Ratio

RATIO ANALYSIS

Question 1
The following is the balance sheet of Parag Ltd. on 31st August 1993. Re - arrange the same
in vertical form and calculate : (1) Current Ratio (2) Liquid Ratio (3) Stock working capital (4)
Capital Gearing (5) Proprietory Ratio (6) Debt Equity Ratio.

Liabilities Rs. Assets Rs.

Eq. Share Capital 10,00,000 Building 22,00,000
12% Preference Capital 10,00,000 Goodwill 3,50,000
14% Debentures 4,00,000 Machinery 10,00,000
Bank Loan 2,00,000 Furniture 3,00,000
General Reserve 15,00,000 Marketable Investments 2,00,000
P&LA/c 2,00,000 Debtors 10,00,000
Bank Overdraft 4,00,000 Stock 4,00,000
Creditors 6,00,000 Bank Balance 1,20,000
Outstanding Expenses 70,000 Preliminary Expenses 1,00,000
Income tax provision 2,00,000
Proposed Dividend 1,00,000
56,70,000 56,70,000

Question 2
From the following balance sheet of Ganga Ltd. as on 31st December 1991 and the Trading,
Profit and Loss A/c for the year ending 31st December 1991 calculate the following ratios :
(1) Current Ratio (2) Liquid Ratio
(3) Inventory Turnover Ratio (4) Debtors Turnover Ratio
(5) Operating Ratio (6) Capital Gearing Ratio
(7) Net Profit Ratio (8) Stock Working Capital Ratio.
Balance Sheet
Liabilities Rs. Assets Rs.
Preference Capital 2,00,000 Fixed Assets 26,00,000
Equity Capital 10,00,000 Bank Balance 1,00,000
General Reserve 8,00,000 Short Term Investments 3,00,000
12% Debentures 14,00,000 Debtors (Last year Rs.2,00,000) 4,00,000
Creditors 1,20,000 Stock 6,00,000
Outstanding Expenses 2,20,000
Income tax provision 2,60,000
40,00,000 40,00,000

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Ratio

Trading ,Profit and Loss Account

Liabilities Rs. Assets Rs.
To Opening Stock 6,00,000 By Sales 60,00,000
To Purchases 51,60,000 By Closing Stock 6,00,000
To Gross Profit 8,40,000
66,00,000 66,00,000
To Administrative Exps 80,000 By Gross Profit 8,40,000
To Rent 56,000 By Profit on sale of F.A 1,10,000
To Interest 90,000
To Selling Expenses 44,000
To Depreciation 2,00,000
To Income tax provision 2,40,000
To Net profit 2,40,000
9,50,000 9,50,000

Question 3
The following is the balance sheet of Dollops Ltd. on 31st March 1993 and other information
from which you are requested to re - arrange the balance sheet in a vertical form and
calculate the following ratios:
(1) Current Ratio (2) Liquid Ratio
(3) Stock working capital ratio (4) Capital Gearing Ratio
(5) Stock Turnover Ratio (6) Debtors Turnover Ratio & Collection Period
Stock on 01.04.1992 was Rs. 1,20,000, Sales (all credit) were Rs.20,00,000, Gross profit on
sales was 25%, Debtors on 01.04.1992 were Rs.40,000.

Balance Sheet as on 31.03.1993

Liabilities Rs. Assets Rs.

12% Preference Capital 3,00,000 Fixed Assets 7,80,000
Eq. Share Capital 6,40,000 Short Term Investments 2,00,000
Capital Reserve 60,000 Stock 3,80,000
General Reserve 2,00,000 Debtors 3,60,000
Profit and Loss A/c 20,000 Prepaid Exps. 60,000
14% Debentures 1,60,000
Creditors 3,20,000
Bank Overdraft 80,000
17,80,000 17,80,000

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Question 4
The following is the balance sheet of Sunny Ltd. as on 31st March 1992 :
Liabilities Rs. Assets Rs.
Share Capital 20,00,000 Fixed Assets 18,00,000
Reserves 4,00,000 Debtors 5,00,000
Creditors 3,00,000 Stock 4,00,000
Bank Overdraft 1,00,000 Bank Balance 1,00,000
28,00,000 28,00,000
Total sales were Rs.90,00,000 and cash sales were 10% of the total sales. Cost of goods sold
was Rs.70,00,000. Net profit before payment of tax at 50% was Rs.9,00,000. Opening stock
figure was 75% of the stock figure on 31.03.1992. Debtors on 31st March 1992 include
advances of Rs.50,000 to suppliers. Advances were given in March 1992.
Debtors on 1st April 1991 were 50% of debtors on 31st March 1992.
There were no non - operating expenses and non - operating incomes.
Calculate the following ratios :
(1) Current Ratio
(2) Liquid Ratio
(3) Operating Ratio
(4) Net Profit Ratio
(5) Stock Turnover Ratio
(6) Debtors Turnover Ratio & Collection Period
(7) Stock / Working Capital Ratio
Question 5
The following is the balance sheet of Farex Limited as on 31st March 1993 :
Liabilities Rs. Assets Rs.
Share Capital 3,00,000 Goodwill 80,000
Reserves and Surplus 1,50,000 Land and Buildings 1,50,000
10% Mortgage Debentures 2,15,000 Plant and Machinery 2,00,000
Sundry Creditors 1,30,000 Patent Rights 21,500
Bank Overdraft 40,000 Stock in trade 1,43,500
Provision for tax 35,000 Sundry Debtors 2,40,000
Cash in hand 5,000
Cash at Bank 10,000
Preliminary Expenses 20,000
8,70,000 8,70,000

