Numerical Problems on Ratio Analysis:
Current Ratio:
Q1. Current Assets Rs. 2, 00,000, Stock Rs. 1, 00,000, Working capital Rs. 1, 20,000. Calculate
Current Ratio.
Q2. Creditors Rs. 20,000. Working Capital Rs. 3, 60,000, other current Liabilities Rs. 1, 00,000.
Q3. The Balance Sheet of T Ltd. as at 31st March 2013 are as under:
Liabilities
Equity Share CapiEquitytal
18% Pref. Share Capital
General Reserve
Profit & Losss A/c
15% Debentures
Trade Creditors
Bills Payable
Outstanding Expenses
Bank Overdraft
Provision for Tax
Amt (RS)
1,00,000
1,00,000
60,000
2,40,000
8,00,000
40,000
30,000
20,000
10,000
2,40,000
Assets
Land & Building
Plant & Machinery
Furniture & Fixture
(-) Depreciation
Trade Investment (LT)
Stock
Debtors
3,40,000
(-) Provisions
30,000
Marketable Securities
Cash
Bills Receivables
Prepaid Expenses
Preliminary Expenses
Underwriting Commission
16,40,000
Amt (RS)
6,00,000
5,00,000
1,00,000
12,00,000
(200,000)
10,00,000
1,00,000
95,000
3,10,000
10,000
10,000
10,000
5,000
60,000
40,000
16,40,000
Net Sales for the year 2011-2012 amounted to Rs. 20,00,000. Net Profit after tax 2,40,000, tax @
50%. Calculate Current Ratio as at 31.3.2012.
Calculate Quick Ratio:
•
1. Current Assets Rs. 4,40,000, Stock Rs. 95,000, Prepaid expenses Rs. 5,000, Current
Liabilities Rs. 3,40,000
•
2. Current Assets Rs. 2,00,000, Inventory Rs. 40,000, Working Capital Rs. 1,20,000.
•
3. Current Liabilities Rs. 1,20,000. Working Capital Rs. 3,60,000, Creditors Rs. 20,000,
Inventory Rs. 1,20,000, Calculate Quick Ratio.
Absolute Cash Ratio:
1. From the following Calculate, Absolute Cash Ratio;
Inventory
Debtors
Rs. 4,00,000
Rs. 3,50,000
Marketable Securities
Current Liabilities
Rs. 1,00,000
Rs. 5,00,000
Cash
Rs. 2,00,000
Provision for Doubtful Debts
Rs. 50,000
Debt to Equity Ratio:
1. Taking the same example of Q3. In Current Ratio Calculate Debt to Equity Ratio.
Proprietary Ratio:
1. Net Fixed Assets Rs. 10,00,000, Long Term Trade Investments Rs. 1,00,000, Current
Assets Rs. 4,40,000, Preliminary Expenses Rs. 60,000, Underwriting Commission Rs.
40,000, Equity Share Capital ( Rs. 10 Each) Rs. 1,00,000, 18% Pref. Share Capital Rs.
1,00,000, Reserves Rs. 1,00,000, P & L A/c ( Opening Balance) Rs. 2,00,000, 15%
Debentures Rs. 8,00,000, Current Liabilities Rs. 3,40,000.
Capital Gearing Ratio:
1. Calculate the Capital Gearing Ratio from the following:
15% Long-Term Debt Rs. 8,00,000, 18% Preference Share Capital Rs. 1,00,000, Equity
Share Capital Rs. 2,00,000. Reserves & Surplus Rs. 1,50,000, Preliminary Expenses Rs.
50,000.
Working Capital Turnover Ratio:
1. Capital Employed Rs. 6,00,000; Net Fixed Assets Rs. 4,00,000; Cost of Goods Sold Rs.
20,00,000; Gross profit Rs. 4,00,000. Calculate the working capital turnover ratio.
Stock Turnover Ratio:
1. Opening Stock Rs. 20,000; Closing Stock Rs. 10,000; Purchases Rs. 50,000. Wages Rs. 3,000;
Carriage inward Rs. 2,000; Freight outward Rs. 5,000. Calculate Stock Turnover Ratio
Debtors Turnover Ratio & Avg Debt Collection Period:
1. Calculate the Debtors Turnover Ratio and Average Debt Collection Period for the year 20112012 from the following information.
