Ratio Analysis €Edutors Evolve, Enrich & Empower CHAPTER RATIO ANALYSIS Question 1 (*) Following figures are available in the books Tirupati Ltd Fixed assets turnover ratio (calculated on COGS) _| 8 times Capital turnover ratio (calculated on COGS) 2 times Inventory Turnover (calculated on COGS) 8 times Receivable turnover 4times Payable turnover 6 times GP Ratio 25% Gross profit during the year amounts to % 8,00,000. There is no long-term loan or overdraft. Reserve and surplus amount to % 2,00,000. Ending inventory of the year is ® 20,000 above the beginning inventory Required: CALCULATE various assets and liabilities and PREPARE a Balance sheet of Tirupati Ltd Question 2 (*) ‘Assuming the current ratio of a Company is 2, STATE in each of the following cases whether the ratio will improve or decline or will have no change: (i) Payment of current liability (ii) Purchase of fixed assets by cash (iii) Cash collected from Customers (iv) Bills receivable dishonoured (v) Issue of new shares Question 3 (*) The accountant of Moon Ltd. has reported the following data: Gross profit 60,000 Gross Profit Margi 20 per cent Total Assets Turnover Net Worth to Total Assets Current Rati Liquid Assets to Current Credit Sales to Total Sales ‘Average Collection Period 60 days ‘Assume 360 days in a year You are required to complete the following: Balance Sheet of Moon Ltd. Liabilities zg Assets x ‘Net Worth Fixed Assets Current Liabilities Stock“ Edutors Financial Management - Fast Track vote, Exch & Empower commen Debtors Cash Total Liabilities Total Assets Question 4 (*) The following is the information of XML Ltd. relate to the year ended 31-03-2018: Gross Profit 20% of Sales Net Profit 10% of Sales Inventory Holding period 3.months Receivable collection period 3 months Non-Current Assets to Sales 1:4 Non-Current Assets to Current Assets 1:2 Current Rati 21 Non-Current Liabilities to Current Liabilities La Share Capital to Reserve and Surplus a1 Non-current Assets as on 31st March, 2017 | %50,00,000 Assume that: (i) No change in Non-Current Assets during the year 2017-18 (i) No depreciation charged on Non-Current Assets during the year 2017-18. (iii) Ignoring Tax You are required to Calculate cost of goods sold, Net profit, Inventory, Receivables and Cash for the year ended on 31% March, 2018 Question 5 (*) From the follo given at the end ig table of financial ratios of R. Textiles Limited, comment on various ratios Ratios 2017 _| 2018 | Average of Textile Industry Liquidity Ratios Current ratio 22 25 25 Quick ratio 15 2 15 Receivable turnover ratio 6 6 6 Inventory turnover 9 10 6 Receivables collection period _| 87 days | 86 days 85 days Operating profital Operating income -RO! 25% | 22% 15% Operating profit margin 19% | 19% 10% Financing decisions Debt ratio 49.00% | 48.00% 57% Return Return on equity 24% | 25% 15%Ratio Analysis COMMENT on the following aspect of R. Textiles Limited (i) Liquidity (ii) Operating profits (ii) Financing (iv) Return to the shareholders Question 6 (**) The following is the Profit and loss account and Balance sheet of KLM LLP. Trading and Profit & Loss Account ¢dutors XY Particulars Amount (X)_| Particulars Amount (8) To Opening stock 12,46,000 _| By Sales 1,96,56,000 To Purchases 1,56,20,000 | By Closing stock 14,28,000 To Gross profit c/d 42,18,000. 2,10,84,000 2,10,84,000 By Gross profit b/d 42,18,000 To Administrative expenses 18,40,000_| By Interest on investment_| 24,600 To Selling & distribution | 7,56,000 | By Dividend received 22,000 expenses To Interest on loan 2,60,000 To Net profit 14,08,600 42,64,600 42,64,600 Balance Sheet as on. Capital & Liabilities Amount (8) | Assets Amount (3) Capital 20,00,000_| Plant & machinery 24,00,000 Retained earnings -42,00,000 | Building 42,00,000 General reserve 12,00,000_| Furniture 12,00,000 Term loan from bank | 26,00,000_| Sundry receivables 13,50,000 Sundry Payables 7,20,000_| Inventory 14,28,000 Other liabilities 2,80,000 | Cash & Bankbalance | _4,22,000 1,10,00,000 1,10,00,000 You are required to COMPUTE: (i) Gross profit ratio (ii) Net profit ratio (iii) Operating cost ratio (iv) Operating profit ratio () Inventory turnover ratio (vi) Current ratio (vil) Quick ratio (viii) Interest coverage ratio (ix) Return on capital employed (x) Debt to assets ratio.