Question 181:
From the following information related to Naveen Ltd., calculate (a) Return
on Investment and (b) Total Assets to Debt Ratio:
Information: Fixed Assets ` 75,00,000; Current
Assets ` 40,00,000; Current Liabilities `
27,00,000; 12% Debentures ` 80,00,000 and Net
Profit before Interest, Tax and Dividend ` 14,50,000.
Answer:
1) Return on Investment
Return on Investment = Net profit Before Interest, Tax and dividend ×100/
Capital Employed
Net profit Before Interest, Tax and dividend=14,50,000
Capital employed= Fixed Assets + Current Assets+ Current Liabilities
=75,00,000+40,00,000+27,00,000
=88,00,000
Return on Investment =14,50,000×100/88,00,000
=16.48%
2) Total Assets to Debt to Ratio
Total Assets to Debt Ratio = Total Assets/Debt
Total Assets = Fixed Assets + Current Assets
= ` (75,00,000 + 40,00,000)
= ` 1,15,00,000
Debt = ` 80,00,000
Total Assets to Debt Ratio = 1,15,00,000/80,00,000
= 1.44:1
Question 182: From the following information, calculate:
(i) Gross Profit Ratio;
(ii) Working Capital Turnover Ratio; and
(iii) Proprietary Ratio.
|
Particulars |
Rs. |
Particulars |
Rs. |
|
Paid-up Capital |
8,00,000 |
Current Assets |
5,00,000 |
|
Credit Sales |
3,00,000 |
Current Liabilities |
2,90,000 |
|
9% Debentures |
3,40,000 |
Cash Sales: 75% of Credit Sales |
|
|
Cost of Goods Sold |
6,80,000 |
Net Profit for the year |
1,55,000 |
Answer:
(i) Gross Profit Ratio
Gross Profit Ratio = Gross Profit Ratio×100/Revenue from Operations
Gross Profit Ratio = -1,55,000×100/5,25,000
Gross Profit Ratio = -29.52%
Working Notes:
Gross Profit = Revenue form operation - Cost of Goods Sold
-1,55,000 = 5,25,000 - 6,80,000
Revenue form operation = Credit Sales+ Cash Sales: 75% of Credit Sales
Revenue form operation = 3,00,000 + 2,25,000=5,25,000
(ii) Working Capital Turnover Ratio
Working Capital Turnover Ratio = Revenue from Operations/Working Capital
Working Capital Turnover Ratio = 5,25,000/Working Capital
Working Capital Turnover Ratio = 5,25,000/2,10,000= 2.5 Times
Working Notes:
Working Capital = Current Assets + Current Liabilities
Working Capital = 5,00,000 + 2,90,000 = 2,10,000
(iii) Proprietary Ratio
Proprietary Ratio = Proprietary’s fund×100/ Total Assets
Proprietary Ratio = 9,55,000×100/15,85,000
Proprietary Ratio = 60.25%
Working Notes:
Proprietary’s fund = Paid-up Capital + Net Profit for the year
Proprietary’s fund = 8,00,000+1,55,000=9,55,000
Total Assets = Total Liabilities
Total Assets = Paid-up Capital+9% Debentures+ Net Profit for the years+Current Liabilities
Total Assets = 8,00,000 + 3,40,000+1,55,000+2,90,000
Total Assets = 15,85,000