Question 176:
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.
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Gross Profit |
50,000 |
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Revenue from Operations |
1,00,000 |
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Inventory |
15,000 |
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Trade Receivables |
27,500 |
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Cash and Cash Equivalents |
17,500 |
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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
Question 177:
Calculate following ratios on the basis of the given information:
(i) Current Ratio; (ii) Acid Test Ratio; (iii) Operating Ratio; (iv) Gross Profit Ratio.
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Current Assets |
`3,50,000; |
Revenue from Operations (Sales) |
`6,00,000; |
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Current Liabilities |
`1,75,000; |
Operating Expenses |
`2,00,000; |
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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%
Question 178:
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.
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Revenue from Operations (Net Sales) |
5,00,000 |
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Current Liabilities |
1,40,000 |
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Cost of Revenue from Operations (Cost of Goods Sold) |
3,00,000 |
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Paid-up Share Capital |
2,50,000 |
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Current Assets |
2,00,000 |
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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
Question 179:
On the basis of the following information calculate:
(i) Debt to Equity Ratio; and
(ii) Working Capital Turnover Ratio.
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Information: |
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Revenue from Operations: |
(a) Cash Sales |
40,00,000 |
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Paid-up Share Capital |
17,00,000 |
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(b) Credit Sales |
20,00,000 |
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6% Debentures |
3,00,000 |
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Cost of Goods Sold |
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35,00,000 |
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9% Loan from Bank |
7,00,000 |
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Other Current Assets |
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8,00,000 |
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Debentures Redemption Reserve |
3,00,000 |
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Current Liabilities |
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4,00,000 |
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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
Question 180:
From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:
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Equity Share Capital |
` 75,000 |
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Debentures |
` 75,000 |
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Preference Share Capital |
` 25,000 |
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Trade Payable |
` 40,000 |
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General Reserve |
` 45,000 |
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Outstanding Expenses |
` 10,000 |
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Balance in Statement of Profit and Loss |
` 30,000 |
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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%
Ts Grewal Solution 2023-2024
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Class 12 / Volume – I
Chapter 3 – Accounting Ratio