Analysis Of Financial Statements Ts Grewal 2018 for Class 12 Commerce Accountancy Chapter 4 - Accounting Ratios

Answer:

Case 1

Credit Sales = 3,00,000

Cash sales = 25% of Credit Sales

Total Sales = Cash Sales + Credit Sales

= 3,00,000 + 75,000 = 3,75,000

Gross Profit = 20% on Sales

Cost of Goods Sold = Total Sales − Gross Profit

= 3,75,000 − 75,000 = 3,00,000

Case 2

Let Total Sales = x

Total Sales = Cash Sales + Credit Sales

Gross Profit = Sales − Cost of Goods Sold

Answer:

Cost of Goods Sold = Opening Inventory+ Purchases + Direct Expenses – Closing Inventory
                                = Rs 1,25,000 + Rs 3,00,000 + Rs 15,000 – Rs 75,000 = Rs 3,65,000


$\mathrm{Inventory} \mathrm{Turnover} \mathrm{Ratio}=\frac{\mathrm{Cost} \mathrm{of} \mathrm{Goods} \mathrm{Sold}}{\mathrm{Average} \mathrm{Inventory}}=\frac{3,65,000}{1,00,000}=3.65 \mathrm{times}$

Answer:

Answer:

Net Credit Sales = Total Sales − Sales Return − Cash Sales

= 1,00,000 − 1,500 − 23,500 = 75,000

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Credit Sales = 4,80,000

Closing Trade Receivables = Opening Trade Receivables + 40,000

1,00,000 = Opening Trade Receivables + 40,000

Opening Trade Receivables = Rs 60,000

Answer:

$$\begin{gathered} \mathrm{Average} \mathrm{Debtors} =\frac{\mathrm{Opening} \mathrm{Debtors} + \mathrm{Closing} \mathrm{Debtors}}{2} \\ \mathrm{In} 2017 = \frac{83,000 + 1,17,000}{2} = \mathrm{Rs} 1,00,000 \\ \mathrm{In} 2018 = \frac{ 1,17,000 + 83,000}{2} = \mathrm{Rs} 1,00,000 \end{gathered}$$

$$\begin{gathered} \mathrm{Debtors} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Sales}}{\mathrm{Average} \mathrm{Debtors}} \\ \mathrm{In} 2017 = \frac{8,00,000}{1,00,000} = 8 \mathrm{Times} \\ \mathrm{In} 2018 = \frac{7,00,000}{1,00,000} = 7 \mathrm{Times} \end{gathered}$$

Answer:

Let Opening Trade Receivables = x

∴ Closing Trade Receivables = x + 7,000

∴ Opening Trade Receivables = x = 18,375

Closing Trade Receivables = x +7,000 = 25,375

Answer:

Credit Sales = 8,00,000

Average Debtors = 1,00,000

Answer:

Let Credit Sales be = x

Total Sales = Cash Sales + Credit Sales

Opening Trade Receivables = Closing Trade Receivables − 2,00,000

= 4,00,000 − 2,00,000 = 2,00,000

$$\begin{gathered} \mathrm{Trade} \mathrm{Receivables} \mathrm{Turnover} \mathrm{Ratio}=\frac{\mathrm{Net} \mathrm{Credit} \mathrm{Sales}}{\mathrm{Average} \mathrm{Trade} \mathrm{Receivables}} \\ =\frac{12,00,000}{3,00,000} \\ =4 \\ \mathrm{Therefore}, \mathrm{Trades} \mathrm{Receivable} \mathrm{Turnover} \mathrm{Ratio} \mathrm{is} 4 \mathrm{Times} \end{gathered}$$

Answer:

Answer:

Total Sales = Cost of Goods Sold + Gross Profit

= 3,50,000 + 1,50,000 = 5,00,000

Credit Sales = Total Sales − Cash Sales

= 5,00,000 − 2,00,000 = 3,00,000

Case 1:

Let Opening Trade Receivables = x

Closing Trade Receivables = x + 1,00,000

Opening Trade Receivables = x = RS 50,000

Closing Trade Receivables = x + 1,00,000 = 50,000 + 1,00,000 = Rs 1,50,000

Case 2:

Let Opening Trade Receivables = x

Closing Trade Receivables = 3 x

Opening Trade Receivables = x = Rs 50,000

Closing Trade Receivables = 3x = 3 × 50,000 = Rs 1,50,000

Case 3:

Let Opening Trade Receivables = x

Closing Trade Receivables = x + 3 x = 4x

Opening Trade Receivables = x = Rs 40,000

Closing Trade Receivables = 4 x = 4 × 40,000 = Rs 1,60,000

Answer:

(iii) Let the Opening Trade Receivables be x

∴ Closing Trade Receivables = x + 6,000

∴ Opening Trade Receivables = x = Rs 37,000

Closing Trade Receivables = x + 6,000 = 43,000

Answer:

$\begin{array}{l}\text{Trade Receivable Turnover Ratio =}\frac{\text{Credit Revenue from Operations}}{\text{Average Trade Receivables}}\\ \text{ 3 =}\frac{3,00,000}{\text{Average Trade Receivables}}\\ \text{Average Trade Receivables = }\frac{3,00,000}{3}=\text{Rs 1,00,000}\\ \text{Average Trade Receivables}=\frac{\text{Opening Trade Receivables}+\text{Closing Trade Receivables}}{2}\\ \text{ 1,00,000 =}\frac{x+4x}{2}\\ \text{So, x would be Rs 40,000 }\\ \therefore \text{Opening receivables would be Rs 40,000 and,}\\ \text{ Closing Receivables would be Rs 1,60,000}(40,000\times 4)\\ \text{Revenue from Operations}=\text{3,00,000+}\frac{25}{75}\times 3,00,000=\text{Rs 4,00,000}\\ \text{Credit Revenue from Operations}=\text{Total Revenue from Operations}-\text{Cash Revenue from Operations}\\ \text{ x}=\text{4,00,000-}\frac{1}{3}x\\ \text{Credit Revenue from Operations}=\text{Rs 3,00,000}\end{array}$

Answer:

Case 1

Case 2

Net Credit Sales = Total Sales −Cash Sales

= 30,00,000 − 6,00,000 = 24,00,000

Case 3

Cost of Goods Sold = 3,00,000

Gross Profit = 25% on Cost

Total Sales = Cost of Goods Sold + Gross Profit

= 3,00,000 + 75,000 = 3,75,000

Cash Sales = 20% of Total Sales

Credit Sales = Total Sales − Cash Sales

= 3,75,000 − 75,000 = 3,00,000

Case 4

Let Sales be = x

Let Credit Sales be = a

Answer:

(i) Collection from Trade Receivables Rs 40,000- Increase

Reason: Collection from Trade Receivables will result in decrease in the amount of closing Trade Receivables which will reduce the amount of average Trade Receivables.

Closing Trade Receivables = 2,00,000 − 40,000 = Rs 1,60,000

(ii) Credit Revenue from Operations, i.e. Sales Rs 80,000- Decrease

Reason: This transaction will result in increase in both credit sales as well as closing Trade Receivables. Increase in closing Trade Receivables, in turn, will lead to an increase in the average Trade Receivables.

Credit Sales = 8,00,000 + 80,000 = Rs 8,80,000

Closing Trade Receivables = 2,00,000 + 80,000 = Rs 2,80,000

(iii) Sales Return Rs 20,000- Increase

Reason: This transaction will result in decrease in both sales and average Trade Receivables.

