ASSIGNMENT-3

Question 1: Calculate Current Ratio and Quick Ratio from the following information: Particulars Rs. Inventories
50,000 Trade receivables 50,000 Advance tax 4,000 Cash and cash equivalents 30,000 Trade payables 1,00,000
Short-term borrowings (bank overdraft) 4,000

Particulars Amount
Inventories Rs.50000
Trade Receivables Rs.50000
Advance tax Rs.4000
Cash equivalents & Cash Rs.30000
Trade Payables Rs.100000
Short term borrowings Rs.4000

Current Assets = Inventories + Trade Receivables + Advance Tax + Cash and Cash Equivalent = Rs.134000
Current Liabilities = Trade payables + Short term borrowings = Rs.104000
Current ratio = Current Assets
Current Liabilities
= 1.28:1
Quick Assets = Current Assets – (Inventories + Advance Tax) = 80000
Quick ratio = Quick assets
Current Liabilities
= 0.76: 1

Question 2: X Ltd., has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current assets over quick assets
represented by inventories is Rs. 24,000, calculate current assets and current liabilities.

Current ratio 3.5:1

Quick ratio 2:1
Inventories Rs.24000

3.5 * Current liabilities = Current assets

2 * Current liabilities = Current assets – 24000
2 * Current liabilities = 3.5 * Current liabilities – 24000
Current liabilities = Rs.16000
Current assets = 3.5 * 16000
=Rs.56000

Question 3: Calculate the current ratio from the following information: Total assets = Rs. 3,00,000 Non-current
liabilities = Rs. 80,000 Shareholders’ Funds = Rs. 2,00,000 Non-Current Assets: Fixed assets = Rs. 1,60,000 Non-
current Investments = Rs. 1,00,000

Total assets Rs.300000

Non-current liabilities Rs.80000
Shareholders fund Rs.200000
Non-current assets:
Fixed assets Rs.160000
Non-current Investments Rs.100000
Total assets = Non-current assets + Current assets
300000 = 160000 + 100000 + Current assets
Current assets = 40000
Total assets = Non-current liabilities + Current Liabilities + Shareholder fund
300000 = 80000 + 200000 Current liabilities
Current liabilities = 20000
Current ratio = 40000
20000
= 2:1

Question 4: Current liabilities of a company are Rs. 5,60,000, current ratio is 2.5:1 and quick ratio is 2:1. Find the
value of the Inventories.

Current liabilities Rs.560000

Current ratio 2.5:1
Quick ratio 2:1

2.5 * 560000 = Current assets

2 * 560000 = Current assets – Inventories
2 * 560000 = 2.5 * 560000 – Inventories
Inventories = Rs.280000

Question 5: Current ratio = 4.5:1, quick ratio = 3:1. Inventory is Rs. 36,000. Calculate the current assets and current
liabilities.

Current ratio 4.5:1

Quick ratio 3:1
Inventory Rs.36000

4.5 * Current liabilities = Current assets

3 * Current liabilities = Current assets – 36000
3 * Current liabilities = 4.5 * Current liabilities – 36000
1.5 * Current liabilities = 36000
Current liabilities = Rs.24000
Current assets = Rs.108000

Question 6: Current assets of a company are Rs. 5,00,000. Current ratio is 2.5:1 and Liquid ratio is 1:1. Calculate
the value of current liabilities, liquid assets and inventories.

Current ratio 2.5:1

Liquid ratio 1:1
Current assets Rs.500000

2.5 * Current liabilities = 500000

Current liabilities = Rs.200000
1 * 200000 = liquid assets
Liquid assets = Rs.200000
Inventory = 500000 – 200000
=Rs.300000

Question 7: From the following information, calculate inventory turnover ratio : Rs. Inventory in the beginning =
18,000 Inventory at the end = 22,000 Net purchases = 46,000 Wages = 14,000 Revenue from operations = 80,000
Carriage inwards = 4,000
 Inventory in beginning Rs.18000
Inventory at the end Rs.22000
Net Purchases Rs.46000
Wages Rs.14000
Revenue from Operations Rs.80000
Carriage Inwards Rs.4000

Cost of goods sold = (18000 + 46000 + 14000 + 4000) – 22000

= Rs.60000
Average inventories = 18000 + 22000
2
=Rs.20000
Inventory Turnover ratio = 60000
20000
=3:1

Question 8: From the following information, calculate inventory turnover ratio: Rs. Revenue from operations =
4,00,000 Average Inventory = 55,000 Gross Profit Ratio = 10%

