Class XII
Accountancy
Project
Submitted to,
Submitted by,
Acknowledgement
I would like to convey my heartiest
thanks to ………………..(Name of the
teacher ), my Economics teacher who
always gave me valuable suggestions
and guidance during the competition of
this project. She/ He has been a source
of
inspiration
and
helped
me
understand and remember important
details of the project. My project has
been a success only because of her/his
guidance.
(Name of the student)
Certificate
This is to certify that …………… (Name of
the
student)
of
Class
XII
of
……………………….….(Name of the school)
has completed his/her project file
under my supervision. He/ She has
taken proper care and shown utmost
sincerity in completion of the project. I
certify that this project is up to my
expectations and as per the guidelines
issued by CBSE.
Index
S.No.
1.
2.
3.
Content
Comprehensive Project
Study of Divas Fashion for the year
ending 31st Mar’17 and preparation of
lt’s Financial Statement and Ratio
Analysis.
Specific Project – 1
Segment Analysis of Tata Chemical Ltd.
for the Quarter ended 30th Mar’17 of
the Financial year 2016-17 and doing :
a. Segment-wise Result Analysis
b. Segment-wise Revenue Analysis
c. Segment-wise Capital Employed
Analysis
Specific Project – 2
Study of ITC Ltd. for the period 31st
Mar’16 to 31st Mar’17 and analysis of
its Financial Statements by doing Ratio
Analysis and depicting it in diagrams.
Page No.
Comprehensive
Project
Divas Fashions
Vandana & Rekha, decided to do business of fashion garments together under the
name of M/s Divas Fashions. They joined hands as Vandana was a good fashion
designer and Rekha was experienced in marketing such products. They purchased
a commercial space of 500 sq. feet for Rs.5,00,000. The space so purchased was
suitably decorated to make it fit for such trade. They further invested Rs.1,00,000
on decoration. They had invested the above Rs.6,00,000 by borrowing Rs.3,00,000
from State Bank of India and balance amount was brought equally by Vandana
and Rekha. Total amount of bank loan is to be paid in 20 quarterly investments
beginning 30th June, 2016. Annual rate of interest is 12%.
Bank loan and interest repaid in first year are:June 30, 2016 = Rs.15,000 + Rs.9,000
Sept 30, 2016 = Rs.15,000 + Rs.8,550
Dec 31, 2016 = Rs.15,000 + Rs.8,100
Mar 31, 2017 = Rs.15,000 + Rs.7,650
They started business on 1st April, 2016. Both the partners decide to deposit
Rs.1,00,000 each in Bank. They deposited Rs.5,000 for electricity connection with
BSES. They paid a deposit of Rs.2,000 to MTNL. They also purchased furniture for
Rs.10,000. All the payments were to be made by cheques. All receipts were
deposited into bank on same day.
At the end of the year, their results showed following:
Particular
Total Sales
Total Purchases
Electricity Expense
Telephone Charges
Cartage Outwards
Travelling Expenses
Entertainment Expenses
Maintenance Expenses
Miscellaneous Expenses
Electricity Expenses Payable
Amount (Rs.)
20,00,000
17,00,000
40,000
50,000
60,000
45,000
5,000
25,000
15,000
20,000
They withdraw Rs.2,500 by cheque each month for personal expenses. They paid bank loan
regularly.
1. Journalize the above transactions. Post them into ledger and prepare the Trial
Balance.
2. Prepare Profit and Loss Account.
3. Prepare Balance Sheet
4. Calculate profitability Ratio.
5. They approached the bank for further loan. Compute the ratios that the banker
will required before granting loan.
6. Compute the ratio that you consider appropriate for analyzing the
performance.
7. Prepare Cash Flow Statement.
8. Industry standards are as follows:
Gross Profit Ratio = 30%
Net Profit Ratio = 15%
Proprietary Ratio
=1
Stock Turnover Ratio
= 4.50
Journal
M/S Divas Fashion
Date
April 1,
2016
April 1,
2016
April 1,
2016
April 1,
2016
April 1,
2016
April 1,
2016
April 1,
2016
June 30,
2016
Particulars
L.F.