Credit Sales = 8,00,000 − 20,000= Rs 7,80,000

Closing Trade Receivables = 2,00,000 − 20,000 = Rs 1,80,000

(iv) Credit Purchase Rs 1,60,000- No Change

Reason: Credit Purchase does not affect the Debtors Turnover Ratio.

Answer:

$$\begin{gathered} \mathrm{Average} \mathrm{Trade} \mathrm{Payables} = \frac{\mathrm{Opening} \mathrm{Creditors} \& \mathrm{B}/\mathrm{P} + \mathrm{Closing} \mathrm{Creditors} \& \mathrm{B}/\mathrm{P}}{2} \\ = \frac{1,50,000 + 50,000 + 4,50,000 + 1,50,000}{2} = \mathrm{Rs} 4,00,000 \\ \mathrm{Net} \mathrm{Credit} \mathrm{Purchases} = \mathrm{Total} \mathrm{Purchases} - \mathrm{Purchases} \mathrm{Return} - \mathrm{Cash} \mathrm{Purchases} \\ = 21,00,000 - 1,00,000 - 4,00,000 = \mathrm{Rs} 16,00,000 \end{gathered}$$

$\mathrm{Trade} \mathrm{Payables} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Credit} \mathrm{Purchases}}{\mathrm{Average} \mathrm{Trade} \mathrm{Payables}} = \frac{16,00,000}{4,00,000} = 4 \mathrm{times}$
$\mathrm{Average} \mathrm{Debt} \mathrm{Payment} \mathrm{Period} = \frac{12}{\mathrm{Trade} \mathrm{Payable} \mathrm{Turnover} \mathrm{Ratio}} = \frac{12}{4} = 3 \mathrm{months}$
 
 

Answer:

Net Credit Purchases = Purchases – Cash Purchases – Purchase Return
                                  = Rs 9,50,000 – Rs 1,00,000 – Rs 45,000 = Rs 8,05,000

Answer:

Case 1

Net Credit Purchases = Net Purchases − Cash Purchases

= 3,60,000 − 90,000 = 2,70,000
$$\begin{gathered} \mathrm{Trade} \mathrm{Payables} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Credit} \mathrm{Purchases}}{\mathrm{Closing} \mathrm{Trade} \mathrm{Payables}} \\ = \frac{2,70,000}{45,000} = 6 \mathrm{times} \end{gathered}$$

Case 2

Net Purchases = 3,60,000
$$\begin{gathered} \mathrm{Average} \mathrm{Trade} \mathrm{Payables} = \frac{\mathrm{Opening} \mathrm{Trade} \mathrm{Payables} + \mathrm{Closing} \mathrm{Trade} \mathrm{Payables}}{2} \\ = \frac{15,000 + 45,000}{2} = 30,000 \end{gathered}$$
$\mathrm{Trade} \mathrm{Payables} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Credit} \mathrm{Purchases}}{\mathrm{Average} \mathrm{Trade} \mathrm{Payables} } = \frac{3,60,000}{30,000} = 12 \mathrm{times}$

Case 3

$\mathrm{Trade} \mathrm{Payable} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Credit} \mathrm{Purchases}}{\mathrm{Closing} \mathrm{Trade} \mathrm{Payables}} = \frac{3,60,000}{45,000} = 8 \mathrm{times}$

Case 4

Net Credit Payables for Goods = Trade Payables − Creditors for Machinery

= 55,000 − 25,000 = 30,000

$\mathrm{Trade} \mathrm{Payables} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Credit} \mathrm{Purchases}}{\mathrm{Average} \mathrm{Trade} \mathrm{Payables}} = \frac{3,60,000}{30,000} = 12 \mathrm{times}$

Answer:

Working Capital = Current Assets – Current Liabilities
                            = 5,00,000 – 3,00,000 = 2,00,000

Answer:

Net Sales = Cash Sales + Credit Sales − Sales Returns

= 5,00,000 + 6,00,000 − 1,00,000 = 10,00,000

Answer:

Net Sales = Cost of Goods sold + Gross Profit

Let Net Sales =  x

Answer:

Gross Profit = 25% on Cost
Let Cost be = Rs x

∴ Cost of Goods Sold = 20,00,000

Answer:

Cost of Goods Sold = 40,00,000

Gross Profit = 20% of Cost

Answer:

$$\begin{gathered} \mathrm{Working} \mathrm{Capital} \mathrm{Turnover} \mathrm{Ratio}=\frac{\mathrm{Net} \mathrm{Sales}}{\mathrm{Working} \mathrm{Capital}} \\ \mathrm{Revenue} \mathrm{from} \mathrm{Operations} (\mathrm{Net} \mathrm{Sales})=\mathrm{Rs} 30,00,000 \left(\mathrm{Given}\right) \\ \mathrm{Working} \mathrm{Capital}=\mathrm{Current} \mathrm{Assets}-\mathrm{Current} \mathrm{Liabilities} \\ \mathrm{Current} \mathrm{Assets}=12,50,000 \left(\mathrm{Given}\right) \\ \mathrm{Current} \mathrm{Liabilities}=? \\ \mathrm{Total} \mathrm{Assets}=\mathrm{Total} \mathrm{Liabilities}=\mathrm{Rs} 20,00,000 \left(\mathrm{Given}\right) \\ \mathrm{Total} \mathrm{Liabilities}=\mathrm{Shareholders}\text{'} \mathrm{Funds} + \mathrm{Non}-\mathrm{Current} \mathrm{Liabilities}+\mathrm{Current} \mathrm{Liabilities} \\ 20,00,000=5,00,000+10,00,000+\mathrm{Current} \mathrm{Liabilities} \\ \mathrm{Current} \mathrm{Liabilities}=\mathrm{Rs} 5,00,000 \\ \mathrm{Working} \mathrm{Capital}=12,50,000-5,00,000=\mathrm{Rs} 7,50,000 \\ \mathrm{Working} \mathrm{Capital} \mathrm{Turnover} \mathrm{Ratio}=\frac{30,00,000}{7,50,000}=4 \mathrm{times} \end{gathered}$$

Answer:

Gross Profit = Revenue from Operations – Cost of Revenue from Operations
                       = 6,00,000 – 5,40,000
                      = Rs 60,000
$\begin{array}{l}\text{Gross Profit Ratio = }\frac{\text{Gross Profit }}{\text{Revenue from Operations}}\times \text{ 100}\\ =\frac{60,000}{6,00,000}\times \text{ 100}\\ \text{ = 10\%}\end{array}$

Answer:

$$\begin{gathered} \mathrm{Net} \mathrm{Sales} = \mathrm{Rs} 5,00,000 \\ \mathrm{Gross} \mathrm{Profit} = \mathrm{Rs} 50,000 \end{gathered}$$

$$\begin{gathered} \mathrm{Gross} \mathrm{Profit} \mathrm{Ratio} = \frac{\mathrm{Gross} \mathrm{Profit} }{\mathrm{Net} \mathrm{Sales}} \times 100 \\ = \frac{50,000}{5,00,000} \times 100 = 10\% \end{gathered}$$
Note: Here we will not deduct the amount of sales return because the amount of net sales has already been provided in the question.

