Ts grewal practical problems of Accounting Ratio (2023-2024)

Accounting Ratio Ts grewal solution volume-3(2023-2024):part-2

Page No 4.112:

Question 81:

From the following information, calculate value of Opening Inventory:
Closing Inventory
=
` 68,000
Total Sales
=
` 4,80,000 (including Cash Sales ` 1,20,000)
Total Purchases
=
` 3,60,000 (including Credit Purchases ` 2,39,200)
Goods are sold at a profit of 25% on cost.

Answer:

Let Cost of Goods Sold be = x
Gross profit=X×25/100=25X/100

Cost of goods sold = Sales – Gross profit
Or X=4,80,000-25X/100
Or X+25X/100=4,80,000
Or 125X/100=4,80,000
X=4,80,000×100/125=3,84,000
Cost of Goods Sold = x = ` 3,84,000

Cost of Goods Sold = Opening Inventory (Stock) + Purchases − Closing Inventory (Stock)
3,84,000 = Opening Inventory + 3,60,000 − 68,000
Opening Inventory = 3,84,000 − 2,92,000 = ` 92,000

Page No 4.112:

Question 85:

Credit Revenue from Operations, i.e., Net Credit Sales for the year
1,20,000
Debtors
12,000
Billls Receivable
8,000
Calculate Trade Receivables Turnover Ratio.

Answer:

Trade receivable turnover ratio= Net sales/ Debtors+Bills receivable
Trade receivable turnover ratio= 1,20,000/12000+8,000=6 Times

Page No 4.112:

Question 86:

Calculate Trade Receivables Turnover Ratio from the following information:

Opening Balance ( `)
Closing Balance ( `)
Sundry Debtors
28,000
25,000
Bills Receivable
7,000
15,000
Provision for Doubtful Debts
2,800
2,500

Total Sales ` 1,00,000; Sales Return ` 1,500; Cash Sales ` 23,500.

Answer:

Net Credit Sales = Total Sales − Sales Return − Cash Sales
= 1,00,000 − 1,500 − 23,500 = 75,000
Average receivables= Opening Receivables +Closing Receivables/2
Average receivables= 28,000+7,000+25,000+15,000/2=37,500
Trade receivable turnover ratio= Net sales/ Average receivables
Trade receivable turnover ratio= 75,000/37,500 = 2 Times

Page No 4.113:

Question 89:

From the following particulars, determine Trade Receivables Turnover Ratio:

`
Revenue from Operations (Net Sales)
20,00,000
Credit Revenue from Operations (Credit Sales)
16,00,000
Trade Receivables
2,00,000

Answer:

Credit Sales = 16,00,000
Average Debtors = 2,00,000
Trade receivable turnover ratio= Net sales/ Average receivables
Trade receivable turnover ratio= 16,00,000/2,00,000= 8 Times

Page No 4.113:

Question 90:

Compute Trade Receivables Turnover Ratio from the following:

31st March, 2020( `)
31st March, 2021( `)
Revenue from Operations (Net Sales)
8,00,000
7,00,000
Debtors in the beginning of year
83,000
1,17,000
Debtors at the end of year
1,17,000
83,000
Sales Return
1,00,000
50,000

Answer:

Average Debtors =Opening Debtors + Closing Debtors/2

In 2017 = 83,000 + 1,17,000/2 = ` 1,00,000

In 2018 = 1,17,000 + 83,000/2 = ` 1,00,000
Debtors Turnover Ratio = Net Sales/Average Debtors
In 2020 = 8,00,000/1,00,000 = 8 Times
In 2021 = 7,00,000/1,00,000 = 7 Times

page No 4.115:

Question 102:

Calculate Trade Payables Turnover Ratio for the year 2018-19 in each
of the alternative cases:
Case 1 : Closing Trade Payables ` 45,000; Net Purchases ` 3,60,000;
Purchases Return ` 60,000; Cash Purchases ` 90,000.
Case 2 : Opening Trade Payables ` 15,000; Closing Trade Payables `
45,000; Net Purchases ` 3,60,000.
Case 3 : Closing Trade Payables ` 45,000; Net Purchases ` 3,60,000.
Case 4 : Closing Trade Payables (including ` 25,000 due to a supplier of machinery)
` 55,000; Net Credit Purchases ` 3,60,000.