“ Edutors Financial Management - Fast Track vote, Each & Empower by Gourav Kabra Question 7 (*) Following figures and ratios are related to a company QLtd.: Sales for the year (all credit) 30,00,000 Gross Profit ratio 25 per cent Fixed assets tumover (based on cost of goods sold) 15 Stock turnover (based on cost of goods sold) 6 Liquid rat Current rati Receivables (Debtors) collection period 2 months Reserves and surplus to share capital 0.6: 1 Capital gearing ra 0s Fixed assets to net worth 1.20:1 You are required to calculate: i. Closing stock, ii, Fixed Assets, ili, Current Assets, iv. Debtors and Net worth Question 8 (*) Following information has been gathered from the books of Tram Ltd. the equity shares of which is trading in the stock market at € 14. Particulars Equity Share Capital (face value ® 10) 10% Preference Shares Reserves 10% Debentures Profit before Interest and Tax for the year Interest Profit after Tax for the year Amount (8) Calculate the following: (i) Return on Capital Employed (i) Earnings per share (iii) PE ratio Question 9 (*) MT Limited has the following Balance Sheet as on March 31, 2019 and March 31, 2020: Balance Sheet in lakhs March 31, 2019 | March 31, 2020 Sources of Fund: Shareholders’ Funds 2,500 2,500Ratio Analysi €Edutors Evolve, Enrich & Empower Loan Funds 3,500 3,000 6,000 5,500 Applications of Funds: Fixed Assets 3,500 3,000 Cash and bank 450 400 Receivables 1,400 1,100 Inventories 2,500 2,000 Other Current Assets 1,500 1,000 Less: Current Liabilities (1,850) (2,000) 6,000 5,500 The Income Statement of the MT Ltd. for the year ended is as follows: Zin lakhs March 31, 2019 [ March 31, 2020 Sales 22,500 23,800 Less: Cost of Goods sold (20,860) (21,100) Gross Profit 1,640 2,700 Less: Selling, General and Administrative expenses (1,100) (1,750) Earnings before Interest and Tax (EBIT) 540 950 Less: Interest Expense (350) (300) Earnings before Tax (EBT) 190 650 Less: Tax (57) (195) Profits after Tax (PAT) 133 455 Required: CALCULATE for the year 2019-20 {a) Inventory turnover ratio (b) Financial Leverage (c) Return on Capital Employed (ROCE) (4) Return on Equity (ROE) (e) Average Collection period. [Take 1 year = 365 days] Question 10 (>) Following information has been provided from the books of M/s Laxmi & Co. for the year ending on 31st March, 2020: Net Working Capital % 4,80,000 Bank overdraft 80,000 Fixed Assets to Proprietary rati 0.75 Reserves and Surplus %3,20,000 Current rati 25 Liquid ratio (Quick Ratio) 15 You are required to PREPARE a summarised Balance Sheet as at 31st March, 2020“ Edutors Financial Management - Fast Track Evolve Enrch & Empower By Gouray Kabra Question 11 (*) Following information relates to RM Co. Ltd. Total Assets employed _| 10,00,000 Direct Cost 85,50,000 Other Operating Cost = 90,000 Goods are sold to the customers at 150% of direct costs. 50% of the assets being financed by borrowed capital at an interest cost of 8% per annum. Tax rate is 30%. You are required to calculate: (i) Net profit margin (ii) Return on Assets (iii) Asset turnover (iv) Return on owners’ equity Question 12 (+) Given below are the estimations for the next year by Niti Ltd. Particulars (Rin crores) Fixed Assets 5.20 Current Lia 4.68 Current Assets 7.80 Sales 23.00 EBIT 2.30 The company will issue equity funds of ® 5 crores in the next year. It is also considering the debt alternatives of & 3.32 crores for financing the assets. The company wants to adopt one of the policies given below: (Rin crores) Financing Policy_| Short term debt @ 12% | Long term debt @ 16% _| Total Conservative 1.08 2.24 3.32 Moderate 2.00 1:32 3.32 ‘Aggressive 3.00 0.32 3.32 ‘Assuming corporate tax rate at 30%, CALCULATE the following for each of the financing policy: (i) Return on total assets (ii) Return on owner's equity (iii) Net Working capital (iv) Current Ratio Question 13 (*) From the