Answer:

Sales = Cost + Gross Profit

Cost = x = Rs 3,20,000

Answer:

Credit Sales = 5,00,000
Cash sales = 20% of Total Sales
 
Let Total Sales be ‘x’
Therefore, Cash Sales = 20% of x
Total Sales = Cash Sales + Credit Sales


Cost of Goods Sold = Purchases – Excess of Closing Stock over Opening Stock
                                = Rs 4,00,000 – Rs 25,000 = Rs 3,75,000
Gross Profit = Total Sales – Cost of Goods Sold
                    = Rs 6,25,000 – 3,75,000 = Rs 2,50,000

Answer:

Credit Sale = Rs 5,00,000
Rate of Credit Sale to Cash Sale = 4:1
$\mathrm{Cash} \mathrm{Sale} = \frac{1}{4} \times 5,00,000 = \mathrm{Rs} 1,25,000$

Total Sales = Cash Sales + Credit Sales = Rs 1,25,000 + Rs 5,00,000 = Rs 6,25,000
Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory
                              = Rs 3,00,000 – Rs 10,000 + Rs 10,000 + Rs 50,000 + Rs 10,000
                              = Rs 3,60,000
Gross Profit = Total Sales – Cost of Goods Sold
                    = Rs 6,25,000 – Rs 3,60,000 = Rs 2,65,000

$\mathrm{Gross} \mathrm{Profit} \mathrm{Ratio} = \frac{\mathrm{Gross} \mathrm{Profit} }{\mathrm{Net} \mathrm{Sales}} \times 100 = \frac{2,65,000}{6,25,000} \times 100 = 42.40\%$

Answer:

Inventory Turnover Ratio = 8 times
Average Inventory = Rs 3,20,000

Cost of Goods sold = 25,60,000
Trade Receivables Turnover Ratio = 6 times
Average Trade Receivables = Rs 4,00,000


Net Credit Sales = 24,00,000
Total Sales = Cash Sales + Credit Sales
Total Sales = 25% of Total Sales + Credit Sales
75% of Total Sales = 24,00,000


Gross Profit = Total Sales – Cost of Goods Sold
                    = 32,00,000 – 25,60,000 = 6,40,000

Answer:

Cost of Goods Sold = 8,00,000

(ii) Average Stock = 1,60,000

Stock Turnover Ratio = 6 Times

Gross Profit = 25% on Cost

(iii) Opening Inventory = 1,00,000

Closing Inventory = 60,000

Gross Profit = 25% on Cost

Answer:

Answer:

Answer:

$\mathrm{Revenue} \mathrm{from} \mathrm{Operations} (\mathrm{Net} \mathrm{Sales})= \mathrm{Rs} 6,00,000*$

Operating Ratio = 92%

$$\begin{gathered} \mathrm{Operating} \mathrm{Ratio}=\frac{\mathrm{Operating} \mathrm{Cost}}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ 92=\frac{\mathrm{Operating} \mathrm{Cost}}{6,00,000}\times 100 \\ \mathrm{Operating} \mathrm{Cost}= \frac{6,00,000\times 92}{100}=5,52,000 \end{gathered}$$

Operating Cost = Cost of Goods Sold + Operating Expenses

5,52,000 = Cost of Goods Sold + 94,000

Cost of Goods Sold = Rs 4,58,000

*Note: Sales Return will not be considered since net sales are given which means sales return have already been adjusted in the sales figure.

Answer:

Cost of Goods Sold = 2,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

Operating Cost = 2,20,000 + 26,000 = 2,46,000

Sales = 3,20,000

Operating Expenses = Office and Selling Expenses = 50,000

Answer:

$$\begin{gathered} \mathrm{Net} \mathrm{Sales} = \mathrm{Gross} \mathrm{Sales} - \mathrm{Sales} \mathrm{Return} \\ = 88,000 - 8,000 = \mathrm{Rs} 80,000 \end{gathered}$$

$$\begin{gathered} \mathrm{Operating} \mathrm{Cost} = \mathrm{Cost} \mathrm{of} \mathrm{Goods} \mathrm{Sold} + \mathrm{Operating} \mathrm{Expenses} \\ = 52,000 + 18,000 = \mathrm{Rs} 70,000 \\ \mathrm{Operating} \mathrm{Ratio} = \frac{\mathrm{Operating} \mathrm{Cost}}{\mathrm{Net} \mathrm{Sales}} \times 100 \\ = \frac{70,000}{80,000} \times 100 = 87.5\% \end{gathered}$$

Answer:

$$\begin{gathered} \mathit{G}\mathit{i}\mathit{v}\mathit{e}\mathit{n}: \\ \mathrm{Revenue} \mathrm{from} \mathrm{Operations} (\mathrm{Net} \mathrm{Sales})=\mathrm{Rs} 12,00,000 \\ \mathrm{Operating} \mathrm{Ratio}=75\% \\ \mathrm{Operating} \mathrm{Expenses}=\mathrm{Rs} 1,00,000 \\ \mathit{F}\mathit{i}\mathit{n}\mathit{d}\mathit{ }\mathit{o}\mathit{u}\mathit{t}: \mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations} \\ \mathrm{Operating} \mathrm{Ratio}=\frac{\mathrm{Operating} \mathrm{Cost}}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ 0.75=\frac{\mathrm{Operating} \mathrm{Cost}}{12,00,000} \\ \mathrm{Operating} \mathrm{Cost}=\mathrm{Rs} 9,00,000 \\ \mathrm{Operating} \mathrm{Cost}=\mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}+\mathrm{Operating} \mathrm{Expenses} \\ 9,00,000=\mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}+1,00,000 \\ \mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}=\mathrm{Rs} 8,00,000 \end{gathered}$$

Answer:

$$\begin{gathered} \mathit{G}\mathit{i}\mathit{v}\mathit{e}\mathit{n}: \\ \mathrm{Operating} \mathrm{Cost}=\mathrm{Rs} 6,80,000 \\ \mathrm{Operating} \mathrm{Expenses}=\mathrm{Rs} 80,000 \\ \mathrm{Gross} \mathrm{Profit} \mathrm{Ratio}=25\% \\ \mathit{F}\mathit{i}\mathit{n}\mathit{d}\mathit{ }\mathit{o}\mathit{u}\mathit{t}: \mathrm{Operating} \mathrm{Ratio} \\ \mathrm{Operating} \mathrm{Cost}=\mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}+\mathrm{Operating} \mathrm{Expenses} \\ 6,80,000=\mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}+80,000 \\ \mathrm{Cost} \mathrm{of} \mathrm{Revenue} \mathrm{from} \mathrm{Operations}=\mathrm{Rs} 6,00,000 \\ \mathrm{Gross} \mathrm{Profit}=\frac{1}{4}\mathrm{th} \mathrm{of} \mathrm{sales}=\frac{1}{3}\mathrm{rd} \mathrm{of} \mathrm{cost} \\ \mathrm{Gross} \mathrm{Profit}=\frac{1}{3}\times 6,00,000=\mathrm{Rs} 2,00,000 \\ \mathrm{Gross} \mathrm{Profit} \mathrm{Ratio}=\frac{\mathrm{Gross} \mathrm{Profit}}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ 25=\frac{2,00,000}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ \mathrm{Net} \mathrm{Sales}=\mathrm{Rs} 8,00,000 \\ \mathrm{Operating} \mathrm{Ratio}=\frac{\mathrm{Operating} \mathrm{Cost}}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ =\frac{6,80,000}{8,00,000}\times 100=85\% \end{gathered}$$

Answer:

Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory
                               = 1,00,000 + 10,00,000 – 1,50,000 = 9,50,000
Operating Expenses = Administrative and Selling Expenses = 1,70,000
Operating Cost = Cost of Goods Sold + Operating Expenses
                         = 9,50,000 + 1,70,000 = 11,20,000
Net Sales = 14,70,000

Operating Profit Ratio = 100 – Operating Ratio = 100 – 76.19 = 23.81%

Answer:

Cost of Goods Sold = 2,00,000
Operating Expenses = Office and Administrative Expenses = 50,000
Operating Cost = Cost of Goods Sold + Operating Expenses
                         = 2,00,000 + 50,000 = 2,50,000
Net Sales = 5,00,000


Operating Profit Ratio = 100 – Operating Ratio = 100 – 50 = 50%

Answer:

Operating Ratio = 82.59%

Operating Ratio + Operating Profit Ratio = 100%

Operating Profit Ratio = 100% − 82.59% = 17.41%

Answer:

Case 1

Case II

Case III

Net Sales = 3,60,000

Gross Profit = 20% on Sales

Case IV

Net Sales = 4,50,000

Case V

Sales = Cost Goods Sold + Gross Profit

∴Sales = 10,00,000

Answer:

$\begin{array}{l}\text{Gross Profit = 9,00,000}\times \frac{25}{125}=\text{\hspace{0.17em}Rs 1,80,000}\\ \text{Operating Profit}=\text{Gross Profit-Operating Expenses}\\ =1,80\text{,000}-\text{45,000}=\text{Rs 1,35,000 }\\ \mathrm{Operating} \mathrm{}\mathrm{Profit} \mathrm{}\mathrm{Ratio}=\frac{\mathrm{Operating}\mathrm{} \mathrm{Profit}}{\mathrm{Revenue} \mathrm{}\mathrm{from}\mathrm{} \mathrm{Operations}}\times 100\\ \text{ =}\frac{1,35,000}{9,00,000}\times 100=15\%\end{array}$

Answer:

$\begin{array}{l}\text{Cost of Revenue from Operations}=\text{Operating Cost}-\text{Operating Expenses}\\ =\text{3,40,000-20,000}=\text{Rs 3,20,000}\\ \text{Gross Profit = }\frac{3,20,000\times 20}{80}=\text{Rs 80,000}\\ \text{Revenue from Operations}=\text{Cost of Revenue from Operations + Gross Profit}\\ \text{ =3,20,000+80,000}=\text{Rs 4,00,000}\\ \text{Operating Profit}=\text{Revenue from Operations - Operating Cost}\\ =4,00,000-3,40,000=\text{Rs 60,000}\\ \mathrm{Operating}\mathrm{} \mathrm{Profit}\mathrm{} \mathrm{Ratio}=\frac{\mathrm{Operating}\mathrm{} \mathrm{Profit}}{\mathrm{Revenue} \mathrm{}\mathrm{from} \mathrm{}\mathrm{Operations}}\times 100\\ \text{ =}\frac{60,000}{4,00,000}\times 100=15\%\end{array}$

Answer:

Answer:

Net Sales = 6,00,000

Net profit = 60,000

Answer:

$\mathrm{Net} \mathrm{Sales}= \mathrm{Rs} 8,20,000$

$$\begin{gathered} \mathrm{Gross} \mathrm{Profit} = \mathrm{Net} \mathrm{Sales} - \mathrm{Cost} \mathrm{of} \mathrm{Goods} \mathrm{Sold} \\ = 8,20,000 - 5,20,000 \\ = \mathrm{Rs} 3,00,000 \end{gathered}$$

$$\begin{gathered} \mathrm{Net} \mathrm{Profit} = \mathrm{Gross} \mathrm{Profit} - \mathrm{Operating} \mathrm{Expenses} - \mathrm{Interest} \mathrm{on} \mathrm{Debentures} + \mathrm{Profit} \mathrm{on} \mathrm{Sale} \mathrm{of} \mathrm{Fixed} \mathrm{Asset} \\ = 3,00,000 - 2,09,000 - 40,500 + 81,000 \\ =\mathrm{Rs} 1,31,500 \end{gathered}$$

$$\begin{gathered} \mathrm{Net} \mathrm{Profit} \mathrm{Ratio}=\frac{\mathrm{Net} \mathrm{Profit}}{\mathrm{Net} \mathrm{Sales}}\times 100 \\ =\frac{1,31,500}{8,20,000}\times 100=16.04\% \end{gathered}$$

Answer:

$\begin{array}{l}\text{Net Profit}=\text{Operating Profit + Non Operating Incomes}-\text{Non Operating Expenses}\\ =40\text{,000+22,000- 2,000}=\text{Rs 60,000}\\ \text{Operating Profit Ratio}=100-\text{Operating Ratio =100-90 =10\%}\\ \text{Operating Profit}=4,00,000\times 10\%=\text{Rs 40,000}\\ \mathrm{Net}\mathrm{} \mathrm{Profit} \mathrm{}\mathrm{Ratio}=\frac{\mathrm{Net}\mathrm{} \mathrm{Profit}}{\mathrm{Revenue}\mathrm{} \mathrm{from} \mathrm{}\mathrm{operations}}\times 100\\ \text{ =}\frac{60,000}{4,00,000}\times 100=15\%\\ \end{array}$

Answer:

Net Fixed Assets = Fixed Assets (at cost) − Accumulated Depreciation

= 22,50,000 − 2,50,000 = 20,00,000

Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities

= 20,00,000 + 12,00,000 − 4,00,000

= 28,00,000

Interest on 10% Debentures = 10% of 10,00,000 = 1,00,000

Let Profit before Tax be = x

Profit after Tax = Profit Before Tax − Tax

Tax Rate = 50%

∴ Tax = 0.5 x

x − 0.5 x = 6,50,000

x = 13,00,000

Net Profit before Tax = x = 13,00,000

Profit before Interest and Tax = Profit before Tax + Interest on Long-term Debt

= 13,00,000 + 1,00,000

= 14,00,000

Answer:

Net Profit before Interest and Tax = 2,50,000

Capital Employed = 10,00,000

Answer:

Net Profit before Interest and Tax = 6,00,000

Capital Employed = Net Fixed Assets + Net Working Capital

= 20,00,000 + 10,00,000 = 30,00,000

Answer:

Net Profit before Interest and Tax = 4,00,000

Capital Employed = 15% long-term Debt + Shareholders’ Funds

= 8,00,000 + 4,00,000 = 12,00,000

Answer:

Net Profit after Tax (as per Statement of Profit and Loss) = 45,000

Provision for Taxation = 10,000

Net Profit before Interest and Tax = 45,000 + 10,000 = 55,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term Borrowings

= 2,00,000 + 1,00,000 + 1,00,000 = 4,00,000

Answer:

Answer:

(i)

Opening Inventory = 80,000

Closing Inventory = 1,60,000

Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses − Closing Inventory

= 80,000 + 4,30,900 + 4,000 − 1,60,000

= 3,54,900

(ii)

Sales = 10,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 10,00,000 − 3,54,900 = 6,45,100

(iii)

Operating Expenses = Administration Expenses + Selling and Distribution Expenses

= 21,100 + 40,000 = 61,100

Answer:

(i)

Sales = 1,50,000

Gross Profit = 30,000

(ii)

Opening Inventory = 29,000

Closing Inventory = 31,000

Cost of Goods Sold = 1,20,000

(iii)

Answer:

(i)

Current Assets = Quick Assets + Closing Stock + Prepaid Expenses

= 6,00,000 + 50,000 + 10,000 = 6,60,000

Current Liabilities = 4,00,000

(ii)

Long-term Debts = 9% Debentures = 5,00,000

Shareholder’s Funds = Equity Share Capital + General Reserve

= 7,00,000 + 3,00,000 = 10,00,000

(iii)

