Ca o Accounting Ratios or Financia Statement AnaN @) ii) Based on Market Value of % 54,00,000 fie. 4,00,000 Shares x % 54) %6,00,000 ~ ROE = 354.00,000 100 = 11.11% gemtationl 12, Remashay & Co,Ltd. has following Capital on Ist January 2019: v 9% Preference Shares @ % 100 each 6,00,000 Equity Shares @ % 10 each 16,00,000 ‘The following information are available to its financial year ending 31.12.2019 {i) Profit after taxation @ 40% — %5,42,000 (ii) Ordinary Dividend paid @ 20% {iii) Depreciation = 1,20,000 {iv) Market Price of Equity Shares € 40 (v) Capital Commitment = 2,40,000 ‘You are required to calculate the following : {a) The Dividend yield on the equity share, {b) The cover for the preference and equity dividend. (¢) The earning yield. (4) The Price-earning Ratio (e) The Net Cash Flow. Solution : Dividend Per Share (DPS) {@) Dividend yield on Equity Share = Market Value Per Share (MPS) £2. 0.05:1 240 (b) Dividend Cover Net Profit (After Tax) Preference Dividend {)OnPreferenceShares = £5,42,000 = 742,000 = 12.9 times Net Profit (After tax - Preference Dividend at Profit (After tax) — (il) On Equity Shares = ~~ Equity Dividend 25,42,000 -€42, 000 Aa, = 1.56 ti = ~~ ¥3,20,000 shi, 33.125 i es = 0,078.1 {c) Earning Yield= gpg = <40Welcome Approach to Financial Repatingand Financiel WS i. Statement Analysis For SEM VI(Honours) . Eamings available for Equity Dividend _Eamings available for Equity Dividend (N.B. : EPS = No. of Equity Shares %5,00,000 = %1,60,000 = 73.125] 40 he (€) Price EamingRatio = “ ees = (e) Net Cash Flow = Net Profit (After Tax) — (Preference Dividend + Equity Dividend) + Deprecia, = %5,42,000 -Z (42,000 + 3,20,000) + ¢ 1,20,000 = %5,42,000 - 2 3,62,000 + % 1,20,000 =%3,00,000 \ IMlustration 13. Calculate Sales and Gross Profit from the following information : ‘ Opening Stock % 40,000 Closing Stock = 80,000 Stock Turnover Ratio 6 Times Gross Profit 25% on cost Solution : (i) Calculation of Cost of Goods Sold : ____Cost of Goods Sold Stock Turnover Ratio = a erage Stock fe __ Cost of Goods Sold ~ (40,000 + 80,000) 2 | Cost of Goods Sold | Or,6, =" x60,000. Cost of Goods sold = 6x 60,000 = % 3,60,000 Statement Showing Calculation of Gross Profit and Sales : Particulars ia | Cost of Goods Sold me [Add : Gross Profit @ 25% on cost a 8 Mlustration 14, From the following compute average col : ‘Average Inventory pend; Debtors : foe Inventory Turnover 6 r Gross Profit Ratio Sites Credit Sales to Total Sales = (Assume 360 days a year) 20%| eee — Si. Add: Gross Profit @ 10% on sales ie $0 10,80,000 __1.20.000 cent 12,00.000 = ©2,40,000 Now, Credit Sales = 20% of € 12,00,000 Calculation of Average Collection Period : 1,20,000 a ‘Average Collection Period = Dates. x Period= 2, 350,000 x 360 days = 180 days. [astati@|NG, Following is the Balance Sheets of Unique Ltdas on 31.03.2020 Balance Sheet as at : 31.03.2020 (2) Longtern Borowings (5% Debentie) 3. Current Liabilities : (2) Trade payables Total IL ASSETS: 1. Non-current Assets : (a) Property, Plant and Equipment (i) Tangible Assets (ii) Intangible Assets (Goodwill) 2. Current Assets : (2) Inventories (Stock) (0) Trade Receivables (Sundry Debtors) (c) Cash and Cash Equivalents (Cash at Bank) Total Notes to Accounts : Particulars 1. Share Capital : (2) Subscribed (i) Equity Share Capital (i) 6% Preference Share Capital 2. Surplus : (a) General Reserve (b) Surplus in Statement of Profit & Loss Less : Preliminary Expenses written off-_ Gummer: Sk... (B) Profitability Ratio : Gross Profit ‘Net Sales @ Gross Profit Ratio = 100 a) Net Profit (ii) Net Profit Ratio = Nase 100 = %4,00,000 *100 = 5% Comment : It is observed that the profitability position of the business is not very sound. So, Steps should be taken to improve the profitability base at the earliest. AGSHERHIGRINT, The following are abridged accounting reports prepared by Y Ltd. : Statement of Profit and Loss for the year ended on 31.3.20 Particulars * (000) T—Tecome: ig Revenue from operations (sales) —600 T Expenses: (i) Cost of Goods sold 450 (ii) Other Expenses (Operating Expenses) 1 | Se Profit before tax (I-ll) | 36 Less: Provision for taxation =<1g Profit After Tax. 2% ‘Statement of Assets and Liabilities Particulars: # (000) L EQUITY AND LIABILITIES = = 1 ‘Shareholders’ Funds (a) Share Capital 160 (>) Surplus 0 2. Non-current Liabilities ‘Loan on mortgage 50 3 Current Liabilities ; (a) Trade Payables (Accounts Payables) 1m (b) Other current Liabilities (Accrued Expenses) 10 {c) Short-term Provisions (Provision for taxes) ib i. ASSETS: __ 50 1. Now-current Assets Property, Plant and Equipment 160 2. Current Assets: (a) Inventories 160 (b) Trade Receivables (Accounts Receivables) 120 (c) Cash and Cash Equivalents (Cash) _mo to Financial Reportingand Financial & eo aaa ont Angle For SEM VI(Honours) (vii) Prepératign of Balance Sheet bai Ltd. as on 31.03 9. From the following information, prepare a Balance ee " fatio - 2:1 Ratio - 1.25: 1 Fixed Assets to Proprietorship Ratio - 0.75: 1 pees Gearing Ratio (Preference Share Capital to Equity Share Working Capital - % 8,000 Surplus - 7 2,000 the ae cee (re a immediately) -< 2,000. [€.U. B.Com (Hons.), 2014 Solution : In the Books of Mumbai Ltd. Balance Sheet es at 31.03.2020 : ‘ Particulars Hote No |_ Anou 1. EQUITY AND LIABILITIES : 1. Shareholders’ Funds : | (@) Share Capital | (©) Surplus Share Application Money Pending Allotment ’ Non-current Liabilities a 4. Current Liabilities = (a) Short-term Borrowings (Bank Overdraft) (b) Other Current Liabilities (Quick Liabilities) | Total I. ASSETS: 1. Non-current Assets : {a) Property, Plant and Equipment-Tangible Assets 24,000 2. Current Assets : {@) Inventories (Stock) (b) Other Current Assets ( Quick Assets) Total Notes to Accounts : ‘Amoutt (a) Subscribed and Fully Paid : Equity Share Capital Preference Share Capital Working Notes : ( Here Current Ratio =2:1