Answer:

Case 1
Net Credit Purchases = Net Purchases − Cash Purchases
= 3,60,000 − 90,000
= 2,70,000
Trade Payables Turnover Ratio = Net Credit Purchases/Closing Trade Payables
= 2,70,000/45,000
= 6 times
Case 2
Net Purchases = 3,60,000
Average Trade Payables = Opening Trade Payables + Closing Trade Payables/2
= 15,000 + 45,000/2 = 30,000
Trade Payables Turnover Ratio = Net Credit Purchases/Average Trade Payables
= 3,60,000/30,000 = 12 times
Case 3

Trade Payable Turnover Ratio = Net Credit Purchases/Closing Trade Payables
= 3,60,000/45,000
= 8 times
Case 4
Net Credit Payables for Goods = Trade Payables − Creditors for Machinery
= 55,000 − 25,000
= 30,000
Trade Payables Turnover Ratio = Net Credit Purchases/Average Trade Payables
= 3,60,000/30,000
= 12 times

Page No 4.115:

Question 105:

Calculate Working Capital Turnover Ratio from the following information;
Revenue from Operations (Cost of Goods Sold) 24,00,000
Current Assets 10,00,000
Current Liabilities 4,00,000

Answer:

Working Capital = Current Assets - Current Liabilities
Working Capital = 10,00,000 – 4,00,000
Working Capital = 6,00,000
Working Capital Turnover Ratio = Revenue from operation/ Working Capital
Working Capital Turnover Ratio = 24,00,000/ 6,00,000
Working Capital Turnover Ratio = 4 Times

Page No 4.116:

Question 106:

From the following information, calculate Working Capital Turnover Ratio:

Cost of Revenue from Operations (Cost of Goods Sold) `5,00,000
Current Assets `2,50,000
Current Liabilities `1,50,000
Answer:
Working Capital
= Current Assets + Current Liabilities

= 2,50,000 + 1,50,000

= 1,00,000
Working Capital Turnover Ratio
= Cost of Revenue from Operations/ Working Capital

= 5,00,000/1,00,000

= 5 Times

page No 4.116:

Question 113:

Compute Gross Profit Ratio from the following information:
Cost of Revenue from Operations (Cost of Goods Sold) `5,40,000;
Revenue from Operations (Net Sales) `6,00,000.

Answer:

Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= 6,00,000 – 5,40,000
= ` 60,000
Gross Profit Ratio = Gross Profit Revenue from Operations × 100
= 60,0006,00,000 × 100
= 10%

page No 4.116:

Question 114:

From the following, calculate Gross Profit Ratio:
Gross Profit: `50,000; Revenue from Operations `5,00,000; Sales Return: `50,000.

Answer:

Net Sales = ` 5,00,000
Gross Profit = ` 50,000

Gross Profit Ratio = Gross Profit / Net Sales × 100
= 50,000/5,00,000 × 100 = 10%
Note: Here we will not deduct the amount of sales return
because the amount of net sales has already been provided in the question.

page No 4.116:

Question 115:

Compute Gross Profit Ratio from the following information:
Revenue from Operations, i.e., Net Sales = `4,00,000; Gross Profit 25% on Cost.