Sales = 1,00,000

Cost of Goods Sold = 80% of Sales = 80,000

Operating Expenses = 10,000

Answer:

(i)

Opening Inventory = 28,000

Closing Inventory = 22,000

$$\begin{gathered} \mathrm{Average} \mathrm{Inventory} = \frac{\mathrm{Opening} \mathrm{Inventory} + \mathrm{Closing} \mathrm{Inventory}}{2} \\ = \frac{28,000 + 22,000}{2} = \mathrm{Rs} 25,000 \end{gathered}$$

Cost of Goods Sold = Opening Inventory + Purchases + Carriage Inwards − Closing Inventory

= 28,000 + 46,000 + 4,000 − 22,000 = 56,000

$\mathrm{Inventory} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Cost} \mathrm{of} \mathrm{Goods} \mathrm{Sold}}{\mathrm{Average} \mathrm{Inventory}} = \frac{56,000}{25,000} = 2.24 \mathrm{Times}$

(ii)

Operating Expenses = Office Expenses + Selling and Distribution Expenses

= 4,000 + 2,000 = 6,000

Net Sales = Rs 80,000*

(iii)

Working Capital = 40,000
$\mathrm{Working} \mathrm{Capital} \mathrm{Turnover} \mathrm{Ratio} = \frac{\mathrm{Net} \mathrm{Sales}}{\mathrm{Working} \mathrm{Capital}} = \frac{80,000}{40,000} = 2 \mathrm{Times}$

*Note: Sales return will not be considered as amount of net sales is provided in the question.

Answer:

$\begin{array}{l}\text{A) Current Ratio = }\frac{\text{Current Assets }}{\text{Current Liabilities}}\\ \end{array}$
Current Assets = Total Assets – Non Current Assets
                           = 1,00,000 – 50,000
                           = Rs 50,000
Total Assets = Total Liabilities = Shareholders’ Funds + Non Current Liabilities + Current Liabilities
     1,00,000 = 60,000 + 20,000 + Current Liabilities
Current Liabilities = Rs 20,000
$\begin{array}{l}\text{Current Ratio = }\frac{\text{50,000}}{\text{20,000}}\text{ = 2}\text{.5 }:\text{ 1}\\ \end{array}$

$\begin{array}{l}\text{B) Working Capital Turnover Ratio = }\frac{\text{Revenue from Operations }}{\text{Working Capital}}\\ \end{array}$
Working Capital = Current Assets – Current Liabilities
                              = 50,000 – 20,000
                              = Rs 30,000
$\begin{array}{l}\text{Working Capital Turnover Ratio = }\frac{\text{1},\text{50,000}}{\text{30,000}}\text{ = 5 times}\\ \end{array}$

Answer:

$\begin{array}{l}\mathrm{Gross} \mathrm{Profit} \mathrm{Ratio}=\frac{\mathrm{Gross} \mathrm{Profit}}{\mathrm{Revenue} \mathrm{from} \mathrm{Operations}}\times 100\\ \mathrm{Gross} \mathrm{Profit} \mathrm{Ratio}=\frac{50,000}{1,00,000}\times 100=50\%\\ \mathrm{Current} \mathrm{Ratio}=\frac{\mathrm{Current} \mathrm{Assets}}{\mathrm{Current} \mathrm{Liabilities}}\\ \mathrm{Current} \mathrm{Ratio}=\frac{\mathrm{Inventory}+\mathrm{Cash} \mathrm{and} \mathrm{Cash} \mathrm{Equivalents}+\mathrm{Trade} \mathrm{Receivables}}{\mathrm{Current} \mathrm{Liabilities}}\\ \mathrm{Current} \mathrm{Ratio}=\frac{15,000+17,500+27,500}{40,000}=1.5:1\\ \mathrm{Liquid} \mathrm{Ratio}=\frac{\mathrm{Liquid} \mathrm{Assets}}{\mathrm{Current} \mathrm{Liabilities}}\\ \mathrm{Liquid} \mathrm{Ratio}=\frac{\mathrm{Cash} \mathrm{and} \mathrm{Cash} \mathrm{Equivalents}+\mathrm{Trade} \mathrm{Receivables}}{\mathrm{Current} \mathrm{Liabilities}}\\ \mathrm{Liquid} \mathrm{Ratio}=\frac{17,500+27,500}{40,000}=1.125:1\\ \mathrm{Inventory} \mathrm{Turnover} \mathrm{Ratio}=\frac{\mathrm{Cost} \mathrm{of} \mathrm{Goods} \mathrm{Sold}}{\mathrm{Average} \mathrm{Stock}}\\ \mathrm{Inventory} \mathrm{Turnover} \mathrm{Ratio}=\frac{\mathrm{Revenue} \mathrm{from} \mathrm{Operations}-\mathrm{Gross} \mathrm{Profit}}{\mathrm{Average} \mathrm{Stock}}\\ \mathrm{Inventory} \mathrm{Turnover} \mathrm{Ratio}=\frac{1,00,000-50,000}{15,000}=3.33\mathrm{times}\end{array}$

Answer:

(i)

Current Assets = 70,000

Current Liabilities = 35,000

(ii)

Liquid Assets = Current Assets − Inventory

= 70,000 − 30,000 = 40,000

(iii)

Net Sales = 1,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 60,000 + 40,000 = 1,00,000

(iv)

Gross Profit = Net Sales − Cost of Goods Sold

= 1,20,000 − 60,000 = 60,000

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

(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

(iii)

Long-term Debts = 13% Debentures = 1,00,000

Equity = Paid-up Share Capital = 2,50,000

(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

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

(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

Answer:

$\begin{array}{l}\mathrm{Debt} \mathrm{to} \mathrm{Equity} \mathrm{Ratio}=\frac{\mathrm{Long} \mathrm{term} \mathrm{Debts}}{\mathrm{Shareholders}\text{'} \mathrm{Funds}}\\ \mathrm{Debt} \mathrm{to} \mathrm{Equity} \mathrm{Ratio}=\frac{\mathrm{Debentures}}{\mathrm{Equity} \mathrm{Share} \mathrm{Capital}+\mathrm{Preference} \mathrm{Share} \mathrm{Capital}+\mathrm{General} \mathrm{Reserve}+\mathrm{Balance} \mathrm{in} \mathrm{Statement} \mathrm{of} \mathrm{Profit} \& \mathrm{Losss}}\\ \mathrm{Debt} \mathrm{to} \mathrm{EquityRatio}=\frac{75,000}{75,000+25,000+45,000+30,000}=0.43:1\\ \mathrm{Total} \mathrm{Assets} \mathrm{to} \mathrm{Debt} \mathrm{Ratio}=\frac{\mathrm{Total} \mathrm{Assets}}{\mathrm{Long} \mathrm{term} \mathrm{Debts}}\\ \mathrm{Total} \mathrm{Assets} \mathrm{to} \mathrm{Debt} \mathrm{Ratio}=\frac{\mathrm{Equity} \mathrm{Share} \mathrm{Capital}+\mathrm{Preference} \mathrm{Share} \mathrm{Capital}+\mathrm{General} \mathrm{Reserve}+\mathrm{Balance} \mathrm{in} \mathrm{Statement} \mathrm{of} \mathrm{Profit} \& \mathrm{Loss}+\mathrm{Debentures}+\mathrm{Trade} \mathrm{Payables}+\mathrm{Outstanding} \mathrm{Expenses}}{\mathrm{Debentures}}\\ \mathrm{Total} \mathrm{Assets} \mathrm{to} \mathrm{Debt} \mathrm{Ratio}=\frac{75,000+25,000+45,000+30,000+75,000+40,000+10,000}{75,000}=4:1\\ \mathrm{Proprietary} \mathrm{Ratio}=\frac{\mathrm{Shareholders}\text{'} \mathrm{Funds}}{\mathrm{Total} \mathrm{Assets}}\\ \mathrm{Proprietary} \mathrm{Ratio}=\frac{\mathrm{Equity} \mathrm{Share} \mathrm{Capital}+\mathrm{Preference} \mathrm{Share} \mathrm{Capital}+\mathrm{General} \mathrm{Reserve}+\mathrm{Balance} \mathrm{in} \mathrm{Statement} \mathrm{of} \mathrm{Profit} \& \mathrm{Loss}}{\mathrm{Equity} \mathrm{Share} \mathrm{Capital}+\mathrm{Preference} \mathrm{Share} \mathrm{Capital}+\mathrm{General} \mathrm{Reserve}+\mathrm{Balance} \mathrm{in} \mathrm{Statement} \mathrm{of} \mathrm{Profit} \& \mathrm{Loss}+\mathrm{Debentures}+\mathrm{Trade} \mathrm{Payables}+\mathrm{Outstanding} \mathrm{Expenses}}\\ \mathrm{Proprietary} \mathrm{Ratio}=\frac{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 \mathrm{or} 58\mathrm{.33\%}\end{array}$