1.4.2011
31.3.2012
Sundry Debtors
Rs. 15,000
Rs. 45,000
Bills Receivables
Rs. 5,000
Rs. 15,000
Provision for Doubtful Debts
Rs. 1,500
Rs. 4,500
Total Sales Rs. 2,10,000, Sales Returns Rs. 10,000. Cash Sales Rs. 40,000.
Creditors Turnover Ratio & Average Debt Payment Period.
1. Calculate the Creditors Turnover Ratio & Average Debt Payment Period from the following
information
1.4.2011
31.3.2012
Sundry Creditors
Rs. 15,000
Rs. 45,000
Bills Payable
Rs. 5,000
Rs. 15,000
Reserve for Discount on Creditors
Rs. 1,500
Rs. 4,500
Total Purchase Rs. 2,10,000, Sales Returns Rs. 10,000. Cash Purchase Rs. 40,000
Return on Total Assets
1. Net profit after interest & tax Rs. 2,40,000, Tax rate 50%, Net Fixed Assets Rs. 10,00,000,
Long Term Trade Investments Rs. 1,00,000, Current Assets Rs. 4,40,000, Preliminary
Expenses Rs. 60,000, Underwriting Commission Rs. 40,000, Equity Share Capital ( Rs. 10
Each) Rs. 1,00,000, 18% Pref. Share Capital Rs. 1,00,000, Reserves Rs. 1,00,000, P & L
A/c ( Opening Balance) Rs. 2,00,000, 15% Debentures Rs. 8,00,000, Current Liabilities Rs.
3,40,000.
Return on Capital Employed/Return on Investment (ROI):
1.Taking the same illustration of Return on Total Assets Calculate the Return of Capital
Employed.
Return on Shareholders’ Fund or Return on Equity (ROI)
1.Taking the same illustration of Return on Total Assets Calculate the Return of Shareholders’
Fund or Return on Equity.
Return on Equity Shareholders’ Fund
1.Taking the same illustration of Return on Total Assets Calculate the Return of Equity
Shareholders’ Fund.
Earning Per Share (EPS)
1.Net Profit after interest & tax Rs. 2,22,000, Equity Share Capital (Rs. 10 each), Rs. 1,00,000.
Calculate Earning Per Share
Earning yield
1.Calculate Earning Yield, Earning Per Share Rs. 22.20, Market Price Per Share Rs. 22.20
Dividend Per Share
Net profit after Interest & Tax Rs. 2,22,000, Profit distributed as dividend 50%, Equity Share
Capital (Rs. 10 each) Rs. 1,00,000. Calculate Dividend per Share
Dividend Payout Ratio
Calculate Dividend Payout Ratio from the following:
Dividend Per Share Rs. 11.10, Earning Per Share RS. 22.20.
Dividend Yield Ratio
Calculate Dividend Yield from the following:
Dividend Per Share Rs. 11.10, Market Price Per Share RS. 22.20
From the following information prepare the Balance sheet:
•
Net profit after Interest, Tax & Preference Dividend Rs. 2,22,000
•
Tax Rate: 50%,
•
18% Preference Share Capital?
•
15% Debentures?,
•
Return on Capital Employed 50%
•
Return on Shareholder’s Funds 60%
•
Return on Equity Shareholder’s fund 74%
•
Current Ratio 2:1
•
Net Fixed Assets Rs. 9,00,000.
MISCELENEOUS PROBLEMS
Example1: From the following details, calculate operating ratio:
Particular
Sales
Opening stock
Purchases
Carriage inwards
Closing stock
Depreciation
Administrative expenses
Selling expenses
Loss on the sale of Assets
Amt
8,50,000
99,500
5,50,500
14,000
1,54,000
20,000
1,50,000
30,000
4,000
Example2: Following is the Profit and loss Account of Adarsh Trading House for the year ended
31.3.2011
Dr.
Cr.
Particular
To administrative expenses
To selling and distribution expenses
To financial expenses
To other Non-operating expenses
To Net Profit
Amt
Particular
85,000
By Gross Profit b/f
40,000
By Interest on Investments
6,000
3,000
71,000
2,05,000
Amt
2,00,000
5,000
2,05,000
The Net Sales during the year were 5,00,000 . you are required to calculate:
i.
ii.
iii.
Administrative Expenses Ratio
Selling and Distribution Expenses Ratio
Financial expenses Ratio
Example 3: M/s. Rakesh & co. supplies the following information for the year ending 31stDec
.2011 :
Credit sales: 1,50,000 ; cash sales : 2,50,000 ; returns inward : 25,000 ; opening stock :25,000 ;
closing stock: 35,000
Find out (i) inventory Turnover when Gross Profit Ratio is 20% ; (ii) inventory conversion
period.