Answer:

Gross Profit 25% on Cost.
Let Cost = x
Gross Profit = x × 25/00=25x/100

Sales = Cost + Gross Profit
4,00,000 =x+ 25x/100
Or, 4,00,000 = 125x/100
Or, x= 4,00,000×100/125 = 3,20,000

Cost = x = ` 3,20,000
Gross profit = Sales – Cost
Gross profit ratio= Gross profit / Net Sales ×100
= 80,000×100/4,00,000=20%

Page No 4.117:

Question 117:

From the following information, calculate Gross Profit Ratio:

`

`
Credit Sales
5,00,000

Decrease in Inventory
10,000
Purchases
3,00,000

Returns Outward
10,000
Carriage Inwards
10,000

Wages
50,000

Rate of Credit Sale to Cash Sale
4:1

Answer:

Credit Sale = ` 5,00,000
Rate of Credit Sale to Cash Sale = 4:1
Cash Sale = 14 × 5,00,000 = ` 1,25,000

Total Sales = Cash Sales + Credit Sales = ` 1,25,000 + ` 5,00,000 = ` 6,25,000
Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory
= ` 3,00,000 – ` 10,000 + ` 10,000 + ` 50,000 + ` 10,000
= ` 3,60,000
Gross Profit = Total Sales – Cost of Goods Sold
= ` 6,25,000 – ` 3,60,000 = ` 2,65,000

Gross Profit Ratio = Gross Profit / Net Sales × 100 = 2,65,000/6,25,000 × 100 = 42.40%

Page No 4.117:

Question 118:

From the following information, calculate Gross Profit Ratio:

`

`
Revenue from Operations:

Cash
2,00,000
Carriage Inwards
8,000
Credit
8,00,000
Salaries
42,000
Purchases:

Decrease in Inventory
1,22,000
Cash
40,000
Returns Outwards
20,000
Credit
3,60,000
Wages
20,000

(CBSE 2020 C)

Answer:

Total Sales= 2,00,000+8,00,000=10,00,000
Gross Profit= Total Sales + Wages- Purchases- Carriage Inwards- Returns Outwards-
Decrease in Inventory
Gross Profit= 10,00,000+20,000-4,00,000-8,000-20,000-1,22,000
Gross Profit=4,70,000
Gross Profit Ratio=Gross Profit ×100/ Revenue from Operations
Gross Profit Ratio=4,70,000 ×100/ 10,00,000
Gross Profit Ratio = 47%

Page No 4.118:

Question 128:

From the following information, calculate Operating Ratio:
Cost of Revenue

Revenue from Operation:

from Operations (Cost of Goods Sold)
`52,000

Gross Sales
` 88,000
Operating Expenses
`18,000

Sales Return
` 8,000

Answer:

Net Sales = Gross Sales - Sales Return
= 88,000 - 8,000 = ` 80,000
Operating Cost = Cost of Goods Sold + Operating Expenses
= 52,000 + 18,000 = ` 70,000
Operating Ratio = Operating Cost/Net Sales × 100
  = 70,000/80,000 × 100 = 87.5%

Page No 4.118:

Question 129:

Calculate Cost of Revenue from Operations from the following information:
Revenue from Operations ` 12,00,000; Operating Ratio 75%; Operating Expenses ` 1,00,000.

Answer:

Given: Revenue from Operations (Net Sales)= ` 12,00,000
Operating Ratio=75%
Operating Expenses= ` 1,00,000
Find out:
Cost of Revenue from Operations
Operating Ratio=Operating Cost/ Net Sales×100/75
=Operating Cost/12,00,000
Operating Cost= ` 9,00,000
Operating Cost=Cost of Revenue from Operations+Operating Expenses
9,00,000=Cost of Revenue from Operations+1,00,000
Cost of Revenue from Operations= ` 8,00,000

Page No 4.118:

Question 130:

Calculate Operating Ratio from the following information:
Operating Cost ` 6,80,000; Gross Profit 25%; Operating Expenses ` 80,000.