Bank A/c
Dr.
To Vandana Capital A/c
To Rekha Capital A/c
Dr. (Rs.)
Cr. (Rs.)
3,00,000
1,50,000
1,50,000
(Being the amount of capital brought by
Vandan and Rekha)
Bank A/c
Dr.
3,00,000
To Bank Loan A/c
3,00,000
(Being amount of loan taken from Bank)
Building A/c
To Bank A/c
Dr.
5,00,000
5,00,000
(being commercial space purchased )
Building A/c
To Bank A/c
Dr.
1,00,000
1,00,000
(being amount spend on building decoration)
Bank A/c
Dr.
To Vandan’s Capital A/c
To Rekha’s Capital A/c
2,00,000
1,00,000
1,00,000
(being the amount of capital further
introduced)
Security Deposit A/c
To Bank A/c
Dr.
7,000
7,000
(Being the amount of security deposit made
with BSES and MTNL)
Furniture & Fixture A/c
To Bank A/c
Dr.
10,000
10,000
(Being the furniture purchased)
Bank Loan A/c
Bank Interest A/c
To Bank A/c
(being amount of bank loan paid)
Dr.
Dr.
15,000
9,000
24,000
Sept 30,
2016
Bank Loan A/c
Bank Interest A/c
To Bank A/c
Dr.
Dr.
15,000
8,550
23,550
(Being amount of bank loan paid)
Dec 31,
2016
Bank Loan A/c
Bank Interest A/c
To Bank A/c
Dr.
Dr.
15,000
8,100
23,100
(Being amount of bank loan paid)
Mar 31,
2017
Bank Loan A/c
Bank Interest A/c
To Bank A/c
Dr.
Dr.
15,000
7,650
22,650
(Being amount of bank loan paid)
March 31,
2017
March 31,
2017
Bank A/c
Dr.
20,00,000
To Sales A/c
20,00,000
(Being amount of revenue received)
Purchase A/c
To Bank A/c
Dr.
17,00,000
17,00,000
(Being amount paid for purchase)
March 31, Vandana’s Capital A/c
2017
Rekha’s Capital A/c
To Bank A/c
Dr.
Dr.
(Being amount withdrawn by partners)
Dr.
March 31, Electricity Expenses A/c
Telephone
Charges
A/c
Dr.
2017
Cartage Outwards A/c
Dr.
Travelling Expenses A/c
Dr.
Entertainment Expenses A/c
Dr.
Maintenance Expenses A/c Dr.
Miscellaneous Expenses A/c Dr.
To Bank A/c
30,000
30,000
60,000
40,000
50,000
60,000
45,000
5,000
25,000
15,000
(Being amount of expenses paid)
March 31, Depreciation A/c Dr.
2017
To Building A/c
To Furniture A/c
2,40,000
31,000
30,000
1,000
(being amount of depreciation @ 5% on
Building and @10% on Furniture)
March 31, Electricity Expenses A/c Dr.
2017
To Electricity Expenses Payable A/c
(Being the amount of provision for
expenses payable)
20,000
20,000
Ledgers
Bank Account
Dr.
Date
Particulars
L.F
.
Amount
2016
Date
Particulars
L.
F.
Cr.
