Sponsor Area
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.
Some More Questions From Accounting Ratios Chapter
(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.
(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%.
(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.
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
(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?
Sponsor Area
Mock Test Series
Mock Test Series