Answer:

Given:
Operating Cost= ` 6,80,000
Operating Expenses= ` 80,000
Gross Profit Ratio=25%
Find out: Operating Ratio Operating Cost = Cost of Revenue from Operation+Operating Expenses 6,80,000=Cost of Revenue from Operations+80,000
Cost of Revenue from Operations= ` 6,00,000
Gross Profit=14th of sales=13rd of cost
Gross Profit=13×6,00,000= ` 2,00,000
Gross Profit Ratio=Gross Profit Net Sales×100/25=2,00,000
Net Sales×100
Net Sales= ` 8,00,000
Operating Ratio=Operating Cost/Net Sales×100
=6,80,000/8,00,000×100
=85%

Page No 4.118:

Question 133:

Calculate Operating Profit Ratio from the following

Revenue from Operations (Net Sales) `5,00,000
Cost of Revenue from Operations (Cost of Goods Sold) `2,00,000
Wages `1,00,000
Office and Administrative Expenses `50,000
Interest on Borrowings `5,000

Answer:

Operating Profit= Sales – Cost of Goods Sold- Office and Administrative Expenses
Operating Profit=5,00,000-2,00,000-50,000
Operating Profit=2,50,000
Operating Profit Ratio=2,50,000×100/5,00,000 = 50%
Operating Profit Ratio = 50%

Page No 4.118:

Question 134:

Calculate Operating Profit Ratio from the following information:

Opening Inventory
`1,00,000

Closing Inventory
`1,50,000
Purchases
` 10,00,000

Loss by fire
` 20,000
Revenue from Operations, i.e., Net Sales
` 14,70,000

Dividend Received
` 30,000
Administrative and Selling Expenses
` 1,70,000

Answer:

Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory
= 1,00,000 + 10,00,000 – 1,50,000 = 9,50,000
Operating Expenses = Administrative and Selling Expenses = 1,70,000
Operating Cost = Cost of Goods Sold + Operating Expenses
= 9,50,000 + 1,70,000 = 11,20,000
Net Sales = 14,70,000

Operating Ratio= Operating Cost/ Net Sales ×100
=11,20,000/14,70,000× 100=76.19%
Operating Profit Ratio = 100 – Operating Ratio = 100 – 76.19 = 23.81%

Page No 4.119:

Question 135:

What will be the Operating Profit Ratio, if Operating Ratio is 82.59%?

Answer:

Operating Ratio = 82.59%
Operating Ratio + Operating Profit Ratio = 100%
Operating Profit Ratio = 100% − 82.59% = 17.41%

Page No 4.119:

Question 136:

Calculate Operating Profit Ratio, in each of the following alternative cases:
Case 1: Revenue from Operations (Net Sales) `
20,00,000; Operating Profit ` 3,00,000.

Case 2: Revenue from Operations (Net Sales) `
6,00,000; Operating Cost ` 5,10,000.

Case 4: Revenue from Operations (Net Sales) `
3,60,000; Gross Profit 20% on Sales; Operating Expenses ` 18,000

Case 4: Revenue from Operations (Net Sales) `
4,50,000; Cost of Revenue from Operations ` 3,60,000; Operating Expenses ` 22,500.

Case 5: Cost of Goods Sold, i.e., Cost of Revenue from Operations
` 4,00,000; Gross Profit 20% on Sales; Operating Expenses ` 25,000.
Answer:
Case 1
Operating Ratio= Operating Cost/ Net Sales ×100
                        =3,00,000/20,00,000× 100=15%
Case II
Operating Profit = Net Sales- Operating Cost
                        =6,00,000-5,10,000
                        =90,000
Operating Ratio= Operating Cost/ Net Sales ×100
                        =90,000/6,00,000× 100=15%

Case III
Net Sales = 3,60,000
Gross Profit = 20% on Sales
Gross Profit =20/100×3,60,000=72,000
Operating Profit = Net Sales- Operating Cost
                        =72,000-18,000
                        =54,000
Operating Ratio= Operating Cost/ Net Sales ×100
                        =54,000/3,60,000× 100=15%

Case IV
Net Sales = 4,50,000
Operating Profit = Net Sales- Cost of goods sold-Operation expenses
                        =4,50,000-3,60,000-22,500
                        =67,500
Operating Ratio= Operating Cost/ Net Sales ×100
                        =67,500/4,50,000× 100=15%