Example 4: from the following details calculate opening stock and closing stock :
Stock Turnover Ratio
6 times
Gross Profit
20% on sales
Sales
1,80,000.
Closing stock is 15,000 in excess of opening stock .
Example 5 : From the following details , calculate Return on Capital Employed :
Particular
Amt
Share Capital:
Equity
Preference
General Reserve
10% Debentures
Current Liabilities
Discount on Shares
Net Profit (after debenture interest but before income Tax )
4,00,000
1,00,000
1,89,000
4,00,000
1,00,000
5,000
80,000
Example 7 : Calculate the Debtors Turnover ratio and average Debt collection period for the
year 2012-2011 from the following information
Particular
Sundry Debtors
Bill Receivable
Provision for Doubtful Debts
2010
15,000
5,000
1,500
2011
45,000
15,000
4,500
Total sales 2,10,000 , sales returns 10,000 , cash sales 40,000 ,
Example 8 : B . Raj & co. sells goods on cash as well as credit .the following particular are
extracted from their book of account for the calendar year 2012 :
Particular
Total sales
Cash sales (included in above )
Sales Returns
Total Debtors for sales as on 31.12.12
Bills receivables as on 31.12.12
Provision for doubtful debts as on 31.12.12
Total Creditors on 31.12.12
Calculate the Average Collection Period.
Amt
1,00,000
20,000
7,000
9,000
2,000
1,000
10,000
Example 9: The following is the balance sheet of Goda Enterprises Ltd. On dec 31,2011:
Particulars
Equity share capital
Capital Reserves
12% Mortgage Loan
Creditors
Bank overdraft
Provision for tax
Profit & Loss a/c
Amt
4,00,000
80,000
2,00,000
1,00,000
40,000
60,000
1,20,000
Particulars
Goodwill
Fixed assets
Stock
Investment(short-term)
Cash
Amt
1,00,000
5,00,000
1,20,000
1,00,000
1,80,000
10,00,000
10,00,000
Calculate the following ratios:
1)
2)
3)
4)
Current ratio
Quick ratio
Proprietary ratio
Debts equity ratio
Example 10: Calculate the following ratio:
1)
2)
3)
4)
5)
Gross profit ratio
Net profit ratio
Current ratio
Liquid ratio
Proprietary ratio
Particulars
Sales
Cost of sales
Net profit
Average inventory
Other current assets
Amt
25,00,000
20,00,000
4,00,000
8,00,000
7,00,000
Particulars
Fixed assets
Net worth
Debts (long-term)
Current liabilities
Net profit before tax and
interest
Amt
14,40,000
15,00,000
9,00,000
5,00,000
8,00,000
Example 11: The following is the balance sheet of PVC Ltd. Pune. Balance sheet (as on
march,2011)
Liabilities
Share capital:
Equity shares of Rs 10 each
Reserves fund
Profit & Loss a/c
long-term loans
Creditors
Others current liabilities
Amt
Assets
5,00,000
3,50,000
5,50,000
17,50,000
2,50,000
1,50,000
Fixed assets:
At cost
Less: Dep.
Amt
30,00,000
4,50,000
25,50,000
Stock
Debtors
Cash
5,00,000
4,00,000
1,00,000
35,50,000
35,50,000
Additional information:
1)
2)
3)
4)
Profit earned during the year was Rs 4,00,000.
The company has declared 25% dividend.
Market price of a share is Rs 360.
Ignore provision regarding taxation.
Calculate any five of the following ratios:
1)
2)
3)
4)
5)
Debts equity ratio
Current ratio
Acid test ratio
Earning per share
Price earning ratio
Example 12: From the following detail calculate:
1)
2)
3)
4)
5)
Current ratio
Proprietary ratio(on the basic of total assets)
Net profit ratio
Earning per share
Return on investment.
