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Question
Gross Profit at 25% on cost; Gross profit ₹ 5,00,000; Equity Share Capital ₹ 10,00,000; Reserves and Surplus 2,00,000; Long-term Loan 3,00,000; Fixed Assets (Net) ₹ 10,00,000. Calculate Working Capital Turnover Ratio
Solution
Gross Profit = 25% on Cost
Let Cost be = Rs x
Gross Profit = `x xx 25/100 = (25x)/100`
or, 500000 = `(25x)/100`
or, x = `500000/25 xx 100 = 2000000`
∴ Cost of Goods Sold = 20,00,000
Net Sales = Cost of Goods Sales + Gross Profit
= 2000000 + 500000 = 2500000
Capital Employed = Equity Share Capital + Reserves and Surpluss + Long term loan
= 1000000 + 200000 + 300000 = 1500000
Working Capital = Capital Employed - Fixed Assets
= 1500000 - 1000000 = 500000
Working Capital Turnover Ratio = `"Net Sales"/"Working Capital" = 2500000/500000` = 5 times
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Short Answer Question
What are the various types of ratios?
The current ratio provides a better measure of overall liquidity only when a firm’s inventory cannot easily be converted into cash. If inventory is liquid, the quick ratio is a preferred measure of overall liquidity. Explain.
Calculate Current Ratio if:
Inventory is Rs 6,00,000; Liquid Assets Rs 24,00,000; Quick Ratio 2:1.
Calculate Inventory Turnover Ratio if:
Inventory in the beginning is Rs. 76,250, Inventory at the end is 98,500, Gross Revenue from Operations is Rs. 5,20,000, Sales Return is Rs. 20,000, Purchases is Rs. 3,22,250.
Current Liablilites of a company were ₹1,75,000 and its Current Ratio was 2:1. It paid ₹30,000 to a Creditor. Calculate Current Ratio after payment.
Ratio of Current Assets (₹8,75,000) to Current Liabilities (₹3,50,000) is 2.5:1 The firm wants to maintain Current Ratio of 2:1 by purchasing goods on credit. Compute amount of goods that should be purchased on credit.
Current Assets of a company is are ₹ 5,00,000. Its Current Ratio is 2.5 : 1 and Quick Ratio is 1 : 1. Calculate value of Current Liabilities, Liquid Assets and Inventory.
Following is the Balance Sheet of Crescent Chemical Works Limited as at 31st March, 2019:
|
Particulars |
Note |
₹ |
| I. EQUITY AND LIABILITIES : 1. Shareholder's Funds : |
||
|
(a) Share Capital |
|
70,000 |
|
(b) Reserves and Surplus |
|
35,000 |
| 2. Non-Current Liabilities : | ||
|
Long-term Borrowings |
|
25,000 |
| 3. Current Liabilities : | ||
|
(a) Short-term Borrowings |
|
3,000 |
|
(b) Trade Payables (Creditors) |
|
13,000 |
|
(b) Short-term Provisions: Provision for Tax |
|
4,000 |
|
Total |
|
1,50,000 |
| II. ASSETS : | ||
|
1. Non-Current Assets |
||
|
(a) Fixed Assets (Tangible) |
|
45,000 |
|
(b) Non-current Investments |
|
5,000 |
|
2. Current Assets |
||
|
(a) Inventories (Stock) |
|
50,000 |
|
(b) Trade Receivables (Debtors) |
|
30,000 |
|
(c) Cash and Cash Equivalents |
|
20,000 |
|
Total |
|
1,50,000 |
Compute Current Ratio and Liquid Ratio
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 |
Total Debt ₹12,00,000; Shareholders' Funds ₹2,00,000; Reserves and Surplus ₹50,000; Current Assets ₹5,00,000; Working Capital ₹1,00,000. Calculate Total Assets to Debt Ratio.
Total Debt ₹12,00,000; Current Liabilities ₹4,00,000; Capital Employed ₹`12,00,000. Calculate Total Assets to Debt Ratio.
From the following information, calculate Interest Coverage Ratio:
| ₹ | |
| 10,000 Equity Shares of ₹10 each | 1,00,000 |
| 8% Preference Shares | 70,000 |
| 10% Debentures | 50,000 |
| Long-term Loans from Bank | 50,000 |
| Interest on Long-term Loans from Bank | 5,000 |
| Profit after Tax | 75,000 |
| Tax | 9,000 |
Calculate Inventory Turnover Ratio from the following:
| ₹ | |
| Opening Inventory | 29,000 |
| Closing Inventory | 31,000 |
| Revenue from Operations, i.e., Sales | 3,20,000 |
| Gross Profit Ratio 25% | |
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 | ₹ |
| Revenue From Operations | 12,00,000 |
| Cost of Revenue from Operations | 9,00,000 |
| Operating Expenses | 15,000 |
| Inventory | 20,000 |
| Other Current Assets | 2,00,000 |
| Current Liabilities | 75,000 |
| aid up Share Capital | 4,00,000 |
| Statement of Profit and Loss (Dr.) | 47,500 |
| Total Debt | 2,50,000 |
What is the Debt to Equity Ratio?
Read the following information and answer the given question:
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| ₹ | ||
| (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 | 34,000 |
How will goodwill written off be adjusted in the cash flow statement?
Pick the odd one out.
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% |
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