Case V
Gross profit = 20% on sales
Let Sales =x
Gross profit=x×20/100=20x/100
Sales = Cost Goods Sold + Gross Profit
x=4,00000+20x/100
Or, 80x/100=4,00,000
Or, x=5,00,000
∴Sales = 5,00,000
Operating Cost = Cost of Goods Sold+ Operating Expenses
                        =4,00,000+25,000=4,25,000
Operating Profit = Net Sales- Cost of goods sold-Operation expenses
                        =5,00,000-4,00,000-25,000
=75,000
Operating Profit Ratio = Operating Profit/ Net Sales×100
                                    =75,000×100/5,00,000=15%

Question 139:

Revenue from Operations, i.e., Net Sales ` 6,00,000. Calculate Net Profit Ratio.

Answer:

Net Sales = 6,00,000
Net profit = 60,000
Net Profit Ratio= Net profit ×100/Net Sales
= 60,000×100/6,00,000
= 10%

Page No 4.119:

Question 142:

Net Profit before Interest and Tax `2,50,000;
Capital Employed `10,00,000. Calculate Return on Investment.

Answer:

Net Profit before Interest and Tax = 2,50,000
Capital Employed = 10,00,000
Return on Investment = Net profit Before Interest and Tax ×100/ Capital Employed
= 2,50,000×100/10,00,000
= 25%

Page No 4.120:

Question 147:

From the following Balance Sheet of Global Ltd., you are required to calculate
Return on Investment for the year 2020-21:
BALANCE SHEET OF GLOBAL LTD.
as at 31st March, 2021
Particulars
Note No.
Amount
`
I. EQUITY AND LIABILITIES
1. Shareholder's Funds

(a) Share Capital–Equity Shares of ` 10 each Fully paid

5,00,000
(b) Reserves and Surplus

4,20,000
2. Non-Current Liabilities

15% Long-term Borrowings

16,00,000
3. Current Liabilities

8,00,000
Total

33,20,000
II. ASSETS

1. Non-Current Assets

(a) Fixed Assets

16,00,000
(b) Non-Current Investments:

(i) 10% Investments

2,00,000
(ii) 10% Non-trade Investments

1,20,000
2. Current Assets

14,00,000
Total

33,20,000
Additional Information: Net Profit before Tax for the year 2020-21 is ` 9,72,000.

Answer:

Return on Investment = (Net Profit before Interest, Tax and Dividend/ Capital Employed × 100)
Interest on borrowings = ` (16,00,000 × 15/100)= ` 2,40,000
Net Profit before Tax = ` 9,72,000
Net Profit before Interest and Tax = ` (9,72,000 + 2,40,000) = ` 12,12,000
Net Profit before Interest and Tax (excluding interest on Non-trade investments) = `
(12,12,000 – 12,000) = ` 12,00,000
Capital Employed = Shareholder’s Funds + Non-Current Liabilities – Non-Trade Investment
= ` (5,00,000 + 4,20,000 + 16,00,000 – 1,20,000) = ` 24,00,000
Return on Investment = (12,00,000/24,00,000 × 100) = 50%

Page No 4.121:

Question 151:

Calculate Revenue from Operations of BN Ltd. from the following information:
Current Assets 8,00,000
Quick Ratio is 1.5:1
Current Ratio is 2:1.
Inventory Turnover Ratio is 6 times.
Goods were sold at a profit of 25% on cost.
(CBSE 2019)

Answer:

Current Ratio = Current Assets/ Current Liabilities
2:1 = 8,00,000/ Current Liabilities
Current Liabilities= 8,00,000/2=4,00,000