Answer:

1) Return on Investment





2) Total Assets to Debt to Ratio

$$\begin{gathered} \mathrm{Total} \mathrm{Assets} \mathrm{to} \mathrm{Debt} \mathrm{Ratio} = \frac{\mathrm{Total} \mathrm{Assets}}{\mathrm{Debt}} \\ \mathrm{Total} \mathrm{Assets} = \mathrm{Fixed} \mathrm{Assets} + \mathrm{Current} \mathrm{Assets} \\ =\mathrm{Rs} (75,00,000 + 40,00,000) \\ =\mathrm{Rs} 1,15,00,000 \\ \mathrm{Debt} = \mathrm{Rs} 80,00,000 \\ \mathrm{Total} \mathrm{Assets} \mathrm{to} \mathrm{Debt} \mathrm{Ratio} = \frac{1,15,00,000}{80,00,000} = 1.44:1 \end{gathered}$$

Answer:

(i)

Current Assets = Inventory + Prepaid Expenses + Other Current Assets

= 30,000 + 2,000 + 50,000 = 82,000

Current Liabilities = 40,000

(ii)

Liquid Assets = Current Assets − Inventory − Prepaid Expenses

= 82,000 − 30,000 − 2,000 = 50,000

(iii)

Long-term Debts = 12% Debentures = 30,000

Equity = Accumulated Profits + Equity Share Capital

= 10,000 + 1,00,000 = 1,10,000

Answer:

Net Profit before tax = 6,00,000
Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings
= 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
                            = 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000

Answer:

Current Assets = Trade Receivables + Pre-paid Expenses + Cash and Cash Equivalents +
Marketable Securities + Inventories
= Rs 1,80,000 + Rs 40,000 + Rs 50,000 + 50,000 + 80,000 = Rs 4,00,000

Current Liabilities = Bills Payable + Sundry Creditors + Expenses Payable
                             = Rs 20,000 + Rs 1,00,000 + Rs 80,000 = Rs 2,00,000

Answer:

Total Assets = Fixed Tangible Assets + Non - Current Investments + Current Assets
5,00,000 = 2,50,000 + 1,50,000 + Current Assets
Current Assets = 5,00,000 – 4,00,000 = Rs 1,00,000
 
Total Assets = Shareholder’s Funds + Non – Current Liabilities + Current Liabilities
5,00,000 = 3,20,000 + 1,30,000 + Current Liabilities
Current Liabilities = 5,00,000 – 4,50,000 = Rs 50,000

Answer:

$\begin{array}{l}Current Ratio=\frac{Current Assets}{Current Liabilities}\\ 2.5=\frac{\text{Current Assets}}{\text{Current Liabilities}}\\ \text{Current Assets}=2.5\text{ Current Liabilities}\\ Working Capital=Current Assets-Current Liabilities\\ \text{1,50,000}=2.5\text{ Current Liabilities}-\text{Current Liabilities}\\ \text{Current Liabilities}=\frac{1,50,000}{1.5}\\ \text{Current Liabilities}=\text{Rs 1,00,000}\\ \text{Current Assets}=2.5\text{ Current Liabilities}\\ \text{Current Assets}=2.5\times 1,00,000=\text{Rs 2,50,000}\end{array}$

Answer:

Working Capital = Rs 9,00,000
Current Liabilities = Trade Payables + Other Current Liabilities
                              = Rs 90,000 + Rs 2,10,000 = Rs 3,00,000
Working Capital = Current Assets – Current Liabilities
       Rs 9,00,000 = Current Assets – Rs 3,00,000
Current Assets = Rs 9,00,000 + Rs 3,00,000 = Rs 12,00,000

Answer:

Total Debts = 3,90,000

Long-term Debts = 3,00,000

Current Liabilities = Total Debts − Long-term Debts

= 3,90,000 − 3,00,000 = 90,000

Working Capital = Current Assets − Current Liabilities

1,80,000 = Current Assets − 90,000

Current Assets = 2,70,000

Answer:

Current Assets = Rs 7,50,000
Working Capital = Rs 2,50,000
Working Capital = Current Assets – Current Liabilities
       2,50,000 = 7,50,000 – Current Liabilities
Current Liabilities = 7,50,000 – 2,50,000 = Rs 5,00,000

Answer:

$\begin{array}{l}\mathrm{Working} \mathrm{}\mathrm{Capital}=\mathrm{Current}\mathrm{} \mathrm{Assets}-\mathrm{Current} \mathrm{}\mathrm{Liabilities}\\ \text{9,00,000}=\text{Current Assets}-\text{3,00,000}\\ \text{Current Assets}=9,00,000+3,00,000=\text{Rs 12,00,000}\\ \mathrm{Current} \mathrm{}\mathrm{Ratio}=\frac{\mathrm{Current}\mathrm{}\mathrm{Assets}}{\mathrm{Current}\mathrm{}\mathrm{Liabilities}}\\ \text{ =}\frac{12,00,000}{3,00,000}=4:1\end{array}$

Answer:

Current Assets = Rs 4,50,000
Current Liabilities = Rs 2,00,000
Purchase of Goods on Credit for Rs 30,000 will have two effects:

1. Increase Stock by Rs 30,000, Current Assets will thereby increase to Rs 4,80,000 (Rs 4,50,000 + Rs 30,000)
2. Increase Creditors by Rs 30,000 and therefore Current Liabilities will now be Rs 2,30,000 (Rs 2,00,000 + Rs 30,000)

Answer:

Current Liabilities = Rs 1,75,000  
Payment of Rs 30,000 to a Creditor will have two effects:

1. Decrease in Cash by Rs 30,000 and therefore Current Assets will decrease to Rs 3,20,000.
2. Decrease in Creditors by Rs 30,000 and this will decrease Current Liabilities to Rs 1,45,000.

Answer:

The company is interested in maintaining the Current Ratio of 2:1 by paying off the liability.

Let the liability paid-off by the company = x

∴ New Current Assets = 3,00,000 − x

New Current Liabilities = 2,00,000 − x

Therefore, liability of Rs 1,00,000 need to be paid-off by the company in order to maintain the Current Ratio of 2 : 1.

