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4. ON LIQUIDITY RATIOS:
The current assets of a company are Rs 900000. Its current ratio is 3 and liquid ratio is 1.20
Calculate the current liabilities, liquid assets and inventory (Answer: current liability= 300000, liquid
assets= 360000; inventory= 540,000)
Answer:
Current liability = current assets / current ratio = 900000/ 3 = 300,000
Liquid assets = current assets inventory / current liability
1.2 = liquid assets / 300,000
liquid assets = 3,60,000
Inventory= current assets liquid assets = 900,000 360,000 = 540,000
(Answer: quick ratio = 0.39:1; stock turnover ratio= 3.09 times)
Answer:
Quick ratio = current assets inventory / current liability
Current assets = stock + debtors + cash
Quick assets = stock + debtors + cash stock = 21000 + 30,000 = 51000
Current liability = creditors + outstanding expenses = 115000 + 15000 = 130000
Quick ratio = 51000/ 130,000 = 0.39:1
Stock turnover ratio = COGS/ average stock
COGS = sales gross profit = 800,000 340,000 = 460,000
Average stock = opening + closing / 2 = 99000 + 199000 /2 = 149000
ST ratio = 460000/ 149000 = 3.09 times
7. Calculate return on capital employed (ROCE) from the following Information:
Answer:
Current assets current liability = 15000
Current liability = 7500
Current assets = 22500
Current ratio = 22500/ 7500 = 3:1
13. CURRENT RATIO:
Answer:
Current assets = total assets fixed assets = 60,000
Current liability = total assets capital employed = 110,000 100,000 = 10,000
Current ratio = 6:1
A Company had current assets of Rs. 300,000 and current liabilities of Rs. 1,40,000. It then purchased
goods worth Rs. 60,000 on credit. Calculate current ratio after the purchase.
(Answer: 1.8:1)
Answer:
Current liabilities of a company were Rs. 100,000 and its current ratio was 2.5:1. After this, it paid Rs.
25,000 to a creditor. Calculate the current ratio after the payment.
(Answer: 3:1)
The ratio of current assets to current liabilities is 1.5:1. Current assets are Rs. 600,000 and current
liabilities are Rs. 400,000. The firm is interested in maintaining a current ratio of 2:1 by paying off a
part of current liabilities. Compute the amount of current liabilities that should be paid, so that current
ratio of 2:1 can be maintained.
Answer:
Self explanatory
17. Share capital of a company is Rs. 21000. Reserves are for Rs. 1500. The profit and loss account shows a
positive balance of Rs. 2500. Bank overdraft is for Rs. 2000 and sundry creditors are Rs. 6000. On the
assets side, fixed assets of the company are at Rs. 17000. The company has stock of Rs. 6200, debtors
of Rs. 3200 and Cash of Rs. 6600. Calculate Current Ratio.
(Answer: 2:1)
Answer:
Liquid assets are Rs. 37500. Stock is valued at Rs. 10,000. Prepaid expenses are Rs. 2500 and working
capital is of Rs. 30,000. Find out current ratio.
(Answer: 2.5:1)
Answer:
Working capital = current assets current liability (technically, net working capital has the above
mentioned formula and gross working capital is equal to current assets. However, there is often a mix
up and examiners assume certain things in questions and mention only working capital, which can be
assumed to be either gross or net. It is important that you use your acumen to identify what it should
mean)
19.
Calculate current ratio and quick ratio from the above balance sheet.
Answer:
Current assets = inventory + debtors + cash + prepaid expenses = 12000 + 9000 + 2280 + 720 = 24000
Liquid assets = 24000 inventory prepaid expenses = 24000 12000 720 = 11280
20. Current liabilities of a company are Rs. 300,000. Its current ratio is 3:1 and liquid ratio is 1:1. Calculate
the value of stock.
(Answer: 3:7)
Answer:
Answer:
Since assets = liabilities in balance sheet, total assets = 125000 should be equal to total liability
Equity share capital of a company is Rs. 2,00,000. Current liabilities are Rs. 1,00,000. Preliminary
expenses are for Rs. 10,000. Reserves and surplus are of Rs. 1,60,000 and 10% debentures are of Rs.
1,50,000. Interest on debentures is Rs. 15,000. Find out debt to equity ratio.