Running from operation Rs.400000

Average Inventory Rs.55000
Gross profit ratio 10%

Gross profit = 10 * 400000

100
= Rs.40000
Inventory turnover ratio = 400000 – 40000
55000
=6.54:1

Question 9: Calculate the amount of gross profit: Average inventory = Rs. 80,000 Inventory turnover ratio = 6
times Selling price = 25% above cost

Average Inventory Rs.80000

Inventory turnover ratio 6:1

Cost of goods sold = 6 * 80000

= Rs.480000
Selling price = 25% of cost price
Gross profit = 25 * 480000
100
=Rs.120000

Question 10: Calculate Inventory Turnover Ratio: Annual Revenue from operations = Rs. 2,00,000 Gross Profit =
20% on cost of Revenue from operations Inventory in the beginning = Rs. 38,500 Inventory at the end = Rs. 41,500

Average revenue from operations Rs.200000

Gross profit 20% of Cost of revenue
Inventory in Beginning Rs.38500
Inventory at End Rs.41500
Gross Profit = 20 * 200000
100
=Rs.40000
Average inventory = (38500 + 41500)
2
=Rs.40000
Inventory Turnover Ratio = 200000 – 40000
40000
=Rs.4:1

Question 11: From the following details, calculate Return on Investment:

Share Capital: Equity (Rs.10) Rs. 4,00,000 Fixed Assets Rs. 9,50,000
Current Liabilities Rs. 1,00,000
12% Preference Rs. 1,00,000
General Reserve Rs. 1,84,000
Current Assets Rs. 2,34,000
10% Debentures Rs. 4,00,000

Also calculate Return on Shareholders’ Funds, EPS, Book value per share and P/E ratio if the market price of the
share is Rs. 34 and the net profit after tax was Rs. 1,50,000, and the tax had amounted to Rs. 50,000

Price of the share = Rs.34

Net profit after tax = Rs.15000
Tax = Rs.50000
Profit before interest and tax = Rs.150000 + Debenture interest + Tax
= Rs.150000 + Rs.40000 + Rs.50000
= Rs.240000
Capital Employed = Equity Share Capital + Preference Share Capital + Reserves + Debentures
= Rs.400000 + Rs.100000 + Rs.184000 + Rs.400000
= Rs.1084000
Return on Investment = Profit before Interest and Tax/ Capital Employed × 100
= Rs.240000/Rs.1084000 × 100
= 22.14%
Shareholders’ Fund = Equity Share Capital + Preference Share Capital + General Reserve
= Rs.400000 + Rs.100000 + Rs.184000
= Rs.684000
Return on Shareholders’ Funds = Profit after tax/shareholders’ Funds × 100
= Rs.150000/Rs.684000 × 100
= 21.93%
EPS = Profit available for Equity Shareholders/ Number of Equity Shares
= Rs.138000/ 40000
= Rs.3.45

Question 12: Following information is given by a company from its books of accounts as on March 31, 2015:
Particulars Rs. Inventory 1,00,000 Total Current Assets 1,60,000 Shareholders’ funds 4,00,000 13% Debentures
3,00,000 Current liabilities 1,00,000 Net Profit Before Tax 3,51,000 Cost of revenue from operations 5,00,000
Calculate: i) Current Ratio ii) Liquid Ratio iii) Debt Equity Ratio iv) Interest Coverage Ratio v) Inventory Turnover

Inventory Rs.100000
Total current assets Rs.160000
Shareholder fund Rs.400000
 13% debentures Rs.300000
Current liabilities Rs.100000
Net profit before tax Rs.351000
Cost of revenue from operations Rs.500000

Current Ratio = Current Assets

Current Liabilities

= 160000
100000

=1.6:1

Liquid Assets = Current assets –Inventory

=160000 – 100000=Rs.60000
Liquid Ratio = Liquid Assets
Current Liabilities
= 60,000
100000
= 0.6:1

Debt-Equity Ratio= Long-term Debts

Shareholders' Funds
300000
400000
= 0.75:1

Net Profit before Interest=Net Profit before Tax + Interest on Long& Tax term Debts
=Rs.351000 + (13% of Rs.300000)
=Rs.351000 + Rs.39000 = Rs.390000
Interest Coverage Ratio= 390000
39,000
= 10:1

Inventory Turnover Ratio =Cost of Revenue from Operations

Average Inventory
=500000
100000
= 5:1