Liabilities
10,000 Equity shares of Rs
100
6% Pref. shares
Reserves and surplus
8% Debentures
Bank overdraft
Creditors
Dividend payable
Others current liabilities
Provision for tax(current
Amt
10,00,000
3,00,000
2,20,000
2,25,000
35,000
22,400
22,400
25,400
25,000
Assets
Cash in bank
Investment
Debtors
Advances
Closing stock
Preliminary expenses
Other current assets
Prepaid expenses
Fixed assets
Amt
25,200
2,50,000
32,500
25,400
42,100
10,000
45,500
4,500
14,40,000
year)
18,75,200
18,75,200
Other information
Amt
Total sales
Credit sales
Opening stock
Purchases
Direct wages
Administrative expenses
Office expenses
Selling and distribution expenses
Debenture interest
12,00,000
8,00,000
12,200
6,20,000
12,400
35,000
15,000
28,000
18,000
Example 13: M/s ABC presents you the following balance sheet as on 31.12.2011:
Liabilities
Share capital;
Equity shares of Rs 10 each
Reserves fund
7% Debentures
Overdraft
Creditors
Amt
Assets
10,00,000
4,00,000
3,50,000
2,50,000
20,00,000
20,00,000
,
Calculate:
1) Liquid ratio
2) Solvency ratio and
3) Debts-equity ratio
Example 14: from the following balance sheet of ABC Ltd., calculate:
1)
2)
3)
4)
5)
Current ratio
Liquid ratio
Proprietary ratio
Debts equity ratio
Gearing ratio
Amt
Fixed assets
10,00,000 Stock
1,00,000 Debtors
3,00,000 Cash
2,00,000
4,00,000
Balance sheet of ABC Ltd. (as on 31 dec,2011)
Liabilities
Equity share capital
Pref. share capital
Reserves and surplus
6% Debentures
Bank overdraft
Sundry creditors
Bills payable
Amt
50,000
70,000
25,000
1,00,000
80,000
70,000
25,000
Assets
Land & building
Plant& machinery
Stock-in-trade
Sundry Debtors
Bills receivables
Cash
Amt
90,000
1,55,000
1,00,000
60,000
10,000
5,000
4,20,000
4,20,000
Example 15: from the balance sheet of XYZ Ltd. And the following information relating to the
company.
Liabilities
Equity share capital
Pref. share capital
Reserves and surplus
6% Debentures
Bank overdraft
Sundry creditors
Bills payable
Amt
50,000
70,000
25,000
1,00,000
80,000
70,000
25,000
Assets
Land & building
Plant& machinery
Stock-in-trade
Sundry Debtors
Bills receivables
Cash
Amt
4,20,000
Calculate:
1)
2)
3)
4)
Gross profit ratio
Earning ratio
Return on investment ratio ,and
Debtors turnover
Sales Rs 4,00,000, gross profit Rs 80,000 and Net profit Rs 24,500. Assume that all the are made
on credit.
90,000
1,55,000
1,00,000
60,000
10,000
5,000
4,20,000
Example 16: The following is the summary of the final accounts of delicacy limited for year
ended 31st march and trading and profit and loss A/c:
Particulars
Amt
Net sales
Stock
Purchases
10,60,000
36,000
8,44,000
8,80,000
(80,000)
Less: stock (31.3.2011)
Costs of goods sold
Gross profit
Less: selling and administration expenses
8,00,000
2,60,000
60,000
Net profit before tax
2,00,000
Balance sheet
Particulars
Amt
Particulars
Amt
Share capital
5,00,000 Fixed assets
4,80,000
Reserves fund
1,00,000 Current Assets:
current liabilities
80,000 Stock
44,000
Debtors
1,20,000
Cash
36,000
6,80,000
6,80,000
From the above information calculate :
1)
2)
3)
4)
5)
Rate of stock turnover
Working capital ratio
Debtors turnover and average credit period taken
Return on total assets : and
Return on equity interest in the business.
Example 17: using the following data, complete the balance sheet given below:
Gross profit (20% of sales)
Shareholder’s equity
Credit sales to total sales
Total assets turnover
Inventory turnover ( to cost of sales)
Average collection period (360 days year )
Current ratio
Rs 60,000
50,000
80%
3 times
8 times
18 days
1.6
Long-term debts to equity
Creditors
Cash
Long-term debts
Debtors
Shareholder’s equity
Inventory
Fixed assets
40%
-
Example 18: Draw up the balance sheet of M/s ABC Ltd. From the following data as on
31.3.2011:
Current ratio
Liquidity ratio
Net working capital
Stock turnover ratio
(cost of sales /closing stock)
Gross profit ratio
Fixed assets turnover ratio
(on costs of sales)
Average debts collection period
Fixed assets /shareholder net worth
Reserves and surplus/capital
2.5
1.5
Rs3,00,000
6 times
20%
2 times
2 months
0.80
0.50