Equity Ratio:
|
Particulars |
₹ |
|
| I. EQUITY AND LIABILITIES | ||
|
1. Shareholder's Funds |
||
|
(a) Share Capital: |
||
|
(i) Equity Share Capital |
5,00,000 |
|
|
(ii) 10% Preference Share Capital |
5,00,000 |
10,00,000 |
|
(b) Reserves and Surplus |
2,40,000 |
|
|
2. Non-Current Liabilities |
||
|
Long-term Borrowings (Debentures) |
2,50,000 |
|
|
3. Current Liabilities : |
||
|
(a) Trade Payables |
4,30,000 |
|
|
(b) Other Current Liabilities |
20,000 |
|
|
(c) Short-term Provisions: Provision for Tax |
3,00,000 |
|
|
Total |
22,40,000 |
|
| II. ASSETS | ||
|
1. Non-Current Assets |
||
|
Fixed Assets: |
||
|
(i) Tangible Assets |
6,40,000 |
|
|
(ii) Intangible Assets |
1,00,000 |
|
|
2. Current Assets |
||
|
(a) Inventories |
7,50,000 |
|
|
(b) Trade Receivables |
6,40,000 |
|
|
(c) Cash and Cash Equivalents |
1,10,000 |
|
|
Total |
22,40,000 |
|
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 |
Closing Trade Receivables ₹ 1,20,000, Revenue from Operations ₹ 14,40,000. Provision for Doubtful Debts ₹ 20,000. Calculate Trade Receivables Turnover Ratio.
A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of ₹ 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?
A company earns Gross Profit of 25% on cost. For the year ended 31st March, 2017 its Gross Profit was ₹ 5,00,000; Equity Share Capital of the company was ₹ 10,00,000; Reserves and Surplus ₹ 2,00,000; Long-term Loan ₹ 3,00,000 and Non-current Assets were ₹ 10,00,000.
Compute the 'Working Capital Turnover Ratio' of the company.
Operating Ratio 92%; Operating Expenses ₹94,000; Revenue from Operations ₹6,00,000; Sales Return ₹40,000. Calculate Cost of Revenue from Operations (Cost of Goods Sold).
Revenue from Operations, i.e., Net Sales ₹ 8,20,000; Return ₹ 10,000; Cost of Revenue from Operations (Cost of Goods Sold) ₹ 5,20,000; Operating Expenses ₹ 2,09,000; Interest on Debentures ₹ 40,500; Gain (Profit) on Sale of a Fixed Asset ₹ 81,000. Calculate Net Profit Ratio.
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Following is the Balance Sheet of the Bharati Ltd. as at 31st March, 2019:
|
Particulars |
Note No. |
Amount (₹) |
|
| I. EQUITY AND LIABILITIES
1. Shareholder's Funds |
|||
|
(a) Share Capital |
7,50,000 |
||
|
(b) Reserves and Surplus: |
|||
|
Surplus, i.e., Balance in Statement of Profit and Loss: |
|||
|
Opening Balance |
6,30,000 |
20,88,000 |
|
|
Add: Transfer from Statement of Profit and Loss |
14,58,000 |
||
|
2. Non-Current Liabilities |
|||
|
15% Long-term Borrowings |
24,00,000 |
||
|
3. Current Liabilities |
12,00,000 |
||
|
Total |
64,38,000 |
||
| II. ASSETS | |||
|
1. Non-Current Assets |
|||
|
(a) Fixed Assets |
27,00,000 |
||
|
(b) Non-Current Investments: |
|||
|
(i) 10% Investments |
3,00,000 |
||
|
(ii) 10% Non-trade Investments |
1,80,000 |
||
| 2. Current Assets |
32,58,000 |
||
|
Total |
64,38,000 |
||
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|
Particulars |
₹ |
||
|
Inventory |
30,000 |
||
| Prepaid Expenses | 2,000 | ||
| Other Current Assets | 50,000 | ||
| Current Liabilities | 40,000 | ||
| 12% Debentures | 30,000 | ||
| Accumulated Profits | 10,000 | ||
| Equity Share Capital | 1,00,000 | ||
|
Non-current Investments |
15,000 |
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State giving reasons which of the following transactions would improve, reduce and not change the current ratio
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"Repayment of current liability"
Read the following information and answer the given question:
| Year | 2020 | 2019 | 2018 |
| Amount | (in ₹) | (in ₹) | (in ₹) |
| Outstanding Expenses | 50,000 | 40,000 | 25,000 |
| Prepaid Expenses | 3,00,000 | 2,50,000 | 3,50,000 |
| Trade Payables | 18,00,000 | 16,00,000 | 14,00,000 |
| Inventory | 12,00,000 | 10,00,000 | 11,00,000 |
| Trade Receivables | 11,00,000 | 8,00,000 | 10,00,000 |
| Cash in hand | 17,00,000 | 12,00,000 | 15,00,000 |
| Revenue from operations | 24,00,000 | 18,00,000 | 20,00,000 |
| Gross Profit Ratio | 12% | 15% | 18% |
Current Ratio for the year 2020 will be ______. (Choose the correct alternative)
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