Amount
2016
Apr 1
Apr 1
Apr 1
Apr 1
Apr 1
2017
To Vandana’s Capital A/c
To Rekha’s Capital A/c
To Bank Loan A/c
To Vandana’s Capital A/c
To Rekha’s Capital A/c
Mar 31
To Sales A/c
1,50,000
1,50,000
3,00,000
1,00,000
1,00,000
Apr 1
Apr 1
Apr 1
Apr 1
June 30
June 30
20,00,000
Sept 30
Sept 30
Dec 31
Dec 31
By Building A/c
By Building A/c
By Security Deposit A/c
By Furniture A/c
By Bank Loan A/c
By Bank Interest A/c
By Bank Loan A/c
By Bank Interest A/c
By Bank Loan A/c
By Bank Interest A/c
5,00,000
1,00,000
7,000
10,000
15,000
9,000
15,000
8,550
15,000
8,100
2017
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
Mar 31
2017
Apr 1
To Balance B/d
28,00,000
89,700
Bay Bank Loan A/c
By Bank Interest A/c
By Vandana’s Drawing A/c
By Rekha’s Drwaing A/c
By Purchase A/c
By Electricity Expenses A/c
By Telephone Charges A/c
By Cartage Outwards A/c
By Travelling Expenses A/c
By Entertainment Expenses
A/c
By Maintenance Expenses A/c
By Miscellaneous Expenses
A/c
By Balance c/d
15,000
7,550
30,000
30,000
17,00,000
40,000
50,000
60,000
45,000
5,000
25,000
15,000
89,700
28,00,000
Vandana’s Capital Account
Dr.
Date
Particulars
2017
Mar 31
Mar31
To Drawings A/c
To Balance c/d
Dr.
Date
2017
Mar 31
Mar31
Dr.
Date
2017
Mar 31
Dr.
Date
L.F
.
Amount
Date
2016
30,000 April 1
2,20,000 April 1
2,50,000
2017
April 1
Particulars
L.
F.
By Bank A/c
By Bank A/c
1,50,000
1,00,000
2,50,000
By Balance b/d
2,20,000
Rekha’s Capital Account
Particulars
L.F
.
Amount
Date
2016
30,000 April 1
2,20,000 April 1
2,50,000
2017
April 1
To Drawings A/c
To Balance c/d
Particulars
L.
F.
Particulars
To Trading A/c
1,50,000
1,00,000
2,50,000
By Balance b/d
2,20,000
Amount
Date
Particulars
20,00,000
20,00,000
2017
Mar 31
April 1
By Bank A/c
L.
F.
Particulars
Amount
Date
2016
April 1
April 1
To Bank A/c
To Bank A/c
2017
5,00,000 Mar 31
1,00,000 Mar 31
6,00,000
2017
April 1
To Balance b/d
5,70,000
Particulars
By Depreciation A/c
By Balance c/d
Cr.
Amount
20,00,000
20,00,000
Building Account
L.F
.
Cr.
Amount
By Bank A/c
By Bank A/c
Sales Account
L.F
.
Cr.
Amount
L.
F.
Cr.
Amount
30,000
5,70,000
6,00,000
Security Deposit Account
Dr.
L.F
.
Date
Particulars
2016
April 1
To Bank A/c
2017
7,000 Mar 31
7,000
2017
April 1
To Balance b/d
7,000
Dr.
Date
2017
Mar 31
Mar 31
L.F
.
Particulars
Amount
Date
2017
40,000
20,000 Mar 31
60,000
To Bank A/c
To Electricity expense A/c
Particulars
L.
F.
By Balance c/d
Particulars
Particulars
2016
April 1
To Bank A/c
2017
April 1
To Bank b/d
L.F
.
Amount
Date
L.
F.
By Profit/Loss A/c
2017
10,000 Mar 31
Mar 31
10,000
Particulars
Cr.
Amount
60,000
60,000
Cr.
L.
F.
By Depreciation A/c
By Balance c/d
Amount
1,000
9,000
10,000
9,000
Purchase Account
Particulars
Amount
7,000
7,000
Furniture & Fittings Account
Date
2017
Mar 31
Date
Electricity Charges Account
Dr.
Dr.
Date
Amount
Cr.
L.F
.
Amount
Date
2017
17,00,000 Mar 31
17,00,000
To Bank A/c
Particulars
L.
F.
By Trading A/c
Cr.
Amount
17,00,000
17,00,000
Telephone Charges Account
Dr.
Date
Particulars
2017
Mar 31
To Bank A/c
L.F
.
