Accounting Ratios

From the following Balance Sheet and other information, calculate following ratios: (i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) Trade Receivables Turnover Ratio Balance Sheet as at March 31, 2017 I. Equity and Liabilities: 1. Shareholders’ funds: a) Share capital 10,00,000; b) Reserves and surplus 7,00,000; c) Money received against share warrants 2,00,000 2. Non-current Liabilities: Long-term borrowings 12,00,000 3. Current Liabilities: Trade payables 5,00,000 Total: 36,00,000 II. Assets: 1. Non-current Assets: Fixed assets 18,00,000 – Tangible assets 2. Current Assets: a) Inventories 4,00,000; b) Trade Receivables 9,00,000; c) Cash and cash equivalents 5,00,000 Total: 36,00,000 Additional Information: Revenue from Operations Rs. 18,00,000

State which of the following statements are True or False.

What do you mean by Ratio Analysis?

A trading firm’s average inventory is Rs. 20,000 (cost). If the inventory turnover ratio is 8 times and the firm sells goods at a gross profit of 20% on sales, ascertain the gross profit of the firm.

From the following information, calculate the following ratios: i) Liquid Ratio ii) Inventory turnover ratio iii) Return on investment Inventory in the beginning Rs. 50,000; Inventory at the end Rs. 60,000; Net Profit Rs. 2,17,900; 10% Debentures Rs. 2,50,000; Revenue from operations Rs. 4,00,000; Gross Profit Rs. 1,94,000; Cash and Cash Equivalents Rs. 40,000; Money received against share warrants Rs. 20,000; Trade Receivables Rs. 1,00,000; Trade Payables Rs. 1,90,000; Other Current Liabilities Rs. 70,000; Share Capital Rs. 2,00,000; Reserves and Surplus Rs. 1,20,000 (Balance in the Statement of Profit & Loss)

How would you study the Solvency position of the firm?

Cost of Revenue from Operations is Rs. 1,50,000. Operating expenses are Rs. 60,000. Revenue from Operations is Rs. 2,50,000. Calculate Operating Ratio.

From the following information calculate Gross Profit Ratio, Inventory Turnover Ratio and Trade Receivable Turnover Ratio. Revenue from Operations Rs. 3,00,000 Cost of Revenue from Operations Rs. 2,40,000 Inventory at the end Rs. 62,000 Gross Profit Rs. 60,000 Inventory in the beginning Rs. 58,000 Trade Receivables Rs. 32,000

Current Ratio is 3.5 : 1. Working Capital is Rs. 90,000. Calculate the amount of Current Assets and Current Liabilities.

The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they become due. What are the ratios used for this purpose?

Shine Limited has a current ratio 4.5 : 1 and quick ratio 3 : 1; if the inventory is 36,000, calculate Current Liabilities and Current Assets.

Current Liabilities of a company are Rs. 75,000. If current ratio is 4:1 and Liquid Ratio is 1 : 1, calculate value of Current Assets, Liquid Assets and Inventory.

Handa Ltd. has inventory of Rs. 20,000. Total liquid assets are Rs. 1,00,000 and quick ratio is 2 : 1. Calculate current ratio.

The _____ is useful in evaluating credit and collection policies.

ABC Co. extends credit terms of 45 days to its customers. Its credit collection would be considered poor if its average collection period was.

_____ are especially interested in the average payment period, since it provides them with a sense of the bill-paying patterns of the firm.

The _____ measures the activity of a firm’s inventory.

The _____ of business firm is measured by its ability to satisfy its short-term obligations as they become due:

The _____ may indicate that the firm is experiencing stockouts and lost sales.

The two basic measures of liquidity are: