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Ratio analysis | part 2 | Solution of old is gold

Ratio analysis Part 2 | Solution of old is gold

(2071 Supp.- 2066 supp.)

2071 Supp. B Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

= 350000 / 150000

= 2.33:1

Working note

Current assets = Closing stock + Sundry debtors + Bank balance

= 200000 + 100000 + 50000

= 350000

Current liabilities = Short term loan + Salary due

= 100000 + 50000

= 150000

b)    Fixed assets turnover ratio = Sales / Net fixed assets

= 1000000/ 500000

= 2 times

c)     Inventory turnover ratio = Sales / Closing stock

= 1000000 / 200000

= 5 times

d)    Return on assets = (NPAT + Interest) / Total assets

= (1700000 + 30000)/850000

= 200000 / 850000

= 23.52 %

Working note

Net profit = 1000000

(-) Interest on debenture 30000

Total asset = Total assets – Preliminary expenses

= 950000 – 100000

= 850000

e)     Debt-equity ratio = (Long term debts / Shareholder’s fund)

= 200000 / 500000

= 40%

Working note

Long term debts = 15 % debenture

= 200000

Shareholder’s fund = Share capital + Profit and loss a/c – preliminary expenses

= 500000 + 100000 - 100000

= 500000

2071 Set C Q. No. 15

(a)             Current ratio = (current assets) / (current liabilities)

= 250000 / 150000

= 1.677:1

Working note

Current assets = Accounts receivable + Cash + Bills receivable + Inventories

= 130000 + 20000+ 30000 + 70000

= 250000

Current liabilities = Bills payable + Account payable

= 50000 + 100000

= 150000

(b)            Liquid ratio = (Liquid assets) / (Current liabilities)

= 180000 / 150000

= 1.2:1

Working note

Liquid assets = Current assets – Inventories

= 250000 – 70000

= 180000

(c)             Debt-equity ratio = (Long term debts / Shareholder’s fund) *100

= (40000 / 450000)*100

= 8.89%

Working note

Long-term debts = 10% debenture

= 40000

Shareholder’s fund = Share capital + Retaining earning – preliminary expenses

= 400000 + 60000 – 10000

= 450000

(d)            Inventory turnover ratio = Sales / Closing stock

= 650000 / 70000

= 9.28 times

Note: The question hasn’t given gross profit neither sales in this condition we consider the cost of goods sold as sales and net profit as a gross profit

(e)             Earnings per share = (NPAT – Pref. Dividend) / No. of common shares

= (60000 – 0) / 4000

= Rs. 15

2071 Set D Q. No. 15

(a)             Quick ratio = (Quick Assets) / (Current liabilities)

= 260000 / 260000

= 1:1

Working note

Quick assets = Debtors + cash

= 160000 + 100000

= 260000

Current liabilities = Current liabilities

= 260000

(b)            Debtors turnover ratio = Net sales / Debtors

= 800000 / 160000

= 5 times

(c)             Debt-equity ratio = (Long term debts / Shareholder’s fund)

= 300000 / 1350000

= 22.22%

Working note

Long term debts = Debenture

= 300000

Shareholder’s fund = Capital + Reserve + Profit & loss a/c

= 1000000 + 200000 + 150000

= 1350000

(d)            Fixed assets turnover ratio = Sales / Net fixed assets

= 800000 / 1200000

= 0.667 times

(e)             Return on total assets = (NPAT – Interest) / Total assets

=

2071 Supp. Q. No. 15

(a)             Debt-equity ratio = (Long term debts / Shareholder’s fund)*100

= (250000 / 5000000)*100

= 50%

Working note

Long term debts =Long term loan

= 250000

Shareholder’s fund = Share capital

= 500000

(b)            Current ratio = (current assets) / (current liabilities)

= 400000/250000

=1.60:1

(c)             Return on total assets = ((NPAT – Interest) / Total assets)*100

= (90000 / 100000) *100

= 9%

(d)            Return on capital employed = ((NPAT – Interest) / Capital employed)