Additional Information:
(1) Stock in trade as on 1st April 1992 1,56,500
(2) Sales for the year ended 31st March 1993 10,95,000

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(3) Rate of gross profit 33 1/3%

(4) Net Profit (Before Interest and Tax) 99,000
(5) Net Profit (After Interest and Tax) 43,000
You are required to:
(a) Present balance sheet in vertical form,
(b) Calculate the following ratios:
(i) Capital Gearing Ratio (ii) Stock Turnover Ratio
(iii) Return on Capital Employed (iv) Return on Proprietors Funds
(v) Return on Ordinary Capital (vi) Turnover of Debtors

Question 6
The following is the abridged accounting reports prepared for X Ltd
Profit and Loss Account for the year ended 31st March 1992
To Cost Of Goods Sold : By Sales (All Credit) 3,00,000
Opening Inventory 1,00,000
Purchases 2,05,000
3,05,000
Less: Closing Inventory 80,000
2,25,000
To Gross Profit 75,000
3,00,000 3,00,000
To Operating Expenses 57,000 By Gross Profit b/d 75,000
To Provision for Taxation 8,000
To Net Profit 10,000
75,000 75,000
Balance Sheet as at 31st March 1992
Liabilities Rs. Assets Rs.
Equity Share Capital 80,000 Plant 20,000 15,000
Reserves 30,000 Less : Depreciation 5,000
Unappropriated Profits 15,000 15,000
Loan on Mortgage (Term Loan) 25,000 Building 65,000
Accounts Payable 87,000 Inventory 80,000
Provision for taxation 8,000 Accounts Receivable 60,000
Accrued Expenses 5,000 Cash 30,000
2,50,000 2,50,000
Name and calculate the ratios which indicate :
1. The rapidity with which the accounts receivable are collected.
2. The ability of the company to meet its current obligations.
3. What profitability on capital invested has been attained.

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4. The efficiency with which funds represented by inventories are being utilised and
managed.

Question 7
The following are the financial statement of Albeit Company
Balance Sheet as on December 31,1994
Liabilities Rs. Assets Rs.
Equity Share Capital, Rs. 10 each 50,000 Plant and Equipment 2,00,000
6% Preference Share Capital 20,000 Less Depreciation 1,60,000
P & L A/c 44,000 40,000
5 1⁄4% Mortgage Loan 80,000 Inventory 1,00,000
Debtors (previous year
Bills Payable 30,000 Rs.40,000) 60,000
Taxes Payable 20,000 Investments 24,000
Cash 20,000
2,44,000 2,44,000
Profit and Loss Account for the year ended December 31, 1994
To Stock in the beginning 80,000 By Sales 2,40,000
To Purchases 1,20,000 By Stock at the end 1,60,000
To Gross Profit 1,40,000
3,40,000 3,40,000

To Operating Expenses : By Gross Profit 1,40,000

Selling Expenses 30,000
General and Admn. Exps. 40,000
To Net Operating Income 70,000
1,40,000 1,40,000

To Interest Expenses 4,200 By Net Operating Income 70,000

To Income before tax 65,800
70,000 70,000

To Income taxes 29,800 By Income before tax 65,800

To Net Income After tax 36,000
65,800 65,800

You are required to calculate :

a) Current Ratio (b) Acid Test Ratio
c) Debtors Turnover (d) Number of days uncollectible (assume a 360 day year)
e) Inventory Turnover (f) Number of times interest earned
g) Earning per share (equity share)

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Question 8
The following information is derived from the accounts of a company :
Net credit sales 1,86,000
Cost of goods sold 1,24,000
Debtors : On 1stJanuary 1993 24,000
: 31st December 1993 28,000
Inventory : On 1st January 1993 10,000
: On 31st December 1993 16,000
You are required to calculate :
a. Debtors Turnover Ratio
b. Debtors collection period in days
c. Inventory Turnover
d. Age of Inventory in days
Ans:
1. Debtors Turnover Ratio:
𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
− − − −𝒕𝒊𝒎𝒆𝒔
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔

𝟏, 𝟖𝟔, 𝟎𝟎𝟎
− − − −𝒕𝒊𝒎𝒆𝒔
𝟐𝟔, 𝟎𝟎𝟎
7.15 times

𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑫𝒆𝒃𝒕𝒐𝒓𝒔+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑫𝒆𝒃𝒕𝒐𝒓𝒔

Average Debtors= 𝟐
𝟐𝟒, 𝟎𝟎𝟎 + 𝟐𝟖, 𝟎𝟎𝟎
𝟐
Rs.26,000
2. Debtors Collection Period:

𝑵𝒐 𝒐𝒇 𝑫𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
𝑫𝒆𝒃𝒕𝒐𝒓𝒔 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐

𝟑𝟔𝟓 𝑫𝒂𝒚𝒔
𝟕. 𝟏𝟓 𝒕𝒊𝒎𝒆𝒔
51.04 Days
3. Inventory Turnover Ratio:
𝑪𝑶𝑮𝑺
𝑨𝒗𝒓𝒆𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌

𝟏, 𝟐𝟒, 𝟎𝟎𝟎
𝟏𝟑, 𝟎𝟎𝟎
9.54 times
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
Average Stock= 𝟐
𝟏𝟎, 𝟎𝟎𝟎 + 𝟏𝟔, 𝟎𝟎𝟎
𝟐
Rs.13,000