Amount
Date
2017
50,000 Mar 31
50,000
Particulars
By Profit/Loss A/c
L.
F.
Cr.
Amount
50,000
50,000
Cartage Outward Account
Dr.
Date
Particulars
2017
Mar 31
To Bank A/c
L.F
.
Amount
Date
2017
60,000 Mar 31
60,000
Particulars
L.
F.
Cr.
Amount
By Profit/Loss A/c
60,000
60,000
Travelling Expense Account
Dr.
Date
Particulars
2017
Mar 31
To Bank A/c
Dr.
Date
2017
Mar 31
Dr.
Date
2017
Mar 31
Dr.
Date
2016
June 30
Sept 30
Dec 31
2017
Mar 31
L.F
.
Amount
Date
2017
45,000 Mar 31
45,000
Particulars
L.
F.
By Profit/Loss A/c
45,000
45,000
Entertainment Expense Account
Particulars
L.F
.
Amount
Date
2017
5,000 Mar 31
5,000
To Bank A/c
Particulars
L.
F.
Particulars
Amount
Date
2017
15,000 Mar 31
15,000
To Bank A/c
5,000
5,000
Particulars
L.
F.
To Bank A/c
To Bank A/c
To Bank A/c
To Bank A/c
L.F
.
Amount
Date
2017
9,000 Mar 31
8,550
8,100
7,650
33,300
Cr.
Amount
By Profit/Loss A/c
15,000
15,000
Bank Interest Account
Particulars
Cr.
Amount
By Profit/Loss A/c
Miscellaneous Expense Account
L.F
.
Cr.
Amount
Particulars
L.
F.
Cr.
Amount
By Profit/Loss A/c
33,300
.
.
33,300
Vandana’s Drawing Account
Dr.
Date
Particulars
2017
Mar 31
To Bank A/c
Dr.
Date
L.F
.
Amount
30,000
30,000
2017
Mar 31
Mar 31
Particulars
2017
Mar 31
By Capital A/c
L.F
.
Particulars
Amount
30,000
30,000
Date
Particulars
2017
Mar 31
By Capital A/c
L.
F.
Particulars
To Building A/c
To Furniture & Fixture A/c
Amount
Date
2017
30,000 Mar 31
1,000
31,000
Particulars
Cr.
Amount
30,000
30,000
Depreciation Account
L.
F.
Cr.
Amount
30,000
30,000
Rekha’s Drawing Account
2017
Dr.
Mar 31 To Bank A/c
Dr.
Date
Date
L.
F.
L.
F.
Cr.
Cr.
Amount
By Profit & Loss A/c
.
31,000
.
31,000
Trial Balance
S. No.
Name of Account
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Bank A/c
Vandana’s Capital A/c
Rekha’s Capital A/c
Bank Loan A/c
Building A/c
Security Deposit A/c
Furniture & Fixture A/c
Sales A/c
Purchase A/c
Electricity Expenses A/c
Telephone Charges A/c
Travelling Expenses A/c
Entertainment Expenses A/c
Maintenance Expenses A/c
Miscellaneous Expenses A/c
Cartage Outwards A/c
Bank Interest A/c
Depreciation A/c
Electricity Expenses Payable A/c
L.F.
Dr. (Rs.)
Cr. (Rs.)
89,700
2,20,000
2,20,000
2,40,000
5,70,000
7,000
9,000
20,00,000
17,00,000
60,000
50,000
45,000
5,000
25,000
15,000
60,000
33,300
31,000
20,000
27,00,000 27,00,000
Trading & Profit & Loss A/c
For the year ended on 31st March, 2017
Particulars
Amount
To Purchases
To Gross Profit c/d
To Electricity Expenses A/c
To Telephone Charges A/c
To Travelling Expenses A/c
To Entertainment Expenses A/c
To Maintenance Expenses A/c
To Miscellaneous Expenses A/c
To Cartage Outwards A/c
To Bank Interest A/c
To Depreciation A/c
To Net Profit Transferred to the
Capital A/c
Vandana
2,62,850
Rekha
2,62,850
Particulars
Amount
17,00,000 By Sales
8,50,000 By Closing Stock
25,50,000
60,000 By Gross Profit b/d
50,000
45,000
5,000
25,000
15,000
60,000
33,300
31,000
20,00,000
5,50,000
25,50,000
8,50,000
5,25,700
8,50,000
.