Quick Assets= 4,00,000×1.5=6,00,000
Working Capital = Current Assets - Current Liabilities
Working Capital = 8,00,000 – 4,00,000
Working Capital = 4,00,000
Inventory= Current Assets – Quick Assets
Inventory= 8,00,000 – 6,00,000
Inventory= 2,00,000
Inventory Turnover Ratio= Cost of Revenue from operation/Average Inventory
Cost of Revenue from operation = Inventory× Inventory Turnover Ratio
Cost of Revenue from operation = 2,00,000 × 6
Cost of Revenue from operation = 12,00,000

Profit of 25% on cost
therefore,
it is assumed that
Cost is equal to 100%
Revenue
=
Cost
+ Profit
125
=
100
+25

Hence,
Revenue= 12,00,000×125/100=15,00,000

Page No 4.121:

Question 152:

Following information is given about a company:

`

`
Revenue From Operations, i.e., Net Sales Gross Profit
1,50,000

Opening Inventory
29,000
Cost of Revenue From Operations
30,000

Closing Inventory
31,000
(Cost of Goods Sold)
1,20,000

Debtors
16,000

From the above information, calculate following ratios:
(i) Gross Profit Ratio,
(ii) Inventory Turnover Ratio, and
(iii) Trade Receivables Turnover Ratio.

Answer:

(i)
Sales = 1,50,000
Gross Profit = 30,000
Gross Profit Ratio= Gross profit ×100/Net Sales
                        = 30,000×100/1,50,000
                        = 20%
(ii)
Opening Inventory = 29,000
Closing Inventory = 31,000
Average Inventory= Opening Inventory+ Closing Inventory/2
                                    =29,000+30,000/2
                                    =30,000
Cost of Goods Sold = 1,20,000
Inventory tunover ratio= Cost of goods sold / Average Inventory
                                    = 1,20,000/30,000
                                    = 4 Times
(iii)
Trade receivable turnover ratio= Net Credit sales/ Average Trade receivables
Trade receivable turnover ratio= 1,50,000/16,000
= 9.4 Times

Page No 4.122:

Question 154:

From the following calculate:
(a) Current Ratio; and
(b) Working Capital Turnover Ratio.

`
(i)
Revenue from Operations
1,50,000
(ii)
Total Assets
1,00,000
(iii)
Shareholders' Funds
60,000
(iv)
Non-current Liabilities
20,000
(v)
Non-current Assets
50,000

Answer:

A) Current Ratio = Current Assets Current Liabilities
Current Assets = Total Assets – Non Current Assets
= 1,00,000 – 50,000
= ` 50,000

Total Assets = Total Liabilities = Shareholders’ Funds + Non-Current Liabilities + Current Liabilities
1,00,000 = 60,000 + 20,000 + Current Liabilities
Current Liabilities = ` 20,000
Current Ratio = 50,000/20,000 = 2.5 : 1

B) Working Capital Turnover Ratio = Revenue from Operations /Working Capital
Working Capital = Current Assets – Current Liabilities
= 50,000 – 20,000
= ` 30,000

Working Capital Turnover Ratio = 1,50,000/30,000 = 5 times

Page No 4.122:

Question 155:

From the following information obtained from the books of Kamal Ltd., calculate

`
Revenue from Operations
2,50,000
Purchases
1,05,000
Carriage Inwards
4,000
Salaries
30,000
Decrease in Inventory
15,000
Return Outwards
5,000
Wages
18,000
(CBSE 2020)
Answer:
(i) Gross Profit= Revenue- Net Purchase- Carriage Inwards- Wages- Decrease in Inventory
Gross Profit= 2,50,000- (1,05,000-5,000)- 4,0000 – 18,000-15,000
Gross Profit=1,13,500
Gross Profit=1,13,500×100/2,50,000 =45.20%
(ii) Net Profit= Gross Profit –Salaries
Net Profit= 1,13,000 – 30,000
Net Profit= 83,000
Net Profit=83,500×100/2,50,000 =33.20%

Page No 4.123:

Question 156:

Calculate following ratios on the basis of the following information:
(i) Gross Profit Ratio;
(ii) Current Ratio;
(iii) Acid Test Ratio; and
(iv) Inventory Turnover Ratio.