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Age of Inventory in days

𝑵𝒐 𝒐𝒇 𝑫𝒂𝒚𝒔 𝒊𝒏 𝒂 𝒚𝒆𝒂𝒓
𝑰𝒏𝒗𝒆𝒏𝒕𝒐𝒓𝒚 𝑻𝒖𝒓𝒏𝒐𝒗𝒆𝒓 𝑹𝒂𝒕𝒊𝒐

𝟑𝟔𝟓 𝑫𝒂𝒚𝒔
𝟗. 𝟓𝟒 𝒕𝒊𝒎𝒆𝒔
38.26 Days

Question 9
From the following information calculate creditors turnover and average age of accounts
payable.
Credit Purchases 1,00,000
Returns 20,000
Creditors 01.01.93 15,000
31.12.93 12,000
Bills Payable 01.01.93 6,000
31.12.93 7,000
Ans: Creditors Turnover Ratio
𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔(𝑰𝒏𝒄𝒍𝒖𝒅𝒊𝒏𝒈 𝑩𝑷)

𝟖𝟎, 𝟎𝟎𝟎
𝟐𝟎, 𝟎𝟎𝟎
4 times

a) Net Credit Purchase: Total Credit Purchase – Returns

1,00,000-20,000= 80,000
b) Average Creditors:
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔 & 𝑩𝑷 + 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔 & 𝑩𝑷
𝟐
(𝟏𝟓𝟎𝟎𝟎 + 𝟔𝟎𝟎𝟎) + (𝟏𝟐𝟎𝟎𝟎 + 𝟕𝟎𝟎𝟎)
𝟐
20,000

Average age of accounts payable (Creditors Velocity)

𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔 (𝑰𝒏𝒄𝒖𝒍𝒅𝒊𝒏𝒈 𝑩𝑷)

∗ 𝟑𝟔𝟓 𝑫𝒂𝒚𝒔
𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆
𝟐𝟎, 𝟎𝟎𝟎
∗ 𝟑𝟔𝟓 𝑫𝒂𝒚𝒔
𝟖𝟎, 𝟎𝟎𝟎
91 Days

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Question 10
Pawan Ltd. has the following trading and Profit and Loss Account for the year ended 31st
December 2008 and Balance sheet as at that date.
Trading and Profit and Loss Account for the year ended 31st December 2008

Particular Rs. Particulars Rs. Rs.

To Opening Stock 3,50,000 By Sales
To Purchases Credit 16,50,000 Cash 6,00,000
To Carriage Inward 5,00,000 Credit 24,00,000 30,00,000
To Gross Profit c/d 8,00,000 By Closing Stock 3,00,000
33,00,000 33,00,000
To Administrative Exps. 1,92,000 By Gross Profit b/d 8,00,000
To Selling Expenses 50,000 By Other Income 18,000
To Depreciation 1,00,000
To Interest 94,000
To Income Tax 1,30,000
To Net Profit c/d 2,52,000
8,18,000 8,18,000

Balance Sheet as on 31st December,2008

Liabilities Rs. Assets Rs.
Equity Share Capital (Rs.10) 7,00,000 Plant and machinery 20,00,000
10% Preference Share Capital 4,00,000 Less: Depreciation 5,00,000
Reserves and Surplus 4,00,000 15,00,000
Long Term Loan 1,00,000 Goodwill 2,80,000
Debentures 6,00,000 Stock 3,00,000
Creditors 1,20,000 Debtors 2,00,000
Bills Payable 40,000 Prepaid Expenses 50,000
Accrued Expenses 40,000 Marketable Securities 1,50,000
Provision of Tax 1,30,000 Cash 50,000
25,30,000 25,30,000
The market price of the share of the company on 31st December, 2008 was Rs.9.25

Reserves at Beginning 2,93,000

Net Profit during the year 2,52,000 5,45,000
Interim Dividend 1,45,000
Reserves at the closed of the year 4,00,000

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Question 11
M/s. Milind Products Ltd. furnish you their Profit and Loss Account for the year ending 31st
March, 2011 and Balance Sheet as on that date.
Profit and Loss Account
Particulars Rs. Particulars Rs.
To Cost of Goods Sold 9,50,000 By Sales 16,00,000
To Operating Expenses 2,57,000
To Interest 43,000
To Provision for Taxation 1,75,000
To Net Profit c/d 1,75,000
16,00,000 16,00,000
To Provision for Dividend 70,000 By Balance b/f 50,000
To Balance c/f 1,55,000 By Net Profit b/d 1,75,000
2,25,000 2,25,000

Balance Sheet
Liabilities Rs. Assets Rs.
Equity Share Capital (Rs.10 each) 2,50,000 Land and Building 5,00,000
10% Preference Share Capital Plant and Machinery 3,50,000
(Rs.100 each) 2,00,000 Copyrights 1,00,000
General Reserves 2,50,000 Furniture 2,00,000
Profit and Loss Account 1,55,000 Stock 3,00,000
Securities Premium 50,000 Debtors 2,00,000
9% Debentures 2,00,000 Bills Receivables 1,00,000
Public Deposits 2,50,000 Cash and Bank 50,000
Accounts Payable 2,50,000 Advance Tax 1,00,000
Bank Overdraft 50,000
Provision for Taxation 1,75,000
Provision for Dividend 70,000
19,00,000 19,00,000

Market price per equity share Rs.25.

Closing stock is Rs. 1,00,000 less than the opening stock. Calculate following ratios :
(a) Operating Ratio
(b) Stock Turnover Ratio
(c) Stock Working Capital Ratio
(d) Dividend Payout Ratio
(e) Return on Equity Share Capital
Vertical statement of accounts not expected.

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Question 12
Complete the following Balance Sheet from the information given below:
Balance sheet as on 31st December,2003
Liabilities Rs. Assets Rs.
Eq. share capital (of Rs.10 each) ? Fixed Assets ?
Reserves and Surplus ? Current Assets ?
10% Debentures 4,00,000 Stock ?
Sundry Creditors ? Debtors ?
Other Current Liabilities 2,00,000 Other Current Assets ?
? ?

