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Accounting Ratios
(a)From the following information, compute Debt-Equity Ratio:
| Long Term Borrowings | 2,00,000 |
| Long Term Provisions | 1,00,000 |
| Current Liabilities | 50,000 |
| Non-Current-Assets | 3,60,000 |
| Current - Assets | 90,000 |
(b) The current ratio of X. Ltd is 2:1. State with reason which of the following transaction could (i) increase; (ii) decrease or (iii) not change the ratio.
(1) Included in the trade payables was a bills payable of Rs 9,000 which was met on maturity.
(2) Company issued 1,00,000 equity shares of Rs 10 each to the Vendors of machinery purchased.
(a) Debt- Equity Ratio = Long term Debt/ Share holder’s fund or Debt/ Equity.
Debt = 200000 + 100000 (borrowings+ provisions) = Rs 3,00,000
Equity = Current Assets + Non Current Assets –debts - Current Liabilities= 90,000+3,60,000-3,00,000—50,000 = Rs 1,00,000
(b)
(1) A bill payable of Rs 9,000 was met on maturity:
a) Trade Payables will reduce by Rs 9,000 (liability reduced)
b) Cash will reduce by Rs 9,000 (asset reduced)
This simultaneous decrease in both current assets and current liabilities leads to increase in ratio.
(2) Issue of shares of Rs 10,00,000 to vendor of Machinery will affect the following:
Neither Current Assets nor Current Liabilities are changing hence no change in the ratio.
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(a)From the following information, compute Debt-Equity Ratio:
| Long Term Borrowings | 2,00,000 |
| Long Term Provisions | 1,00,000 |
| Current Liabilities | 50,000 |
| Non-Current-Assets | 3,60,000 |
| Current - Assets | 90,000 |
(b) The current ratio of X. Ltd is 2:1. State with reason which of the following transaction could (i) increase; (ii) decrease or (iii) not change the ratio.
(1) Included in the trade payables was a bills payable of Rs 9,000 which was met on maturity.
(2) Company issued 1,00,000 equity shares of Rs 10 each to the Vendors of machinery purchased.
Compute Working Capital Turnover Ratio using the following information:
| Particulars | Amount (Rs) |
| Cash Sales | 1,30,000 |
| Credit Sales | 3,80,000 |
| Sales Returns | 10,000 |
| Liquid Assets | 1,40,000 |
| Current Liabilities | 1,05,000 |
| Inventory | 90,000 |
Compute Debt Equity Ratio using the following information:
| Particulars | Amount (RS.) |
| Total Assets | 3,50,000 |
| Total Debts | 2,50,000 |
| Current Liabilities | 80,000 |
O.M. Ltd has a Current Ratio of 3.5:1 and Quick Ratio of 2:1. If the excess of Current Assets over Quick Assets as represented by Stock is Rs 1,50,000, calculate Current Assets and Current Liabilities.
From the following information, calculate any two of the following ratios:
(a) Debt-Equity Ratio
(b) Working Capital Turnover Ration and
(c) Return on Investment
Information: Equity Share capital Rs 50,000, General Reserve Rs 5,000; Profit and Loss
Account after tax and interest Rs 15,000; 9% Debenture Rs 20,000; Creditors Rs 15,000; Land and Building Rs 65,000; Equipment Rs 15,000; Debtors Rs 14,500 and Cash Rs 5,500. Discount on issue of shares Rs 5,000
Sales for the year ended 31-3-2011 was Rs 1,50,000. Tax rate 50%.
On the basis of the following information, calculate:
(i) Debt-Equity Ratio and
(ii) Working Capital Turnover Ratio
Information: Rs.
Net Sales 60,00,000
Cost of goods sold 45,00,000
Other current assets 11,00,000
Current liabilities 4,00,000
Paid up share capital 6,00,000
6% Debentures 3,00,000
9% Loan 1,00,000
Debenture Redemption Reserve 2,00,000
Closing Stock 1,00,000
From the following Balance Sheets of Vijaya Ltd. as on 31-3-2009 and 31-3-2010 prepare a Cash Flow Statement.
|
Liabilities |
31-3-2009 (Rs) |
31-3-2010 (Rs) |
Assets |
31-3-2009 (Rs) |
31-3-2010 (Rs) |
|
Share Capital General Reserve Profit & loss account Trade Creditors
|
45,000 15,000 10,000 8,700 |
65,000 27,500 15,000 11,000 |
Fixed Assets Stock Debtors Cash Preliminary expense |
46,700 11,000 18,000 2,000 1,000 |
83,000 13,000 19,500 2,500 500
|
|
|
78,700 |
1,18,500 |
|
78,700 |
1,18,500 |
Additional Information:
(i) Depreciation on Fixed Assets for the year 2009-2010 was Rs. 14,700.
(ii) An interim dividend Rs. 7,000 has been paid to the shareholders during the year.
What is meant by solvency of business?
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