`

`
Gross Profit
50,000

Revenue from Operations
1,00,000
Inventory
15,000

Trade Receivables
27,500
Cash and Cash Equivalents
17,500

Current Liabilities
40,000

Answer:

(i)

Gross Profit Ratio = Gross Profit /Revenue from Operations×100

Gross Profit Ratio = 50,000/1,00,000×100=50%

(ii)
Current Ratio = Current Assets/Current Liabilities
Current Ratio = Inventory + Cash and Cash Equivalents + Trade Receivables/Current Liabilities
Current Ratio=15,000+17,500+27,500/40,000
=1.5:1

(iii)
Liquid Ratio = Liquid Assets/Current Liabilities
Liquid Ratio = Cash and Cash Equivalents + Trade Receivables/Current Liabilities
Liquid Ratio = 17,500+27,500/40,000
=1.125:1

(iv)
Inventory Turnover Ratio = Cost of Goods Sold/Average Stock
Inventory Turnover Ratio = Revenue from Operations − Gross Profit/Average Stock Inventory
Turnover Ratio = 1,00,000 − 50,000/15,000
=3.33times

Page No 4.123:

Question 157:

Calculate following ratios on the basis of the given information:
(i) Current Ratio; (ii) Acid Test Ratio; (iii) Operating Ratio; (iv) Gross Profit Ratio.
Current Assets
`3,50,000;
Revenue from Operations (Sales)
`6,00,000;
Current Liabilities
`1,75,000;
Operating Expenses
`2,00,000;
Inventory
`1,50,000;
Cost of Revenue from Operations
`3,00,000;

Answer:
(i) Current Ratio;
Current Ratio= Current Assets/ Current Liabilities
Current Ratio= 3,50,000/1,75,000
Current Ratio= 2/1= 2:1
(ii) Acid Test Ratio;
Acid Test Ratio= Quick Assets/ Current Liabilities
Quick Assets=3,50,000-1,50,000=2,00,000
Current Ratio= 2,00,000/1,75,000
Current Ratio= 1.14:1
(iii) Operating Ratio;
Operating Cost = Operating Expenses + Cost of Revenue from Operations
Operating Cost =2,00,000+3,00,000=5,00,000
Operating ratio= Operation Cost/ Revenue from Operation
Operating ratio= 5,00,000×100/6,00,000=83.33%
(iv) Gross Profit Ratio
Gross Profit = Revenue from Operations (Sales) - Cost of Revenue from Operations
Gross Profit = 6,00,000-3,00,00
Gross Profit = 3,00,000
Gross Profit Ratio= Gross Profit×100/ Revenue from Operations
Gross Profit Ratio= 3,00,000×100/6,00,000 =50%

Page No 4.123:

Question 158:

From the information given below, calculate any three of the following ratio:
(i) Gross Profit Ratio;
(ii) Working Capital Turnover Ratio:
(iii) Debt to Equity Ratio; and
(iv) Proprietary Ratio.

`

`
Revenue from Operations (Net Sales)
5,00,000

Current Liabilities
1,40,000
Cost of Revenue from Operations (Cost of Goods Sold)
3,00,000

Paid-up Share Capital
2,50,000
Current Assets
2,00,000

13% Debentures
1,00,000

Answer:

(i)
Net Sales = 5,00,000
Cost of Goods Sold = 3,00,000
Gross Profit = Net Sales − Cost of Goods Sold
= 5,00,000 − 3,00,000 = 2,00,000
Gross Profit Ratio= Gross profit ×100/Net Sales
                        = 2,00,000×100/5,00,000
                        = 40%
(ii)
Current Assets = 2,00,000
Current Liabilities = 1,40,000
Working Capital = Current Assets − Current Liabilities
= 2,00,000 − 1,40,000 = 60,000
Working Capital turnover ratio= Net Sales / Working Capital
                                                =5,00,000/60,000
                                                =8.33 Times
(iii)
Long-term Debts = 13% Debentures = 1,00,000
Equity = Paid-up Share Capital = 2,50,000
Debt-Equity Rato= Long-term Debts/ Equity
                                    =1,00,000/2,50,000
                                    =0.4:1
(iv)
    Total Assets = Total Liabilities
= Current Liabilities + Paid-up Share Capital + 13% Debentures
= 1,40,000 + 2,50,000 + 1,00,000
= 4,90,000
Propietary Ratio= Shareholders’ Fund/ Total Assets
                        =2,50,000/4,90,000
=0.51:1