Following information is available :

1. Sales for the year Rs.48 lakhs.
2. Gross Profit Ratio 25%.
3. Net Profit after tax Rs.2,00,000.
4. Purchases and sales on credit basis.
5. Debtors turnover ratio 12 times (Sales / Debtors)
6. Creditors Turnover Ratio 12 times (Cost of Sales / Creditors)
7. E.P.S. Rs.20 per share.
8. Stock Turnover Ratio 10 times.
9. Debt Equity Ratio 0.25 : 1.
10. Current Ratio 1.6 : 1.
Ans:
1. Gross Profit= 48,00,000*25%
= Rs.12,00,000
2. Cost of Goods Sold= Sales- Gross Profit
= 48,00,000-12,00,000
= Rs.36,00,000
𝑁𝑃𝐴𝑇−𝑃𝑟𝑒𝑓𝑟𝑒𝑛𝑐𝑒 𝐷𝑖𝑣𝑖𝑑𝑛𝑒𝑑
3. EPS=
𝑁𝑜 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑆ℎ𝑎𝑟𝑒𝑠
2,00,000−𝑁𝐼𝐿
20=𝑁𝑜 𝑜𝑓 𝐸𝑞𝑢𝑖𝑡𝑦 𝑆ℎ𝑎𝑟𝑒𝑠

20*No. of Equity shares= 2,00,000

No. of Equity Shares= 2,00,000/20
= 10,000 shares
Equity Share Capital= 10,000*10
= Rs.1,00,000

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4. Debtors Turnover Ratio:

𝑆𝑎𝑙𝑒𝑠
𝐷𝑒𝑏𝑡𝑜𝑟𝑠
48,00,000
12= 𝐷𝑒𝑏𝑡𝑜𝑟𝑠

12*Debtors=48,00,000
Debtors= 48,00,000/12
= 4,00,000
5. Creditors Turnover Ratio:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠
𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠
36,00,000
12=
𝐶𝑟𝑒𝑑𝑖𝑡𝑜𝑟𝑠

12*Creditors= 36,00,000
Creditors= 36,00,000/12
= 3,00,000
6. Stock Turnover Ratio:
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘
36,00,000
10=
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘

10*Average Stock= 36,00,000

Average Stock=36,00,000/10
= 3,60,000
7. Debt Equity Ratio:
𝐷𝑒𝑏𝑡
=
𝐸𝑞𝑢𝑖𝑡𝑦
4,00,000 0.25
𝐸𝑞𝑢𝑖𝑡𝑦
= 1

4,00,000*1= Equity*0.25
Equity= 4,00,000/0.25
Equity= 16,00,000
Equity will consist of Reserves & Surplus also
8. Current Ratio:
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑙𝑖𝑡𝑦
=
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 1.6
5,00,000
= 1

Current Assets= 5,00,000*1.6

= 8,00,000
Current Assets= Debtors+Stock+ other CA
8,00,000= 4,00,000+3,60,000+ other CA

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Other CA= 40,000

Balance sheet as on 31st December,2003

Liabilities Rs. Assets Rs.
Eq. share capital (of Rs.10 each) 1,00,000 Fixed Assets (Bal. Figure) 17,00,000
Reserves and Surplus 15,00,000
Equity/Net worth 16,00,000 Current Assets
10% Debentures 4,00,000 Stock 3,60,000
Sundry Creditors 3,00,000 Debtors 4,00,000
Other Current Liabilities 2,00,000 Other Current Assets 40,000
25,00,000 25,00,000
Question 13
From the following information relating to Missing Ltd., complete missing items of the
summarised balance sheet as on 31st March, 1994.
Liabilities Rs. (‘000) Assets (Rs.’OOO)
Share Capital 500 Fixed Assets ?
Reserves ? Stock ?
Long Term Loans ? Debtors ?
Current Liabilities ? Cash ?

Current Ratio 2.5

Acid Test Ratio 1.5
Gross Profit Ratio 0.2
Stock Turnover 6
Debtors Turnover 2 month
Working capital to net worth ratio 0.3
Capital to reserve ratio 1
Net worth to long term loan ratio 20

Ans:
1. Capital to Reserve:
𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝑅𝑒𝑠𝑒𝑟𝑣𝑒
=
500
𝑅𝑒𝑠𝑒𝑟𝑣𝑒
=1

Reserve= 500
2. Net worth to Long term Ratio
𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ
𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚
= 20
1000
𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚
= 20

Long term = 1000/20

= 50

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Ratio

3. Working Capital to Net Worth Ratio

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ
= 0.3
𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
1000
= 0.3

Working Capital= 1000*0.3

= 300
4. Current Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
= 2.5

2.5*Current Liability= Current Assets

2.5 Current Liability= Current Assets -------------- Equation 1
Working Capital= Current Assets- Current Liability
300= 2.5 Current Liability- Current Liability
300= 1.5 Current Liability
Current Liability= 300/1.5
= 200
Putting the value of Current Liability in Equation 1
2.5*200= Current Assets
Current Assets= 500
5. Acid Test Ratio
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝑆𝑡𝑜𝑐𝑘−𝑃𝑟𝑒𝑝𝑎𝑖𝑑
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦−𝐵𝑎𝑛𝑘 𝑂𝑣𝑒𝑟𝑑𝑟𝑎𝑓𝑡
= 1.5
500−𝑆𝑡𝑜𝑐𝑘
200
= 1.5

1.5*200= 500-Stock
300= 500 – Stock
Stock= 500-300
Stock= 200
6. Stock Turnover Ratio
𝐶𝑂𝐺𝑆
= 6
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑆𝑡𝑜𝑐𝑘
𝐶𝑂𝐺𝑆
200
= 6

COGS= 200*6
COGS= 1200
7. Gross profit= 0.2 i.e (20%) on sales
20% means 20/100= 1/5 sales= ¼ Cost
¼*1200= 300

Compiled By : CA. Vinay Tiwari Page 13

Ratio

Therefore sales= COGS+ Gross Profit

= 1200+300
= 1500
8. Debtors Turnover Ratio
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠
2= 𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
*12
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠
2= 1500
*12
1500∗2
Average Debtors=
12

= 250
9. Current Assets= Debtors+Stock+Cash
500= 250+200+Cash
Cash= 50

Liabilities Rs. (‘000) Assets (Rs.’OOO)

Share Capital 500 Fixed Assets (Bal.Figure) 750
Reserves 500 Stock 200
Long Term Loans 50 Debtors 250
Current Liabilities 200 Cash 50
Total 1250 1250

Question 14
The following ratios and other data pertain to the financial statements of P Ltd., for the year
ended 31st December 1990 :
Working Capital Ratio 1.75 :1
Acid Test Ratio 1.27: 1
Working Capital Rs.33,000
Fixed assets to shareholders’ equity 0.625 : 1
Inventory Turnover (based on cost of closing inventory) 4 times
Gross Profit ratio 40 %
Earning per share Re.0.50
Average age of outstanding accounts receivable (based on 365 days) 73 days
Share Capital represented by 20,000 shares
Earning for the year as a percentage of share capital: 25%. There are no prepaid expenses,
deferred expenses, intangible assets and long term liabilities.
Prepare profit and loss account and balance sheet with as much details as possible for the
year ended 31st December 1990.

Compiled By : CA. Vinay Tiwari Page 14

Ratio

Trading P&L account for the year ended 31st December 1990
Particulars Rs. (‘000) Particulars (Rs.’OOO)
To COGS 84,480 By Sales 1,40,800
To Gross Profit 56,320
Total 1,40,800 Total 1,40,800
To Other Exp (Bal.Figure) 46,320 By Gross Profit 56,320
To Net Profit 10,000
56,320 56,320

Balance Sheet as on 31st December1990

Liabilities Rs.(‘000) Assets (Rs.’OOO)

Share Capital 40,000 Fixed Assets 55,000
Reserves (Bal Figure) 48,000 Current Assets
Shareholders Fund 88,000 Stock 21,120
Debtors 28,160
Current Liabilities 44,000 Cash (Bal.figure) 27,720 77,000
Total 1,32,000 Total 1,32,000

1. Working Capital Ratio ( Current Ratio)

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠 1.75
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
= 1

Current Assets= 1.75 Current Liabilities ---------- Equation 1

Working Capital= Current Assets- Current Liabilities
33000= 1.75 Current Liabilities- Current Liabilities
33000= 0.75 Current Liabilities
Current Liabilities= 33,000/0.75
= 44,000
Putting the value of Current Liabilities in Equation 1
Current Assets= 1.75 *44,000
Current Assets= 77,000

NPAT−Prefrence Dividend
2. EPS= No of Equity shares
NPAT
0.50=20,000
NPAT= 10,000
3. Earnings (NPAT)= 25% of Share Capital
It means share capital 100%
10,000 25
? 100
10,000*100/25
= Rs.40,000
4. Fixed assets to Shareholders Fund
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠 0.625
=
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐹𝑢𝑛𝑑 1
Fixed Assets= 0.625 Shareholders Fund

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Ratio

5. Shareholders Fund+ Loan Fund= Fixed Assets+ Working Capital

SF+NIL= 0.625 SF+33,000
SF-0.625SF=33,000
0.375SF=33,000
SF=33,000/0.375
SF=88,000
6. Fixed Assets= 0.625*88,000
= 55,000

𝑪𝑨−𝑺𝒕𝒐𝒄𝒌−𝑷𝒓𝒆𝒑𝒂𝒊𝒅 𝑬𝒙𝒑
7. Acid Test Ratio:
𝑪𝑳−𝑩𝒂𝒏𝒌 𝑶𝒗𝒆𝒓𝒅𝒓𝒂𝒇𝒕
𝟕𝟕,𝟎𝟎𝟎−𝑺𝒕𝒐𝒄𝒌 𝟏.𝟐𝟕
=
𝟒𝟒𝟎𝟎𝟎 𝟏

77,000-Stock=1.27*44000
77,000-Stock=55,880
Stock=77,000-55,880
Stock= 21,120
8. Inventory Turnover Ratio=
𝑪𝑶𝑮𝑺
= 4
𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌

𝑪𝑶𝑮𝑺
𝟐𝟏,𝟏𝟐𝟎
= 4
COGS= 4*21120
COGS=84,480

9. Gross Profit= 40% of sales

40/100=2/5 of sale
2/5 of sale= 2/3 cost
Gross Profit= 2/3*84,480
= Rs.56,320
10. Sales= COGS+ Gross Profit
= 84,480+56,320
= 1,40,800
11. Average o/s account receivable=
𝐴𝑣𝑟𝑒𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠
73= 𝐶𝑟.𝑆𝑎𝑙𝑒𝑠
∗ 365
𝐴𝑣𝑟𝑒𝑎𝑔𝑒 𝐷𝑒𝑏𝑡𝑜𝑟𝑠
73= 1,40,800
∗ 365
Average Debtors=1,40,800*73/365
Average Debtors=28,160
Question 15
a. The current ratio of Busy Ltd. is 4.5 and liquid ratio is 3 : 1. Inventory is Rs.6,00,000.
Calculate the current liabilities.
b. Total current liabilities of Beta Ltd. are Rs. 10,00,000 and acid test ratio is 3 : 1. Inventory
is Rs.5,00,000. Find out the current assets and compute the current ratio.
c. Inventory of Delta Ltd. is Rs.6,00,000. Total liquid assets are Rs.24,00,000 and liquid ratio
is 2:1. Work out the current ratio.