.
8,50,000
Balance Sheet
As on 31st March, 2017
Liabilities
Capital A/c
Vandana
(-) Drawing
(+) Net Profit
2,50,000
(30,000)
2,62,850
Rekha
2,50,000
(-) Drawing
(30,000)
(+) Net Profit
2,62,850
Bank Loan
Electricity Expenses Payable
Amount (Rs.)
Assets
Amount (Rs.)
Building
6,00,000
(-) Depreciation
30,000
4,82,850 Furniture
10,000
(-) Depreciation
1,000
Security Deposit
Cash at Bank
4,82,850 Closing Stock
2,40,000
20,000
12,25,700
5,70,000
9,000
7,000
89,700
5,50,000
.
.
12,25,700
Ratios
1. Stock Turnover Ratio
Stock Turnover = Cost of Goods Sold
Average Stock
= 11,50,000 = 2.09 times
5,50,000
2. Working Capital Turnover Ratio
Working Capital Turnover Ratio = Cost of Goods Sold
Working Capital
= 11,50,000 = 1.86 times
6,19,700
3. Gross Profit Ratio
Gross Profit Ratio = Gross Profit x 100
Net Sales
= 8,50,000 x 100 = 42.5%
20,00,000
4. Net Profit Ratio
Net Profit Ratio = Net Profit x 100
Net Sales
= 5,25,000 x 100 = 26.29%
20,00,000
5. Proprietary Ratio
Proprietary Ratio = Proprietary Fund
Total Assets
= 9,67,500 = 0.79
12,25,700
Cash Flow Statement
Particulars
Amount( Rs.)
1) Cash flow from Operating Activity
Net Profit as per P & L A/c
Add: Non-Cash Expenditure
Depreciation
31,000
Add: Bank Interest
33,300
Operating Profit before working capital changes
Add: Increase in Current Liabilities
Electricity expenses payables
Less: Increase in Current Asset
Security Deposit
Closing Stock
Net Cash generated from operating activity (i)
7,000
5,50,000
64,300
5,90,000
20,000
6,10,000
5,70,000
53,000
2) Cash flow from investing activity
Purchase of Building
Purchase of Furniture
Net Cash used in Investing Activity (ii)
(6,00,000)
(10,000)
(6,10,000)
3) Cash Flow from financing activity
Capital introduced by partners
Bank Loan
Less : Drawing by Partners
Bank Loan repaid
Interest on Bank Loan
5,25,000
5,00,000
3,00,000
8,00,000
69,000
60,000
33,300
Net cash from financing activity(iii)
4) Net increase in cash and cash equivalents (I + ii + iii)
Add: cash and cash equivalents in beginning
cash and cash equivalents at the end
1,53,300
6,46,700
89,700
-
89,700
Specific
Project - 1
Segment-wise Result Analysis
for the year ended 31st March 2017
Segments
Revenue as at 31st March Percentage
2017(Rs. In Crores)
a. Inorganic chemicals
b. Fertilisers
c. Other agri inputs
d. Others
Total
3556.83
2288.33
316.39
374.83
6536.38
54.42 %
35.010 %
4.84 %
5.73 %
100 %
Working note for calculation of percentage
Revenue
Percentage Revenue = Segment Revenue as at 31st March 2017 x 100
Total Revenue
Inorganic chemicals = 3556.83 x 100 = 54.42%
6536.38
Fertilisers
= 2288.33 x 100 = 35.010%
6536.38
Other agri inputs = 316.39 x 100 = 4.84%
6536.38
Other
= 374.83 x 100 = 5.73%
6536.38
Percentage
Inorganic chemicals
Fertilisers
Other agri inputs
Others
Segment-wise Result
for the year ended 31st March 2017
Segments
Result as at 31st March
2017(Rs. In Crores)
Percentage
a. Inorganic chemicals
b. Fertilisers
c. Other agri inputs
d. Others
Total
960.99
115.72
9.98
(86.25)
1000.44
96.05%
11.57%
1%
(8.62)%
100%
Working note for calculation of percentage
