+91-8076753736[email protected]
logo
logo
-->

Accounting Ratios

Question
CBSEENAC12000151
Wired Faculty App

From the following details obtained from the financial statements of Jeev Ltd. Calculate interest coverage ratio
Net Profit after tax 1, 20,000
12% Long-term Debt 20, 00,000
Tax Rate 40%

Solution
Interest space Coverage space Ratio space equals space fraction numerator Profit space before space Interest space and space Tax over denominator Interest space on space Long minus term space Debt end fraction Net space Profit space after space Tax space equals 1 comma 20 comma 000 Tax space Rate colon space 40 percent sign
If Profit after tax is 60, Profit before Tax must be 100
And if profit after tax is 1,20,000; profit before tax would be
100 over 60 cross times 1 comma 20 comma 000 equals 2 comma 00 comma 000
12% Long-term Debt 20,00,000
Interest on Long-term debt 12% of 20,00,000 i.e. 2,40,000
Accordingly, Profit before Interest and Tax would be 2,00,000 plus Interest
rightwards double arrow left parenthesis 2 comma 00 comma 000 plus 2 comma 40 comma 000 right parenthesis equals 4 comma 40 comma 000 therefore space Interest space Coverage space Ratio space equals space fraction numerator 4 comma 40 comma 000 over denominator 2 comma 40 comma 000 end fraction equals 1.83 space times

Some More Questions From Accounting Ratios Chapter

From the following information related to Naveen Ltd. calculate 
Total Assets to Debt Ratio
Information: Fixed Assets Rs 75,00,000; Current Assets Rs 40,00,000; Current Liabilities Rs 27,00,000; 12% Debentures Rs 80,00,000 and Net Profit before Interest, Tax and Dividend Rs 14,50,000.

The motto of Yash Ltd., an advertising company is 'Service with Dignity'. Its management and work force is hard-working, honest and motivated. The net profit of the company doubled during the year ended 31-3-2014. Encouraged by its performance company decided to give one-month extra salary to all its employees. Following is the Comparative Statement of Profit and Loss of the company for the years ended 31st March 2013 and 2014. 


(a) Calculate Net Profit Ratio for the years ending 31st March, 2013 and 2014.
(b) Identify any two values which Yash Ltd. is trying to propagate.

(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?

Mock Test Series

Mock Test Series

NCERT Sample Papers

Entrance Exams Preparation