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Ratio

d. Liquid ratio of Alpha Ltd. is 2.5. Inventory is Rs. 12,00,000. Current ratio is 4 : 1. Assume
there is no bank overdraft. Find out the current liabilities.
Ans:
𝑪𝑨 𝟒.𝟓
A] Current Ratio= =
𝑪𝑳 𝟏

CA=4.5CL
𝑪𝑨−𝑺𝒕𝒐𝒄𝒌 𝟑
Liquid Ratio= 𝑪𝑳−𝑩𝒐𝒅 =𝟏

CA-6,00,000=3CL
4.5 CL-600000=3CL
4.5CL-3CL=6,00,000
1.5 CL=600000
CL= 600000/1.5
CL= 4,00,000
CA= 4.5*4,00,000
CA= 18,00,000

𝑪𝑨−𝟓𝟎𝟎𝟎𝟎𝟎 𝟑
B] Liquid Ratio= =
𝟏𝟎,𝟎𝟎,𝟎𝟎𝟎 𝟏

CA-500000= 3*10,00,000
CA=30,00,000+500000
CA= 35,00,000
𝟑𝟓,𝟎𝟎,𝟎𝟎𝟎
Current Ratio=
𝟏𝟎,𝟎𝟎,𝟎𝟎𝟎
= 3.5:1

𝟐𝟒,𝟎𝟎,𝟎𝟎𝟎 𝟐
C} Liquid Ratio= =
𝑪𝑳 𝟏

24,00,000=2CL
CL= 24,00,000/2
CL= 12,00,000
CA= Liquid Assets+ Stock
= 24,00,000+6,00,000
= 30,00,000
𝐶𝐴
Current Ratio= 𝐶𝐿

30,00,000
12,00,000
2.5:1

𝑪𝑨 𝟒
D} Current Ratio= =
𝑪𝑳 𝟏

CA= 4CL

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Ratio
𝑪𝑨−𝟏𝟐𝟎𝟎𝟎𝟎𝟎 𝟐.𝟓
Liquid Ratio= =
𝑪𝑳 𝟏

4CL-1200000=2.5CL
4CL-2.5CL=12,00,000
1.5CL=12,00,000
CL= 12,00,000/1.5
CL=8,00,000
Question 16
Debtors’ Velocity = 3 months
Stock Velocity = 8 times
G.P. Ratio = 25%
Gross profit for the year is Rs. 1,60,000. There are no long term loans or overdraft. Reserves
and surplus amounted to Rs.56,000 and liquid assets are Rs.2,00,000. Closing stock is
Rs.4,000 more than the opening stock. Bills receivable is Rs. 10,000 and bills payable
Rs.4,000.
Compute : (i) Sales (ii) Sundry Debtors (iii) Closing Stock and (iv) Bank Balance.
Ans:
𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡
1. Gross Profit Ratio= 𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
1,60,000
25%=𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
25%*Net Sales=1,60,000
Net Sales= 1,60,000/25%
= 6,40,000
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔(𝑰𝒏𝒄𝒍𝒖𝒅𝒊𝒏𝒈 𝑩𝑹)
2. Debtors Velocity= 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
∗ 𝟏𝟐

𝑫𝒆𝒃𝒕𝒐𝒓𝒔+𝟏𝟎,𝟎𝟎𝟎
3= 𝟔,𝟒𝟎,𝟎𝟎𝟎
∗ 𝟏𝟐
6,40,000*3=(Debtors+10,000)*12
19,20,000=12Debtors+1,20,000
19,20,000-1,20,000= 12 Debtors
18,00,000/12= Debtors
1,50,000= Debtors

𝑪𝑶𝑮𝑺
3. Stock Velocity=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌

COGS=Sales – Gross Profit

= 6,40,000-1,60,000
= 4,80,000
𝟒,𝟖𝟎,𝟎𝟎𝟎
8=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌
8*Average Stock= 4,80,000
Average Stock= 4,80,000/8
Average Stock= 60,000

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 Ratio
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
Average Stock=
𝟐
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
60,000= 𝟐
Closing Stock is 4000 more than the opening stock
Let Opening stock be “x”
Then Closing stock= x+4000
𝒙+(𝒙+𝟒,𝟎𝟎𝟎)
60,000=
𝟐
60,000*2= 2x +4000
1,20,000-4000= 2x
1,16,000/2= x
58,000= x (Opening Stock)
Closing Stock= x+4000
= 58,000+4000
= 62,000

4. Liquid assets= Debtors+ B/R+ Bank

2,00,000= 1,50,000+10,000+Bank
Bank=2,00,000-1,50,000-10,000
Bank= 40,000
Ans:
1. Sales= Rs.6,40,000
2. Debtors= Rs.1,50,000
3. Closing Stock=62,000
4. Bank= Rs.40,000
Question 17 (A)
From the following data prepare the Balance Sheet of ABC Co. Ltd. as at 31st March 1991 :
Current Ratio 1.75
Liquid Ratio (Current Assets less stock to current liabilities ratio) 1.25
Gross Profit Ratio 25%
Debt Collection Period 1.5 month
Sales for the year Rs. 1,20,00,000
Stock Turnover Ratio (with closing stock) 9
Capital Gearing Ratio (Long term debts / Share capital) 0.6
Fixed assets, to net worth 1.25
Cost of sales to fixed assets 1.2
Reserves and surplus to share capital 0.2
(Assume all sales are on credit, and the year is of 360 operating days)

Balance Sheet as on 31st March1991

Liabilities Rs. Assets Rs.