Results:
Percentage Result = Segment Result as at 31st March 2017 x 100
Total Result
Inorganic chemicals = 960.99 x 100 = 96.05%
1000.44
Fertilisers
= 115.72 x 100 = 11.57%
1000.44
Other agri inputs = 9.98 x 100 = 1%
1000.44
Other
= (86.25) x 100 = (8.62%)
1000.44
Percentage
120
100
80
60
Percentage
40
20
0
Inorganic chemicals
-20
Fertilisers
Other agri inputs
Others
Segment-wise Capital Employed
for the year ended 31st March 2017
Segments
Capital Employed as at
31st March 2017(Rs. In
Crores)
Percentage
a. Inorganic chemicals
b. Fertilisers
c. Other agri inputs
d. Others
Total
1404.62
846.86
16.46
101.95
2369.89
59.27%
35.73%
0.70%
4.3%
100%
Working note for calculation of percentage
Capital Employed:
Percentage Capital Employed
= Segment Capital Employed as at 31st March 2017 x 100
Capital Employed
Inorganic chemicals = 1404.62 x 100 = 59.27%
2369.89
Fertilisers
= 846.86 x 100 = 35.73%
2369.89
Other agri inputs = 16.46 x 100 = 0.70%
2369.89
Other
= 101.95 x 100 = 4.3%
2369.89
Percentage
70
60
50
40
Percentage
30
20
10
0
Inorganic chemicals
Fertilisers
Other agri inputs
Others
Segment wise Revenue, Result & Capital Employed
Analysis
We can see that the Tata Chemical Ltd. receive
maximum revenue & results from the Inorganic
Chemicals segment. But the company also has
the highest capital employed in the Inorganic
Chemicals segment. The company would have
been considered more efficient if for a lower
capital employed in the segment; higher results
& revenues are received. In the fertilizers
segment the capital employed & revenue is
sufficient but results is not yielding profit as
desired. In other agree input segment though
the result & capital employed are not much but
this sector is still yielding considerable revenue.
The company can allocate resources from other
agri input to fertilizers for better growth in this
sector. In other segment result is not holding
profit as desired even though the revenue &
capital employed are sufficient.
120
100
80
60
Revenue
Result
40
Capital Employed
20
0
Inorganic
chemicals
-20
Fertilisers
Other agri inputs
Others
Specific
Project -2
Accounting Ratios
Current Ratio
Ratio
Current Ratio
= Current Assets
Current Liabilities
31st March 2016
31st March 2017
= 23233.92
6354.27
= 3.65: 1
= 24537.39
6830.07
= 3.59 : 1
Comment: This ratio shows relationship of current assets to
current liabilities and is calculated to assess the financial
position of the firm. A current ratio of 2: 1 is considered ideal.
Quick Ratio
Quick Ratio
= Quick Assets
Current Liabilities
= 23233.92 – 8519.82
6354.27
= 2.31 : 1
= 24537.39 – 7863.99
6830.07
= 2.44 : 1
Comment: This ratio indicate short-term solvency and debtpaying capacity of the enterprise. Hence it is a good indicator of
liquidity. An ideal quick ratio is 1: 1.
Proprietary Ratio
Proprietary Ratio
= Shareholder’s Fund
Total Assets
= 41656.43
50031.28
= 0.83
= 45340.96
54215.95
= 0.83
Comment: It shows the relationship between proprietor’s funds
and total assets. It indicates the extent to which the
shareholders own the business.