(Answer: 3:7)
Answer:
Shareholders funds = share capital + reserves preliminary expenses = 200000 + 160000 10000 =
350000
A company has applied for a loan. The lender of the loan requests you to compute the debt to equity
ratio to find out long term solvency of the company.
liabilities Rupees
6% debentures 7250
Reserves 4000
Answer:
Profit after interest but before tax is Rs. 6,25,000 (PAT should have been 375000). Interest expense for
the company is Rs. 1,25,000. Calculate Interest coverage ratio.
(Answer: 4 times)
Answer:
A company has residual profits after interest, tax and dividends as Rs. 5000. Dividends amount to Rs.
500, Tax is Rs. 1000 and interests are paid as follows:
Answer:
PAT = 5000
Anuj Jindal successrbigradeb@gmail.com 15
Dividend = 500
Tax = 1000
EBIT= 7350
Answer:
The equity share capital of a company stands at Rs. 200,000. The company has issued 10% preference
share capital of Rs. 300,000. Reserves are held to the level of Rs. 2,50,000. Balance in P & L account is
Rs. 1,50,000. The company has also issued 10% debentures of Rs. 16,00,0000. Current liabilities are Rs.
6,80,000. Net fixed assets are Rs 21,00,000. Long term investments made by the company are Rs.
200,000. The company has current assets of Rs. 880,000. Earning before interest and taxes is Rs.
500,0000. Calculate Proprietary ratio and Interest coverage ratio of the company.
Answer:
Total assets = fixed assets + long term investments + current assets = 3180000
EBIT = 5000000
Interest = 1600000
ICR = 3.125
Answer:
Equity = 2100000
Total assets = fixed assets + long term investments + current assets = 4000000
Credit- 60,000
Salaries 25000
Wages 5000
What is GP ratio if sales are Rs 600,000 and Gross profit is 25% on cost.
(Answer: 10%; 20%; HINT- use techniques learnt in Quantitative Aptitude in Profit and loss)
Answer:
Gross profit = Gross profit is calculated by reducing operating/ factory expenses from sales
Here, operating expenses/ cost of sales are = purchases return outwards + opening stock closing
stock + direct expenses
= 75000 2000 + 10000 (decrease in stock = opening stock closing stock) + 2000 (carriage inward) +
wages (salaries are indirect but wages are direct)
= 90000
When sales are 600,000 and GP ratio is 25% on cost, it means that GP ratio is 20% on sales
Cash sales are 25% of total sales, purchases are Rs.690,000, credit sales are Rs. 600,000; excess of
closing stock over opening stock is Rs 50,000. Calculate gross profit ratio.
(Answer: 20%)
Answer:
Direct expenses + cost on sales = purchases + (-increase in stock) = 690000 50000 = 640000
33. GROSS PROFIT RATIO: (THIS QUESTION REQUIRES UNDERSTANDING OF INVENTORY TURNOVER
RATIO)
Average stock Rs. 1,60,000. Stock turnover ratio is 8 times. Average debtors are Rs. 200,000. Debtors
turnover ratio is 6 times. Cash sales are 25% of net sales.
Hint- stock turnover ratio = COGS/ average stock; Debtor turnover ratio = net credit sales/ average
debtors)
Answer:
COGS = 1280000
Since credit sales are 75% of total sales, total sales = 1200000 *100/75 = 1600000
Sales of the enterprise are Rs. 400,000. Gross profit is Rs. 1,84,000. Administrative expenses incurred
by the company of Rs. 10,000. Selling and distribution expenses are Rs. 14000. Loss on sale of
machinery is Rs. 10,000. Net profit is Rs. 1,50,000. Find out operating ratio.
(Answer: 60%)
Answer:
Purchases = 500,000
Sales = 7,50,000
(Answer: 23.8%)
Answer:
Net operating profit = net sales COGS operating expenses = 735000 475000 85000 = 175000
(Answer: 84.4%)
Answer:
Sales is given as Rs. 50,20,000. Sales return are Rs. 2,20,000. Cost of goods sold is Rs. 24,40,200. Office
and administrative expenses are given as Rs. 251200. Selling and distribution expenses are Rs.
Anuj Jindal successrbigradeb@gmail.com 23
4,50,400. Interest paid on loan is Rs. 50,000. Income from Investment is Rs. 60,000. Loss by theft is Rs.