Share Capital 50,00,000 Fixed Assets 75,00,000
Reserves 10,00,000 Current Assets
Shareholders Fund 60,00,000 Stock 10,00,000
Long Term Debts 30,00,000 Debtors 15,00,000
Current Liabilities 20,00,000 Cash (Bal. Figure) 10,00,000 35,00,000
Total 1,10,00,000 Total 1,10,00,000

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Ratio

1. COGS= Sales-Gross Profit

= 1,20,00,000-25%
COGS= 90,00,000
𝑪𝑶𝑮𝑺
2. Stock Turnover Ratio= 𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
90,00,000
9= 𝐶𝑙𝑜𝑠𝑖𝑛𝑔 𝑆𝑡𝑜𝑐𝑘

Closing Stock= 90,00,000/9

= 10,00,000
𝑫𝒆𝒃𝒕𝒐𝒓𝒔
3. Debt Collection Period= 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆
*12
𝑫𝒆𝒃𝒕𝒐𝒓𝒔
1.5= 𝟏,𝟐𝟎,𝟎𝟎,𝟎𝟎𝟎
*12

Debtors=1,20,00,000*1.5/12
Debtors= 15,00,000
𝑪𝒐𝒔𝒕 𝒐𝒇 𝑺𝒂𝒍𝒆𝒔
4. Cost of Sales to Fixed Assets= 𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔
𝟗𝟎,𝟎𝟎,𝟎𝟎𝟎
1.2 =
𝑭𝒊𝒙𝒆𝒅 𝑨𝒔𝒔𝒆𝒕𝒔

Fixed Assets= 90,00,000/1.2

Fixed Assets= 75,00,000
5. Fixed Assets to Net worth
75,00,000
1.25=𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ

Net Worth= 75,00,000/1.25

Net Worth = 60,00,000
6. Reserves and surplus to share capital
𝑅&𝑆
0.2= 𝑆ℎ𝑎𝑟𝑒 𝐶𝑎𝑝𝑖𝑡𝑎𝑙
0.2 share Capital= R&S

Shareholders Fund= Share Capital+ R&S

60,00,000= Share Capital+0.2 Share Capital
60,00,000= 1.2 Share Capital
Share Capital= 60,00,000/1.2
Share Capital= 50,00,000
7. Capital Gearing Ratio :
0.6=(Long term debts / 50,00,000)
Long Term Debts=50,00,000*0.6
Long term Debts= 30,00,000
𝐶𝐴−𝑆𝑡𝑜𝑐𝑘
8. Liquid Ratio=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
𝐶𝐴−10,00,000
1.25=𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

1.25CL= CA-10,00,000 -------------------------------(1)

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Ratio

9. Current Ratio=
𝐶𝐴
1.75=
𝐶𝐿

1.75CL= CA------------------------------------------(2)
Put the value of CA in Equitation (1)
1.25CL=1.75CL-10,00,000
1.75-1.25CL=10,00,000
0.50 CL= 10,00,000
CL=10,00,000/0.5
CL= 20,00,000
CA= 1.75*20,00,000
CA= 35,00,000
Q17(B): From the following details, prepare Balance Sheet:
(i) Stock Velocity (i.e. Stock Turnover Ratio) = 6
(ii) Capital Turnover Ratio i.e., (Proprietary Funds / Cost of Sales) = 2
(iii) Fixed Assets Turnover Ratio = 4
(iv) Gross Profit Ratio = 20%
(v) Debtors Velocity = 2 months
(vi) Creditors Velocity = 73 days.
Gross profit is Rs.60,000. Reserves and surplus is Rs.20,000. Closing stock is Rs.5,000 in
excess of the opening stock.
Balance Sheet as on 31st March1991

Liabilities Rs. Assets Rs.

Share Capital 4,60,000 Fixed Assets 75,000
Reserves (Given) 20,000 Current Assets
Shareholders Fund 4,80,000 Stock 42,500
Debtors 50,000
Current Liabilities 49,000 Cash (Bal figure) 3,61,500 4,54,000
Total 5,29,000 Total 5,29,000

𝑮𝒓𝒐𝒔𝒔 𝑷𝒓𝒐𝒇𝒊𝒕
1. Gross Profit Ratio= 𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔

𝟔𝟎,𝟎𝟎𝟎
20%=𝑵𝒆𝒕 𝑺𝒂𝒍𝒆𝒔
20%*Net Sales= 60,000
Net Sales=60,000/20%
Net Sales= 3,00,000
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑫𝒆𝒃𝒕𝒐𝒓𝒔(𝑰𝒏𝒄𝒍𝒖𝒅𝒊𝒏𝒈 𝑩𝑹)
2. Debtors Velocity= 𝑪𝒓𝒆𝒅𝒊𝒕 𝑺𝒂𝒍𝒆𝒔
∗ 𝟏𝟐
𝑫𝒆𝒃𝒕𝒐𝒕𝒓𝒔
2= ∗ 𝟏𝟐
𝟑,𝟎𝟎,𝟎𝟎𝟎
Debtors= 3,00,000*2/12