following information, complete the Balance Sheet given below: Equity Share Capital % 2,00,000 Total debt to owner's equity 0.75Ratio Analysis Total Assets turnover Inventory turnover Fixed Assets to owner's equity Current debt to total debt €Edutors Evolve, Enrich & Empower 2ti es 8 times Balance Sheet of XYZ Co. as on March 31, 2020 Liabilities Amount () | Assets Amount (8) Equity Shares Capital | 2,00,000_| Fixed Assets 2 Long term Debt 2 Current Assets: Current Debt 2 Inventory 2 Cash ? Question 14 (x) Masco Limited has furnished the following ratios and information relating to the year ended 31st March 2021 Sales %75,00,000 Return on net worth 25% Rate of income tax 50% Share capital to reserves 4 Current ratio 25 Net profit to sales (After Income Tax) 6.50% Inventory turnover (based on cost of goods sold) 2 Cost of goods sold %22,50,000 Interest on 15% debentures 75,000 Receivables (includes debtors % 1,25,000) % 2,00,000 Payables 2,50,000 Bank Overdraft %1,50,000 You are required to: (a) Calculate the operating expenses for the year ended 31st March, 2021. (b) Prepare a balance sheet as on 31st March in the following format: Liabilities x Assets x Share Capital Fixed Assets Reserves and Surplus Current Assets 15% Debentures Stock Payables Receivables Bank Term Loan Cash Question 15 (+) Following are the data in respect of ABC Industries for the year ended 31 st March, 2021: Debt to Total assets ratio Long-term debts to equi Gross profit margin on sales ‘Accounts receivables period Quick ratio 0.40 30% 20% 36days 09Edutors Financial Management - Fast Track Evolve, Enrich & Empower Gy Gourav Kabra Inventory holding period SSdays Cost of goods sold %64,00,000 Liabilities x Assets x Equity Share Capital | 20,00,000 | Fixed assets Reserves & surplus Inventories Long-term debts ‘Accounts receivable Accounts payable Cash Total 50,00,000 | Total Required: Complete the Balance Sheet of ABC Industries as on 31st March, 2021. All calculations should be in nearest Rupee. Assume 360 days in a year. Question 16 (x) FIM Ltd. is in a competitive market where every company offers credit. To maintain the competition, FM Ltd. sold all its goods on credit and simultaneously received the goods on credit. The company provides the following information relating to current financial year: Debtors Velocity 3 months Creditors Velocity 2 months Stock Turnover Ratio (on Cost of Goods Sold) 5 Fixed Assets turnover Ratio (on Cost of Goods Sold) 4 Gross Profit Ratio 25% Bills Receivables 275,000 Bills Payables 30,000 Gross Profit © 12,00,000 FM Ltd. has the tendency of maintaining extra stock of % 30,000 at the end of the period than that at the beginning. DETERMINE: (i) Sales and cost of goods sold (ii) Sundry Debtors (iii) Closing stock (iv) Sundry Creditors (v) Fixed Assets Question 17 (>) The following information of ASD Ltd. relate to the year ended 31st March, 2022: Net profit Raw materials consumed Direct wages Stock of raw materials, Stock of finished goods 8% of sales 20% of Cost of Goods Sold 10% of Cost of Goods Sold 3 months’ usage 6% of Cost of Goods SoldRatio Analysi: Gross Profit Debt collection period (All sales are on credit) Current ratio Fixed assets to Current assets Fixed assets to sales Long-term loans to Current liabilities Capital to Reserves and Surplus You are required to PREPARE- €Edutors Evolve, Enrich & Empower 15% of Sales (a) Profit & Loss Statement of ASD Limited for the year ended 31st March, 2022 in the following format. Particulars &) Particulars ® To Direct Materials consumed 2 By Sales 2 To Direct Wages 2 To Works (Overhead) 2 To Gross Profit c/d 2 To Selling and Distribution Expenses 2 By Gross Profit b/d 2 To Net Profit 2 Total 2 Total ? (b) Balance Sheet as on 31st March, 2022 in the following format. Liabilities (3) Assets &®), Share Capital fi Fixed Assets 130,00,000 Reserves and Surplus a Current Assets: Long term loans 2 ‘Stock of Raw Material Current liabilities 2 Stock of Finished Goods Debtors 2 Cash 2 Total ? Total ? Question 18 (*) Following information and ratios are given for W Limited for