= (90000 / 750000)*100

= 12%

Working note

Capital employed = LTD + SE

= 250000 + 500000

= 750000

2070 Set C. Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

1.5 = 300000 / Current liabilities

1.5 Current liabilities = 300000

Current liabilities = 200000

Working note

Current assets = Debtors + Inventory + Bills receivable

= 150000 + 100000 + 50000

= 300000

b)    Debt-equity ratio = (Long term debts / Shareholder’s fund)*100

= (200000 / 600000) * 100

= 33.33%

Working note

Long term debt = 8 % debenture

= 200000

Shareholder’s fund = Share capital + Profit and loss account

= 500000 + 100000

= 600000

c)     Inventory turnover ratio = Sales / Closing stock

= 650000 / 100000

= 6.5 times

d)    Liquid ratio = Liquid assets / Current liabilities

= 200000 / 200000

= 1:1

Working note

Liquid assets = Current assets – Inventory

= 300000 – 100000

= 200000

2070 Set D. Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

2 = Current assets / 150000

Current assets = 300000

Working note

Current liabilities = Outstanding salary + Creditors

= 10000 + 140000

= 150000

b)    Inventory turnover ratio = Sales / Closing stock

= 700000 / 50000

= 14 times

c)     Liquid ratio = (Liquid assets) / (Current liabilities)

= 250000 / 150000

= 1.667 : 1

Working note

Liquid assets = Current assets – closing stock

= 300000 – 50000

= 250000

d)    Return on fixed assets = (NPAT – Interest) / Fixed assets

= 100000 / 500000

= 20%

2069 Supp. Set A Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

= 400000 / 125000

= 3.2 : 1

Working note

Current assets = Closing stock + Debtors + Cash in hand

= 200000 + 150000 + 50000

= 400000

Current liabilities = Bills payable + Sundry creditors

= 25000 + 100000

= 125000

b)    Quick ratio = Quick assets / Current liabilities

= 200000 / 125000

= 1.6:1

Working note

Quick assets = Current assets – Inventory

= 400000 – 200000

= 200000

c)     Inventory turnover ratio = Sales / closing stock

Or, 5 = Sales / 200000

Sales = Rs. 1000000

d)    Fixed assets turnover ratio = Net sales / Fixed assets

Or, 2.5 = 1000000 / Fixed assets

Or, 2.5 Fixed assets = 1000000

Fixed assets = Rs. 400000

2069 Supp. Set B Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

Or, 2 = 400000 / Current liabilities

Or, 2 Current liabilities = 400000

Current liabilities = 200000

Working note

Current assets = Cash balance + Closing stock + Debtors

= 100000 + 100000 + 200000

= 400000

b)    Quick ratio = Quick assets / Current liabilities

= 300000 / 200000

= 1.5 : 1

Working note

Quick assets = Current assets – Closing stock

= 400000 – 100000

= 300000

c)     Inventory turnover ratio = Sales / Closing stock

= 450000 / 100000

= 4.5 times

e)     Debt-equity ratio = (Long term debts / Shareholder’s fund)*100

= (89000 / 445000)*100

= 20%

Working note

Long term debts = Debenture

= 89000

Shareholder’s fund = Share capital + P/L account

= 400000 + 45000

= 445000

2069 Set A Q. No. 15

(a)             Quick ratio = (Quick assets) / (Current liabilities)

= 550000 / 300000

= 1.83:1

Working note

Current assets = Debtors + Bank balance

= 400000 + 150000

= 550000

Current liabilities = O/S expenses + Creditors

= 50000 + 250000

= 300000

(b)            Debtors turnover ratio = Net sales / Debtors

= 1500000 / 400000

= 3.75 times

(c)             Fixed assets turnover ratio = Net sales / Fixed assets

= 1500000 / 700000

= 2.14:1

(d)            Return on shareholder’s equity = (NPAT/Shareholder’s fund)*100

= (210000/1150000)*100

= 18.26%

Working note

Net profit before tax = 280000

(-) tax 70000

Net profit after tax 210000

Shareholder’s fund = Equity share capital + General reserve + Profit and loss account – Preliminary share

= 800000 + 100000 + 300000 – 50000

= 1150000

2069 Set B Q. No. 15

a)    Debtors turnover ratio = Net sales / Debtors

or, 10 = Sales amount / 50000

Sales amount = Rs. 500000

b)    Current ratio = (current assets)/(current liabilities)

= 120000 / 40000

= 3:1

Working note

Current assets = Closing stock + Debtors + Cash balance

= 40000 + 50000 + 30000

= 120000

Current liabilities = Creditors + expenses due

= 20000 + 20000

= 40000

c)     Quick ratio = (Quick assets) / (Current liabilities)