30,000. Calculate Operating Ratio.
Answer:
COGS = 2440200
The balance in profit and loss account of a company is Rs 500,000 (net profit). Long term borrowings @
10% are 10,00,000. Current liabilities are Rs. 15,00,000. Fixed assets of the company are 29,00,000.
Current assets of the company are 25,00,000. Find out return on capital employed.
(Answer: 15.38%)
Answer:
Capital employed = total assets current liabilities = 2900000 + 2500000 1500000 = 3900000
A company has equity share capital of Rs. 500,000 and 8% preference share capital of Rs. 200,000.
Reserves and surplus are valued at Rs. 2,50,000. Long term borrowings are for Rs. 300,000 and interest
on these borrowings is Rs. 40,000. Profit after interest on borrowings but before dividend is Rs.
Anuj Jindal successrbigradeb@gmail.com 24
200,000. Current liabilities stand at Rs. 8,20,000. On the assets side, fixed assets are for Rs. 8,80,000.
Non current investments stand at Rs. 2,50,000. Current assets are valued at Rs. 9,40,000. Find out
return on capital employed for the company.
(Answer: 24%)
Answer:
Capital employed = fixed assets + current assets current liability = 880,000 + 940000 820,000 =
10,00,000
Equity share capital of a company is Rs. 50,000. 10% preference share capital stands at Rs. 50,000.
Reserves and surplus are for Rs. 100,000. Current liabilities are Rs. 1,70,000. 12% debentures are
issued for Rs. 400,000. Current assets are for Rs. 2,20,000. Net profit for the company after interest
and tax is Rs. 1,20,000. Tax paid for the year of Rs. 1,20,000. Find out return on capital employed for
the company.
(Answer: 48%)
Answer:
EBIT = profit after interest and tax + tax + interest = 120,000 + 120,000 + 48000 = 288000
Capital employed = equity share capital + reserves + preference share capital + long term loans =
Sales of a company stand at Rs. 200,000. Direct expenses are Rs. 10,000 and Indirect expenses are Rs.
20,000. Profit before tax but after direct and indirect expenses is Rs. 30,000. Opening stock stood at Rs.
40,000 and closing stock stands at Rs. 20,000. Find out inventory turnover ratio.
(Answer: 5 times)
(Gross profit is found out after reducing direct expenses from sales)
Cost of goods sold is given as Rs. 300,000. Purchases made in the year are Rs. 3,30,000 and Opening
stock is given as Rs. 60,000. Find out inventory turnover ratio
(Answer: 4 times)
Answer:
COGS = 300,000
Sales 3,20,000
(Answer: 8 times)
Answer:
Closing stock = opening stock + purchase COGS = 29000 + 242000 240000 = 31000
Opening stock is given as Rs. 20,000 and closing stock is given as Rs. 40,000. Sales are given as Rs.
300,000. Gross Profit on cost is 25%. Calculate inventory turnover ratio.
(Answer: 8 times; hint- use technique learnt in profit and loss to measure gross profit on sales)
Answer:
Answer:
X + X/3 = 800,000
Y + Y + 20,000 = 150000 *2
2Y = 280,000
Y = 140,000
Answer:
(when beginning creditor is not given, the end creditor is assumed to be average)
Current assets are Rs. 9,00,000. Current liabilities are Rs. 3,00,000. Total sales Rs. 30,50,000. Sales
return are Rs. 50,000.
(Answer: 5 times)
Answer:
(Answer: 5 times)
Answer:
COGS = 10,00,000
GP on cost = 2,50,000
Current liabilities of a company include trade payables and short term provisions of Rs. 2,50,000 and
50,000 respectively. Credit purchase made during the year is for Rs. 7,50,000. Sales during the year
stand at Rs. 32,00,000 and sales return are for Rs. 200,000. Current assets are a total of Rs. 600,000.
Find out working capital turnover ratio and payable turnover ratio
Answer:
WCTR = 10 times
Net sales is given as Rs. 30,00,000. Cost of sales is Rs. 20,00,000. Current assets stand at Rs. 600,000
and current liabilities are Rs. 2,00,000. Paid up share capital of the company is Rs. 500,000. Find out
Gross profit ratio and WC turnover ratio.
Answer:
WC = CA CL = 400,000