the year ended 31st March, 2022: Equity Share Capital of % 10 each 10 lakhs Reserves & Surplus to Shareholders’ Fund | 0.50 Sales / Shareholders’ Fund 1.50 Current Rati 2.50 Debtors Turnover Rati 6.00 Stock Velocity 2 months Gross Profit Ratio 20% Net Working Capital Turnover Ratio 2.50 You are required to calculate: () Shareholders’ Fund“ Edutors Financial Management - Fast Track Evolve Enrch & Empower By Gouray Kabra (ii) Stock (iii) Debtors (iv) Current liabilities (v) Cash Balance. Question 19 (*) The following figures are related to the trading activities of M Ltd. Total assets % 10,00,000 Debt to total assets 50% Interest cost 10% per year Direct Cost 10 times of the interest cost Operating Exp % 1,00,000 ‘The goods are sold to customers at a margin of 50% on the direct cost Tax Rate is 30% You are required to calculate (i) Net profit margin (ii) Net operating profit margin (iii) Return on assets Question 20 (**) From the following information, find out missing figures and REWRITE the balance sheet of Mukesh Enterprise Current Ratio = 2:1 Acid Test ratio = 3:2 Reserves and surplus = 20% of equity share capital Long term debt = 45% of net worth Stock turnover velocity = 1.5 months Receivables turnover velocity = 2 months You may assume closing Receivables as average Receivables Gross profit ratio = 20% Sales is & 21,00,000 (25% sales are on cash basis and balance on credit basis) Closing stock is € 40,000 more than opening stock. Accumulated depreciation is 1/6 of original cost of fixed assets. Balance sheet of the company is as follows Liabilities (3) Assets ® Equity Share Capital 2 Fixed Assets (Cost) 2 Reserves & Surplus 2 Less: Accumulated. Depreciation 2 Long Term Loans 6,75,000_| Fixed Assets (WDV) 2 Bank Overdraft 60,000 _| Stock 2 Creditors 2 Debtors 2 Cash 2 Total ? Total ? 10Ratio Analysis €Edutors Evolve, Enrich & Empower Question 21 (**) Following information and ratios are given in respect of AQUA Ltd. for the year ended 31st March, 2023: Current ratio 4.0 Acid test ratio 25 Inventory turnover ratio (based on sales) 6 ‘Average collection period (days) 70 Earnings per share 335 Current liabilities %3,10,000 Total assets turnover ratio (based on sales) | 0.96 Cash ratio 0.43 Proprietary ratio 0.48 Total equity dividend %1,75,000 Equity dividend coverage ratio 1.60 Assume 360 days in a year. You are required to complete Balance Sheet as on 31stMarch, 2023, Balance Sheet as on 31stMarch, 2023. Liabilities x Assets x Equity shares capital (% 10 per share) XXX Fixed assets XXX Reserves & surplus XXX__| Inventory XXX Long-term debt XXX, Debtors XXX, Current liabilities 3,10,000 | Loans & advances XXX, Cash & bank XXX Total XXX Total XXX Question 22 (*) You are available with following information of Brave Ltd: Debtor's velocity _| 3 months Stock velocity 6 months Creditor’s velocity | 2 months Gross profit ratio 20% The gross profit for the year ended 31st March,2023 was © 10,00,000. Stock for the same period was € 40,000 more than what it was at the beginning of the year. Bills receivable was % 1,20,000. Form the above information you are required to calculate: (i) Sales (ii) Sundry debtors (ii) Closing stock a¢dutors X Question 23 (*) Financial Management - Fast Track By Gourav Kabra From the following information and ratios, PREPARE the Balance Sheet as on 31st March 2023 and Income Statement for the year ended on that date for Li Gross Profit Shareholders’ Funds Gross Profit margi Net Profit Margi PBIT to PBT Credit sales to Total sales Total Assets turnover Inventory turnover (Use sales as turnover) Average collection period (a 360 days year) Current ratio Operating expenses (exclu Long-term Debt to Equity Tax x interest) Question 24 (#*) Theme Ltd provides you the following information: 12.5 % Debt Debt to Equity ratio Return on Shareholder's fund Operating Ratio Ratio of operating expenses to Cost of Goods sold Tax rate Fixed Assets Current Ratio You are required to calculate: (i) Interest Coverage R: (ii) Gross Profit Ratio (iii) Current Assets 2 lite & Co. 20,000 %5,00,000 40% 10% %45,00,000