Answer:

Current Assets = Rs 8,75,000
Current Liabilities = Rs 3,50,000
Current Ratio = 2.5:1
The business is interested to maintain its Current Ratio at 2:1 by purchasing goods on credit.
Let the amount of goods purchased on credit be ‘x’
Current Liabilities = Rs 3,50,000 + x
Current Assets = Rs 8,75,000 + x


8,75,000 + x = 7,00,000 + 2x
8,75,000 – 7,00,000 = 2x – x
1,75,000 = x

Therefore, goods worth Rs 1,75,000 must be purchased on credit to maintain the current ratio at 2:1.

Answer:

Firm disposed off liabilities of Rs 1,00,000 which results in decrease in current liabilities and current assets by the same amount.
After disposing liabilities:
Current Assets = Rs 4,00,000 (Rs 5,00,000 – Rs 1,00,000)
And, Let Current Liabilities be (x – Rs 1,00,000)


4,00,000 = 2x – 2,00,000
6,00,000 =  2x
Therefore, x = 3,00,000

Current Liabilities after payment = x – Rs 1,00,000 = Rs 2,00,000

Working Capital after Payment = Current Assets – Current Liabilities
= Rs 4,00,000 – Rs 2,00,000 = Rs 2,00,000

Current Assets before payment = Rs 5,00,000
Current Liabilities before Payment = Rs 3,00,000
Therefore, Working Capital Before Payment = Current Assets – Current Liabilities
= Rs 5,00,000 – Rs 3,00,000 = Rs 2,00,000

Answer:

Let’s assume Current Assets as Rs 2,00,000 and Current Liabilities as Rs 1,00,000
$\begin{array}{l}\mathrm{Current}\mathrm{} \mathrm{Ratio}=\frac{\mathrm{Current}\mathrm{} \mathrm{Assets}}{\mathrm{Current} \mathrm{}\mathrm{Liabilities}}\\ \text{Current Ratio=}\frac{2,00,000}{1,00,000}=2:1\end{array}$

 (a) Cash paid to Trade Payables (say Rs 50,000)

     $\text{Current Ratio =}\frac{2,00,000-50,000}{1,00,000-50,000}=3:1\text{ (Improve)}$

(b) Bills Payable discharged (say Rs 50,000)

    $\text{Current Ratio = }\frac{2,00,000-50,000}{1,00,000-50,000}=3:1\text{ (Improve)}$

(c) Bills Receivable endorsed to a creditor (say Rs 50,000)

    $\text{Current Ratio =}\frac{2,00,000-50,000}{1,00,000-50,000}=3:1\text{\hspace{0.17em}(Improve) }$

(d) Payment of final Dividend already declared (say Rs 50,000)

    $\text{Current Ratio =}\frac{2,00,000-50,000}{1,00,000-50,000}=3:1\text{ (Improve)}$

(e) Purchase of Stock-in-Trade on credit (say Rs 50,000)

     $\text{Current Ratio =}\frac{2,00,000+50,000}{1,00,000+50,000}=1.67:1\left(\mathrm{Decline}\right)$

(f) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
    $\text{Current Ratio =}\frac{2,00,000+50,000}{1,00,000+50,000}=1.67:1\text{ (Decline)}$

(g) Purchase of Stock-in-Trade for cash (say Rs 50,000)

     $\text{Current Ratio\hspace{0.17em}=}\frac{2,00,000+50,000-50,000}{1,00,000}=2:1\text{ (No effect)}$

(h) Sale of Fixed Assets (Book value of Rs 50,000) for Rs 45,000

    $\text{Current Ratio=}\frac{2,00,000+45,000}{1,00,000}=2.45:1\text{ (Improve)}$

(i) Sale of Fixed Assets (Book value of Rs 50,000) for Rs 60,000

    $\text{Current Ratio\hspace{0.17em}=}\frac{2,00,000+60,000}{1,00,000}=2.6:1\text{ (Improve)}$ 

Answer:

(i)  Let’s assume Current Assets as Rs 1,00,000 and Current Liabilities as Rs 1,00,000

$\begin{array}{l}\mathrm{Current} \mathrm{}\mathrm{Ratio}=\frac{\mathrm{Current} \mathrm{}\mathrm{Assets}}{\mathrm{Current}\mathrm{} \mathrm{Liabilities}}\\ \text{Current Ratio\hspace{0.17em}=}\frac{1,00,000}{1,00,000}=1:1\end{array}$

(a) Cash paid to Trade Payables (say Rs 50,000)
 
   $\text{Current Ratio\hspace{0.17em}=}\frac{1,00,000-50,000}{1,00,000-50,000}=1:1\text{ (No change)}$

(b) Purchase of Stock-in-Trade on credit (say Rs 50,000)
   
    $\text{Current Ratio=}\frac{1,00,000+50,000}{1,00,000+50,000}=1:1(\text{No change)}$

(c) Purchase of Stock-in-Trade for cash (say Rs 50,000)

    $\text{Current Ratio\hspace{0.17em}=}\frac{1,00,000+50,000-50,000}{1,00,000}=1:1\text{ (No change)}$

(d) Payment of Dividend (say Rs 50,000)
  
    $\text{Current Ratio\hspace{0.17em}=}\frac{1,00,000-50,000}{1,00,000-50,000}=1:1\text{ (No change)}$

(e) Bills Payable discharged (say Rs 50,000)

    $\text{Current Ratio\hspace{0.17em}=}\frac{1,00,000-50,000}{1,00,000-50,000}=1:1\text{ (No change)}$

(f) Bills Receivable endorsed to a Creditor (say Rs 50,000)
 
    $\text{Current Ratio=}\frac{1,00,000-50,000}{1,00,000-50,000}=1:1\text{ (No change)}$

(g) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
     $\text{Current Ratio\hspace{0.17em}=}\frac{1,00,000+50,000}{1,00,000+50,000}=1:1\text{ (No change)}$

(ii) Let’s assume Current Assets as Rs 80,000 and Current Liabilities as Rs 1,00,000

$\begin{array}{l}\mathrm{Current} \mathrm{}\mathrm{Ratio}=\frac{\mathrm{Current} \mathrm{}\mathrm{Assets}}{\mathrm{Current}\mathrm{} \mathrm{Liabilities}}\\ \text{Current Ratio\hspace{0.17em}=}\frac{80,000}{1,00,000}=0.8:1\end{array}$

(a) Cash paid to Trade Payables (say Rs 50,000)
 
   $\text{Current Ratio\hspace{0.17em}=}\frac{80,000-50,000}{1,00,000-50,000}=0.6:1\text{ (Reduce)}$

(b) Purchase of Stock-in-Trade on credit (say Rs 50,000)
   
    $\text{Current Ratio=}\frac{80,000+50,000}{1,00,000+50,000}=0.87:1(\mathrm{Improve}\text{)}$

(c) Purchase of Stock-in-Trade for cash (say Rs 50,000)

    $\text{Current Ratio\hspace{0.17em}=}\frac{80,000+50,000-50,000}{1,00,000}=0.8:1\text{ (No change)}$

(d) Payment of Dividend (say Rs 50,000)
  
    $\text{Current Ratio\hspace{0.17em}=}\frac{80,000-50,000}{1,00,000-50,000}=0.6:1\text{ (Reduce)}$

(e) Bills Payable discharged (say Rs 50,000)

    $\text{Current Ratio\hspace{0.17em}=}\frac{80,000-50,000}{1,00,000-50,000}=0.6:1\text{ (Reduce)}$