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Ratio

Debtors= 50,000
𝑪𝑶𝑮𝑺
3. Stock Velocity=𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌
𝟐,𝟒𝟎,𝟎𝟎𝟎
6=
𝑨𝒗𝒆𝒓𝒂𝒈𝒆 𝑺𝒕𝒐𝒄𝒌
Average Stock= 2,40,000/6
Average Stock= 40,000
Let the Opening Stock be x
Then Closing stock = x+5,000
𝑶𝒑𝒆𝒏𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌+𝑪𝒍𝒐𝒔𝒊𝒏𝒈 𝑺𝒕𝒐𝒄𝒌
Average Stock= 𝟐
𝒙+𝒙+𝟓𝟎𝟎𝟎
40,000=
𝟐
40,000*2= 2x+5000
80,000-5000= 2 x
X= 75,000/2
X= 37,500
Closing Stock= 37,500+5000
= 42,500

COGS= Sales-Gross Profit

= 3,00,000-60,000
= 2,40,000

4. Capital Turnover Ratio

𝑃𝑟𝑜𝑝𝑟𝑖𝑒𝑡𝑜𝑟𝑠 𝐹𝑢𝑛𝑑
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠
=2
𝑃𝑟𝑜𝑝𝑟𝑖𝑒𝑡𝑜𝑟𝑠 𝐹𝑢𝑛𝑑
2,40,000
= 2
Proprietors Fund= 2,40,000*2
= 4,80,000
5. Fixed Assets Turnover Ratio
𝑆𝑎𝑙𝑒𝑠
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
= 4
3,00,000
𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡𝑠
= 4

Fixed Assets= 3,00,000/4

Fixed Asets=75,000
6. COGS= Opening stock+ Purchases- Closing Stock
2,40,000= 37,500+Purchases-42,500
Purchases=2,40,000-37500+42,500
Purchases=2,45,000
𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔
7. Creditors Velocity=𝑪𝒓𝒆𝒅𝒊𝒕 𝑷𝒖𝒓𝒄𝒉𝒂𝒔𝒆 ∗ 𝟑𝟔𝟓

𝑪𝒓𝒆𝒅𝒊𝒕𝒐𝒓𝒔
𝟕𝟑 = ∗ 𝟑𝟔𝟓
𝟐, 𝟒𝟓, 𝟎𝟎𝟎
Creditors=2,45,000*73/365
= 49,000

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Ratio

Question 19
Complete the following income statement for the year ended 31st March, 2008
Particulars Rs.
Net Sales ?
Less : Cost of Goods Sold ?
Gross Profit (25% of sales) 2,00,000
Less: Operating Expenses ?
Operating Net Profit ?
Add : Non Operating Income Nil
Less : Non Operating Expenses 40,000
Net Profit Before Tax 40,000
Less : Income tax (50% on NPBT) ?
Net Profit After Tax ?

Sales=
Gross Profit = 25%
Sales will be =100%
Cost of Sales will be = 75%
25% 2,00,000
100% ?
Sales= 8,00,000

Particulars Rs.
Net Sales 8,00,000
Less : Cost of Goods Sold 6,00,000
Gross Profit (25% of sales) 2,00,000
Less: Operating Expenses 1,20,000
Operating Net Profit 80,000
Add : Non Operating Income Nil
Less : Non Operating Expenses 40,000
Net Profit Before Tax 40,000
Less : Income tax (50% on NPBT) 20,000
Net Profit After Tax 20,000

Question 20
Following Financial statements of "JAY Ltd." are given to you. Preference Dividend was Rs.
4,800. Equity Dividend was Rs. 19,000. Rearrange them into vertical form and compute all
possible ratios:
Trading and Profit and Loss A/c for the year ended 31-3-2002
Particulars Rs. Particulars Rs.
To Opening Stock 45,000 By Sales 4,00,000
To Purchase less returns 2,20,000 By Closing Stock 95,000

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Ratio

To Wages 1,00,000 By Non-operating Income 12,000

To Salaries 40,000
To Office Rent 17,000
To Interest 3,000
To Non-operating Expenses 2,000
To Advertisement 6,000
To Transport on Sales 4,000
To Net Profit 50,000
To Income Tax 20,000
5,07,000 5,07,000
Balance Sheet as on 31-3-2002

Liabilities Rs. Assets Rs.

12% Preference Share Capital 40,000 Fixed Assets :
Equity Share Capital 1,90,000 Original Cost 2,30,000
Capital Reserve 15,000 Less : Depreciation 40.000 1,90,000
General Reserve 45,000 Investments (Short Term) 50,000
P &LA/c 10,000 Stock 95,000
10 % Debentures 30,000 Debtors 85,000
Bank Loan 15,000 Pre-paid Expenses 20,000
Creditors 70,000
Bills Payables 5,000
Bank Overdraft 20,000
4,40,000 4,40,000
Question 21
Balance Sheet as on 31st March, 2004

Liabilities Rs. Assets Rs.

Equity Share Capital 1,00,000 Cash in Hand 2,000
6% Preference Share Capital 1,00,000 Cast at Bank 10,000
7% Debentures 40,000 Bills Receivable 30,000
8% Public Deposits 20,000 Debtors 70,000
Bank Overdraft 40,000 Stock 40,000
Creditors 60,000 Advances 20,000
Unpaid Dividend 10,000 Furniture 30,000
Outstanding Expenses 7,000 Machinery 10,00,000
Reserves 1,50,000 Land & Building 2,20,000
Provision for Tax 20,000 Goodwill 30,000
Profit & Loss Account 20,000 Preliminary Expenses 10,000
Calls in Arrears in Equity Shares 5,000
5,67,000 5,67,000

Convert the above Balance Sheet in vertical form and calculate - (i) Current Ratio (ii) Quick
ratio (iii) Proprietary Ratio (iv) Capital Gearing Ratio (v) Stock Working Capital ratio.
Give your comments.

Compiled By : CA. Vinay Tiwari Page 24