1) From following annual accounts of the company, you are required to

calculate the following ratios and comment on the results.

 Gross profit ratio
 Net profit ratio
 Quick assets ratio
 Debtors collection period
 Stock turnover ratio
 Current ratio
 Debt equity ratio

Data from balance sheet & Profit and loss account

Particulars Amount
Share capital 450
Retained profits 240
Debentures 700
Trade creditors 620
Net fixed assets 875
Stock 310
Debtors 770
Bank balance 100
Sales 3100
Gross profit 1725
Expenses 805
Depreciation 250

2) ABC company’s financial statements contain following information

Particulars 2016 2017

Cash 200000 160000
Debtors 320000 400000
Temporary 200000 320000
Investments
 Stock 1840000 2160000
Prepaid expenses 28000 12000
Total current assets 2588000 3052000
Total Assets 5600000 6400000
Current liabilities 640000 800000
Loans 1600000 1600000
Capital 2000000 2000000
Retained earnings 468000 812000

Particulars 2017
Sales 4000000
Cost of goods sold 2800000
Interest 160000
PBT 1040000
Taxes 520000
PAT 520000
Profit distributed 220000

From the above, appraise the financial position of the company from
point of view of
a) Liquidity b) Profitability c) Activity

Solution: (Current ratio= 3.8, Acid test ratio= 1:1, Debt equity ratio= .57,
Interest coverage ratio= 7.5 times, gross profit ratio= 30%, net profit ratio=
13%, return on total assets=8.12%, return on capital employed= 13.6%, return
on equity funds= 18.5%, Debtors turn over= 11.1 times, stock turn over= 1.4
times, total assets turnover= .67 times

3) The data summarised in the table below show the performance of two firms A
and B, over three years.
Ratio 2014 2013 2012 Industry
average
 GP ratio Firm A 34 35 36 34
Firm B 40 39 38 42
NP ratio Firm A 17 17 18 16
Firm B 19 18 17 21
ROCE Firm A 14 13 12 13
Firm B 9 10 10 11
Acid test Firm A 2.7 2.6 2.5 2.5
ratio Firm B 1.7 1.5 1.3 1.5

(a) Using the information in the table explain the comparative attractiveness of the
two firms to a potential investor.

4) A company supplies the following information

Liabilities Amount Assets Amount
Share capital 200000 Good will 120000
Reserves 58000 Plant 150000
Debentures 100000 Stock 80000
Creditors 40000 Debtors 45000
Bills payable 20000 Cash 17000
Other current 2000 Other current 8000
liabilities assets
Total 420000 420000

Credit sales for the year- Rs 400000, gross profit- Rs160000

Calculate current ratio, liquid ratio, inventory turnover ratio and average collection period

Solution: Current ratio= 2.42:1, liquid ratio= 1.13:1, Inventory turnover ratio= 3 times,
Average collection period= 41 days

5) The data summarised in the table below show the performance of ITC , over
three years.
Ratio 2014 2013 2012 Industry
 average
Liquidity Current 1.17 1.15 1.1 1.5
ratios ratio
Quick .6 .7 .8 1
ratio
Profitability ROCE 46 41 40 40
ratios ROE 35 37 37 40
Turn over STR 8.7 8.7 7.2 9
ratios DTR 16 18 17 24
fTR 4.8 4.7 4.3 4.5

STR= stock turnover ratio, DTR= Debtors turnover ratio, FTR=Fixed Asset
Turnover ratio
using the information in the table explain the attractiveness of the firm to a
potential investor.

6)
1) The data summarised in the table below show the performance of D abur, over
three years.
Ratio 2014 2013 2012
EPS 3.9 3.3 2.8
Dividend 46 47 48
payout
Interest 46 41 53
coverage
Net profit 13 13 12
ratio
Dividend 6% 7% 8%
yield

Comment on attractiveness on investing in the stock based on above

ratios.

Q1: (a) Stock Turnover 6 times

(b) GP Ratio 20% on sales
(c) Sales Rs.3,00,000
(d) C/S is Rs.10,000 more than the opening stock
(e) Opening creditors Rs.20,000
(f) Closing Creditors Rs.30,000
(g) Debtors at end Rs.60,000
(h) Net working capital Rs.50,000
Find out: Average stock, Purchases, Creditors Turnover Ratio, Average
payment period, Debtors Turnover Ratio, Average collection period,
Working capital Turnover Ratio

Q2: The comparative statements of income and financial position are:

2013 2014
Net Sales 1,00,000 1,50,000
Cost of sales 70,000 1,10,000
GP 30,000 40,000
Operating Exp 20,000 25,000
Net Profit 10,000 15,000
Cash 5,000 8,000
Bank 4,000 2,000
Debtors 40,000 25,000
Stock 15,000 10,000
Fixed Assets 56,000 65,000
Creditors 36,000 12,000
B/P 2,000 1,000
Loan 10,000 20,000
Equity capital 60,000 70,000
Reserves 12,000 7,000

Calculate:
Current Ratio
Acid Test Ratio
Debtors Turnover Ratio
Collection Period
Stock Turnover Ratio