A higher proprietary ratio is generally treated as indicator of
sound financial position from long-term point of view,On the
other hand, a low proprietary ratio is a danger signal as it
indicates lower margin of safety available for the long-term
lenders. It shall be taken as safe if it is above 50%.
Gross Profit Ratio
Gross Profit Ratio
= Gross Profit x 100
=
51944.57 – (11054.75
Net Sales
+ 2591.80 + 196.55 + 15361.90)
Gross Profit = Revenue from
51944.57
Operation - COGS
= 43.78%
= 55448.46 – (11765.56 + 3566.57
– 644.17 + 15359.78)
55448.46
= 45.81%
Comment: This ratio establishes a relationship between gross
profit and revenue from operations, i.e., net sales. This ratio is
computed and presented in percentage.
Higher the ratio lower cost of goods sold.
Net Profit Ratio
Net Profit Ratio
= Net Profit x 100
Net Sales
= 9328.37 x 100
51944.57
= 17.96%
= 10200.90 x 100
55448.46
= 18.40%
Comment: This ratio shows the relationship between net profit
and net revenue from operations. It shows the percentage of
Net Profit earned on Revenue from Operations.
Higher the net profit ratio, better the business.
Stock Turnover Ratio
Stock Turnover Ratio
=
COGS .
Average Stock
= 11054.75 + 2591.80 + 196.55
+ 15361.90
.
(
[7863.99+8519.82]/2
= 3.56 times
= 11765.56 + 3566.57
– 644.17 + 15359.78
[8519.82+7836.76]/ 2
= 3.67 times
Comment: This ratio indicates the relationship between the cost
of revenue from operations during the year and average
inventory kept during that year.
The higher the ratio, the better it is, since it indicates that
inventory is selling quickly.
Working Capital Ratio
Working Capital Ratio
=
Net Sales
Working Capital
=
51944.57
.
23233.92 – 6354.27
= 3.08 times
=
55448.46
.
24537.39 – 6830.07
= 3.13 times
Comment: Working Capital Turnover Ratio shows the
relationship between working capital and revenue from
operation.
A high working capital turnover ratio shows efficient use of
working capital and quick turnover of current assets like
inventory and trade receivables.
Analysis & Interpretation
Liquidity Ratios
The Current Ratio of the company analyzed is 3.65 to 3.59 from
31st March 16 to 31st March 17 and the Quick Ratio of the
company is 2.31 to 2.44 from 31st March 16 to 31st March 17 .
Both the ratios are more than ideal. Therefore, the company is
in the position to meet its short term liabilities in time.
Solvency Ratios
Proprietary Ratio of the company is also low, is 0.83: 1 to 0.83:1
from 31st March 16 to 31st March 17 . This ratio indicates that
the firm is depending more on shareholder’s funds than external
equities. It indicates the lower or inadequate safety to creditors.
Profitability Ratios
The Gross Profit Ratio is 43.78% to 45.81% from 31st March 16
to 31st March 17 & Net Profit Ratio is 17.96% to 18.40% from
31st March 16 to 31st March 17. As the gross profit ratio is
higher shows the low cost of goods sold. Gross profit ratio is
adequate enough to cover the operating expense and provided
for depreciation, interest on loans, dividends and creation of
reserves. As increase in the Net Profit ratio over the previous
period shows improvement in the operational efficiency and
decline means otherwise.
Activity Ratios
The Inventory Turnover Ratio is 3.56 to 3.67 from 31st March
16 to 31st March 17 & the Working Capital Turnover Ratio is
3.08 to 3.13 from 31st March 16 to 31st March 17.
The ratio is higher therefore the company is in a better position;
it indicates that inventory is selling quickly. Higher inventory
turnover ratio shows that goods can be sold at a low margin of
profit and even then the profitability may be quite high. The
company also has a high working capital turnover ratio which
shows efficient use of working capital and quick turnover of
current assets like inventory and trade receivables.