Page No 4.123:

Question 159:

On the basis of the following information calculate:
(i) Debt to Equity Ratio; and
(ii) Working Capital Turnover Ratio.
Information:

`

`
Revenue from Operations:
(a) Cash Sales
40,00,000

Paid-up Share Capital
17,00,000

(b) Credit Sales
20,00,000

6% Debentures
3,00,000
Cost of Goods Sold

35,00,000

9% Loan from Bank
7,00,000
Other Current Assets

8,00,000

Debentures Redemption Reserve
3,00,000
Current Liabilities

4,00,000

Closing Inventory
1,00,000

Answer:

(i)
Long-term Debts = 6% Debentures + 9% Loan from Bank
= 3,00,000 + 7,00,000 = 10,00,000
Equity = Paid-up Share Capital + Debenture Redemption Reserve
= 17,00,000 + 3,00,000 = 20,00,000
Debts-Equity Ratio= Long-term Debts/ Equity
                                    =10,00,000/20,00,000
                                    =0.5:1
(ii)
Current Assets = Other Current Assets + Inventory
= 8,00,000 + 1,00,000
= 9,00,000
Working Capital = Current Assets − Current Liabilities
= 9,00,000 − 4,00,000
= 5,00,000
Net Sales = Cash Sales + Credit sales
= 40,00,000 + 20,00,000
= 60,00,000
Working Capital tunover Ratio=Net Sales/Working Capital
                                                =60,00,000/5,00,000
                                                = 12 Times

Page No 4.124:

Question 160:

From the following, calculate (a) Debt to Equity Ratio;
(b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:

Equity Share Capital
` 75,000

Debentures
` 75,000
Preference Share Capital
` 25,000

Trade Payable
` 40,000
General Reserve
` 45,000

Outstanding Expenses
` 10,000
Balance in Statement of Profit and Loss
` 30,000

Answer:

(a)
Debt to Equity Ratio=Long term Debts/Shareholders' Funds
Debt to Equity Ratio=Debentures
Equity=Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Losss
Debt to Equity Ratio=75,000/75,000+25,000+45,000+30,000=0.43:1
(b)
Total Assets to Debt Ratio=Total Assets/Long term Debts
Total Assets to Debt Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss/Debentures+Trade Payables+Outstanding ExpensesDebentures
Total Assets to Debt Ratio=75,000+25,000+45,000+30,000+75,000+40,000+10,000/75,000
=4:1
(c)
Proprietary Ratio=Shareholders' Funds/Total Assets
Proprietary Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss
Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss+Debentures+Trade Payables+Outstanding Expenses
Proprietary Ratio=75,000+25,000+45,000+30,000/75,000+25,000+45,000+30,000+75,000+40,000+10,000
=0.58:1 or 58.33%

Page No 4.124:

Question 164:

From the following information, calculate Return on Investment (or Return on Capital Employed):

Particulars
`
Share Capital
5,00,000
Reserves and Surplus
2,50,000
Net Fixed Assets
22,50,000
Non-current Trade Investments
2,50,000
Current Assets
11,00,000
10% Long-term Borrowings
20,00,000
Current Liabilities
8,50,000
Long-term Provision
NIL

Answer:

Net Profit before tax = 6,00,000
Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings
= 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
= 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000

Return on Investment = Net profit Before Interest, Tax and Dividend ×100/ Capital Employed
=8,00,000×100/27,50,0000
=29.09%