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12th | Accounting Ratios | Question No. 31 To 35 | Ts Grewal Solution 2022-2023

Question 31:


Total Assets  `11,00,000; Fixed Assets  `5,00,000; Capital Employed  `10,00,000. There were no Long-term Investments.
Calculate Current Ratio.

Answer:


Current Assets = Total Assets − Fixed Assets

Fixed Assets = 5,00,000

Total Assets = 11,00,000

Current Assets = 11,00,000 − 5,00,000 = 6,00,000

Current Liabilities = Total Assets − Capital Employed

= 11,00,000 − 10,00,000 = 1,00,000

Current ratio= Current Assets/ Current liabilities=6,00,000/1,00,000=6:1

Question 32:


Capital Employed  `20,00,000; Fixed Assets  `14,00,000; Current Liabilities  `2,00,000. There are no Long-term Investments. Calculate Current Ratio.

Answer:


Capital Employed = 20,00,000

Fixed Assets = 14,00,000

Current Assets = Capital Employed + Current Liabilities − Fixed Assets

= 20,00,000 + 2,00,000 − 14,00,000 = 8,00,000

Current ratio= Current Assets/ Current liabilities=8,00,000/2,00,000=4:1

 

Question 33:


From the following calculate: (i) Current Ratio; and (ii) Quick Ratio:

 

`

 

 

`

Total Debt

12,00,000

 

Long-term Borrowings

4,00,000

Total Assets

16,00,000

 

Long-term Provisions

4,00,000

Fixed Assets (Tangible)

6,00,000

 

Inventories

1,90,000

Non-current Investment

1,00,000

 

Prepaid Expenses

10,000

Long-term Loans and Advances

1,00,000

 

 

 

Answer:


(i)                 Current ratio

Current RatioCurrent Assets=Total Assets-Fixed Assets-Non-Current Investment - Long term Loans and Advances                       

=16,00,000-6,00,000-1,00,000-1,00,000= ` 8,00,000

 

Current Liabilities=Total Debt - Non-Current Liabilities                             

=12,00,000-4,00,000-4,00,000= ` 4,00,000

 

Current Ratio=Current AssetsCurrent Liabilities                     

=8,00,000/4,00,000=2:1

 

(ii)              ​ Quick Ratio 

Quick Assets=Current Assets-Stock-Prepaid Expenses                   

=8,00,000-1,90,000−10,000= ` 6,00,000

Quick Ratio=Quick Assets/Current Liabilities                     

=6,00,000/4,00,000=1.5:1

 

Question 34:


Following is the Balance Sheet of Crescent Chemical Works Limited as at 31st March, 2021:

Particulars

Note
No.

 `

I. EQUITY AND LIABILITIES :
1. Shareholder's Funds :

 

 

(a) Share Capital

 

70,000

(b) Reserves and Surplus

 

35,000

 

 

 

2. Non-Current Liabilities :

 

 

Long-term Borrowings

 

25,000

 

 

 

3. Current Liabilities :

 

 

(a) Short-term Borrowings

 

3,000

(b) Trade Payables (Creditors)

 

13,000

(b) Short-term Provisions: Provision for Tax

 

4,000

Total

 

1,50,000

II. ASSETS :

 

 

1. Non-Current Assets

 

 

(a) Fixed Assets (Tangible)

 

45,000

(b) Non-current Investments

 

5,000

 

 

 

2. Current Assets

 

 

(a) Inventories (Stock)

 

50,000

(b) Trade Receivables (Debtors)

 

30,000

(c) Cash and Cash Equivalents

 

20,000

Total

 

1,50,000

Compute Current Ratio and Liquid Ratio 

Answer:


Current Assets = Inventory + Trade Receivables + Cash and Cash Equivalents

= 50,000 + 30,000 + 20,000 = 1,00,000

Current Liabilities = Short-term Borrowings + Trade Payables + Provision for Tax

= 3,000 + 13,000 + 4,000 = 20,000

Quick Assets = Trade Receivables + Cash and Cash Equivalents

= 30,000 + 20,000 = 50,000

Current ratio= Current Assets/ Current liabilities=1,00,000/20,000=5:1

Quick ratio= Liquid Assets/ Current liabilities=50,000/20,000=2.5:1

 

Comments:

1. Ideal Current Ratio for a business is considered to be 2:1. But in this case the ratio is quite high i.e. 5:1. This may be due to the following reasons:

(i) Blockage of Funds in Stock

(ii) High Amount outstanding from Debtors

(iii)            Huge Cash and Bank Balances

 

2. Ideal Quick Ratio of a business is supposed to be 1:1. This implies that Liquid Assets should be equal to the Current Liabilities. But in the given case Quick Ratio is 2.5 : 1 which indicates that the Liquid Assets are quite high in comparison to the Current Liabilities.

 

Question 35:


Total Assets  ` 2,60,000; Total Debts  ` 1,80,000; Current Liabilities  ` 20,000. Calculate Debt to Equity Ratio. 

Answer:


Total Debts = 1,80,000

Current Liabilities = 20,000

Long-term Debts = Total Debts − Current Liabilities

= 1,80,000 − 20,000 = 1,60,000

Equity = Total Assets − Total Liabilities

= 2,60,000 − 1,80,000 = 80,000

Debt equity ratio= Long-term Debt /equity=1,60,000/80,000=2:1

 

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