(f) Bills Receivable endorsed to a Creditor (say Rs 50,000)
 
    $\text{Current Ratio=}\frac{80,000-50,000}{1,00,000-50,000}=0.6:1\text{ (Reduce)}$

(g) Bills Receivable endorsed to a Creditor dishonoured (say Rs 50,000)
  
     $\text{Current Ratio\hspace{0.17em}=}\frac{80,000+50,000}{1,00,000+50,000}=0.87:1\text{ (Improve)}$

Answer:

Quick Assets or Liquid Assets = Currents Assets – Inventories – Pre-paid Expenses
= Rs 2,00,000 – Rs 50,000 – Rs 10,000 = Rs 1,40,000
Current Liabilities = Rs 70,000

Answer:

Quick Assets = 1,50,000

Inventory = 40,000

Prepaid Expenses = 10,000

Current Assets = Quick Assets + Inventory + Prepaid Expenses

= 1,50,000 + 40,000 + 10,000 = 2,00,000

Working Capital = Current Assets − Current Liabilities

1,20,000 = 2,00,000 − Current Liabilities

Current Liabilities = 80,000

Answer:

Current Liabilities = Current Assets − Working Capital

= 3,00,000 − 2,52,000 = 48,000

Quick Assets = Current Assets − Stock

= 3,00,000 − 60,000 = 2,40,000

Answer:

Current Liabilities = Total Debts − Long-term Debts

= 7,80,000 − 6,00,000 = 1,80,000

Current Assets = Current Liabilities + Working Capital

= 1,80,000 + 3,60,000 = 5,40,000

Quick Assets = Current Assets − Stock

= 5,40,000 − 1,80,000 = 3,60,000

Answer:

Current Liabilities = 6,00,000

Current Assets = 3 × Current Liabilities

= 3 × 6,00,000 = 18,00,000

Liquid Assets = 1 × 6,00,000 = 6,00,000

Inventory = Current Assets − Liquid Assets

= 18,00,000 − 6,00,000 = 12,00,000

Answer:

Let Current Liabilities be = x

Current Assets = 3.5 x

Quick Assets = 2 x

Stock = Current Assets − Quick Assets

24,000 = 3.5 x − 2 x

or, 24,000 = 1.5 x

x = 16,000

Current Liabilities = x = Rs 16,000

Current Assets = 3.5 x = 3.5 × 16,000 = Rs 56,000

Answer:

Inventory = 36,000

Let Current Liabilities be = x

Current Assets = 4.5x

Quick Assets = 3x

Stock = Current Assets − Quick Assets

36,000 = 4.5x − 3x

x = 24,000

Current Assets = 4.5x = 4.5 × 24,000 = 1,08,000

Liquid Assets= 3x = 3 × 24,000 = 72,000

Answer:

Inventory = 6,00,000

Let Current Liabilities be = x

Current Assets = 4x

Quick Assets = 2.5x

Stock = Current Assets − Quick Assets

6,00,000 = 4x − 2.5x

x = 4,00,000

Current Assets = 4x = 4 × 4,00,000 = 16,00,000

Liquid Assets = 2.5x = 2. 5× 4,00,000 = 10,00,000

Answer:

Current Liabilities = 1,50,000

Current Assets = 3 × Current Liabilities

= 3 × 1,50,000 = 4,50,000

Liquid Assets = 1 × 1,50,000 = 1,50,000

Inventory = Current Assets − Liquid Assets

= 4,50,000 − 1,50,000 = 3,00,000

Answer:

Let the Current Liabilities be = x

Current Assets = 4x

Quick Assets = 2.5x

Stock = Current Assets − Quick Assets

6,00,000 = 4x − 2.5x

or, x = 4,00,000

Current Liabilities = x = Rs 4,00,000

Answer:

Current Assets = 5,00,000

Liquid Assets = Current Liabilities × 1 = 2,00,000

Inventory = Current Assets − Quick Assets

= 5,00,000 − 2,00,000 = 3,00,000

Answer:

Quick Ratio = 2:1

Let Quick Assets be = Rs 20,000

Current Liabilities = Rs 10,000

(a) Purchase of goods for Cash- Reduce

Reason: This transaction will result decrease in cash and increases in stock. Liquid Asset will decrease due payment for goods purchased.

Example: Purchase of goods Rs 5,000 for cash

Quick Assets = 20,000 − 5,000 (Cash) = Rs 15,000

(b) Purchase of goods on Credit- Reduce

Reason: Purchase of goods on credit will result increase in Current Liabilities and no change in Quick Assets.

Example: Purchase of goods on Credit Rs 5,000

Current Liabilities = 10,000 + 5,000 (Creditors) = Rs15,000

(c) Sale of goods for Rs 10,000- Improve

Reason: Sale of goods will result in increase in Quick Assets by the amount of Rs 10,000 in the form of either in cash or debtor. This transaction will result no change in current liabilities.

(d) Sale of goods costing Rs 10,000 of or Rs 11,000- Improve

Reason: This transaction will increase the Quick Assets by Rs 11,000 in the form of either in cash or debtors but no effect on the Current Liabilities.

Quick Assets after sale of goods = 20,000 + 11,000 = Rs 31,000

$Quick Ratio after sale of goods= \frac{(20,000+11,000)}{10,000}=3.1:1$

(e) Cash received from debtors- No change

Reason: This transaction results increase in one quick asset in the form of cash and decrease in other quick asset in the form of debtor with equal amount. Therefore it result in no change in the total of Quick Assets.

Example: Cash received from debtors Rs 5,000

Quick Assets = 20,000 + 5,000 (Cash) − 5,000 (Debtors) = 20,000

Answer:

Answer:

Quick Assets = 12,00,000

Current Assets = Quick Assets + Stock

= 12,00,000 + 3,00,000 = 15,00,000

Answer:

Current Assets = Total Assets − Fixed Assets

Fixed Assets = 10,00,000

Total Assets = 22,00,000

∴ Current Assets = 22,00,000 − 10,00,000 = 12,00,000

Current Liabilities = Total Assets − Capital Employed

= 22,00,000 − 20,00,000 = 2,00,000

Answer:

Capital Employed = 10,00,000

Fixed Assets = 7,00,000

Current Assets = Capital Employed + Current Liabilities − Fixed Assets

= 10,00,000 + 1,00,000 − 7,00,000 = 4,00,000

Answer:

(i) Current Ratio
Current Assets = Inventories + Cash and Cash Equivalents + Debtors + Bills Receivable + Marketable Securities
= Rs 5,00,000 + Rs 50,000 + Rs 3,10,000 + Rs 30,000 + Rs 1,50,000 = Rs 10,40,000
Current Liabilities = Short-Term Borrowings + Creditors + Bills Payable
= Rs 1,00,000 + 3,00,000 + Rs 1,20,000 = Rs 5,20,000



(ii) Liquid Ratio
Quick Assets = Currents Assets – Inventories
= Rs 10,40,000 – Rs 5,00,000 = Rs 5,40,000
Or
Quick Assets = Cash and Cash Equivalents + Debtors + Bills Receivable + Marketable Securities
                      = Rs 50,000 + Rs 3,10,000 + Rs 30,000 + Rs 1,50,000 = Rs 5,40,000
Current Liabilities = As calculated in (i) = Rs 5,20,000

Answer:

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

= 18,600 + 9,600 + 19,800

= 48,000

Current Liabilities = Short-term Borrowings + Trade Payables

= 6,000 + 18,000

= 24,000

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

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.