= 80000 / 40000

= 2:1

Working note

Quick assets = Current assets – closing stock

= 120000 – 40000

= 80000

d)    Debt-equity ratio = (Long term debts / Shareholder’s fund)*100

= (125000 / 250000)*100

= 50%

Working note

Long term debts = 10% debenture

= 125000

Shareholder’s fund = Share capital + Reserve and surplus – Preliminary expenses

= 200000 + 60000 – 10000

= 250000

(e)             Inventory turnover ratio = Sales / Closing stock
= 500000 / 40000

= 1.5:1

2068 Q. No. 15

(a)             Inventory turnover ratio = Sales / Closing stock

= 1000000 / 200000

= 5 times

(b)            Current ratio = (current assets)/(current liabilities)

= 580000 / 200000

= 2.9 :1

Working note

Current assets = Inventory + Debtors + Bank balance

= 200000 + 300000 + 80000

= 580000

Current liabilities = Creditors + Provision for tax

= 170000 + 30000

= 200000

(c)             Net profit ratio = (Net profit / Sales) *100

= (250000 / 1000000)*100

= 25%

(d)            Return on shareholder’s equity = (NPAT  / share holder’s equity) *100

= (250000  / 980000)*100

= 25.51%

Working capital

SE = Equity share capital + 7% preference share capital + Profit and loss a/c – Preliminary expenses

= 500000 + 100000 + 400000 – 20000

= 980000

2068 Supp. Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

= 140000 / 70000

= 2:1

Working note

Current assets = Inventory + Cash in hand + Sundry debtors + Bills receivable

= 40000 + 20000 + 60000 + 20000

= 140000

Current liabilities = Sundry creditors

= 70000

b)    Quick ratio = (Quick assets) / (Current liabilities)

= 100000 / 70000

= 1.4286:1

Working note

Quick assets = Current assets – Inventory

= 140000 – 40000

= 100000

c)     Fixed assets turnover ratio = Sales / Net fixed assets

= 250000 / 125000

= 2 times

d)    Inventory turnover ratio = Sales / Inventory

= 250000 / 40000

= 6.25 times

e)     Gross profit ratio = (Gross profit / Sales) * 100

= (50000 / 250000)*100

= 20 %

2067  Q. No. 15

(a)             Return on shareholder’s equity = (NPAT  / shareholder’s equity) *100

= (57000 / 520000) * 100

=10.96%

Working note

Shareholder’s equity = Share capital + General reserve – Preliminary expenses

= 500000 + 25000 – 5000

= 520000

(b)            Net profit margin = (Net profit / Net sales)*100

= (57000 / 270000)*100

= 21.11%

Working note

Net sales = Credit sales + Cash sales

= 70000 + 200000

= 270000

(c)             Current ratio = (current assets)/(current liabilities)

Or, 1.75 = 350000 / Current liabilities

Or, 1.75 Current liabilities = 350000

Current liabilities = 200000

2067 Supp. Q. No. 15

a)    Current ratio = (current assets)/(current liabilities)

= 180000 / 70000

= 2.57:1

Working note

Current assets = Debtors + Inventory + Pre-paid expenses + Cash

= 40000 + 100000 + 10000 + 30000

= 180000

Current liabilities = Creditors + Outstanding expenses + Bills payable

= 30000 + 10000 + 30000

= 70000

b)    Quick ratio = (Quick assets) / (Current liabilities)

= 70000 / 70000

= 1:1

Working note

Liquid assets = Current assets – Inventory – Closing stock

= 180000 – 100000 – 10000

= 70000

c)     Debt – equity ratio = (Long term debts / Share-holder’s fund) *100

= (100000 / 260000)*100

= 38.46 %

Working note

Share – holder’s fund = Equity share + General reserve + Retaining earning – Preliminary expenses

= 200000 + 50000 + 20000 – 10000

= 260000

d)    Stock turnover ratio = Sales / Inventory

= 400000 / 100000

= 4 times

e)     Earnings per share = (NPAT – Pref. dividend) / No. of equity share

= (40000 – 0) / 2000

= Rs. 20

2066 (C) Q. No. 15

a)    Current ratio = Current assets / Current liabilities

Or, 2 = 320000 / Current liabilities

Or, 2 Current liabilities = 320000

Current liabilities = 160000

Working capital

Current assets = Closing inventory + Sundry debtors + Cash – in – hand

= 140000 + 100000 + 80000

= 320000

b)    Quick ratio = Quick assets / current liabilities

180000 / 160000

1.125:1

=