CBSE Class 12 Accountancy Partnership Ratio Analysis Notes

Download CBSE Class 12 Accountancy Partnership Ratio Analysis Notes in PDF format. All Revision notes for Class 12 Accountancy have been designed as per the latest syllabus and updated chapters given in your textbook for Accountancy in Standard 12. Our teachers have designed these concept notes for the benefit of Grade 12 students. You should use these chapter wise notes for revision on daily basis. These study notes can also be used for learning each chapter and its important and difficult topics or revision just before your exams to help you get better scores in upcoming examinations, You can also use Printable notes for Class 12 Accountancy for faster revision of difficult topics and get higher rank. After reading these notes also refer to MCQ questions for Class 12 Accountancy given our website

 

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                                                BALANCE SHEET

                                            As at 31st March, 2012

                                                    Particulars

 I. EQUITY AND LIABILITIES
 Equity Share Capital                                                3,00,000

 Preference Share Capital                                         1,00,000

 Reserves                                                                  50,000

 Profit & Loss Balance                                               65,000

 12% Mortgage Loan                                                 1,80,000

 Current Liabilities                                                      1,20,000

                                                          TOTAL              8,15,000

II. ASSETS:

 Fixed Assets                                                             4,50,000

 Share Issue Expenses                                              15,000

  Current Assets                                                         3,50,000

                                                          TOTAL              8,15,000

What conclusions do you draw from the above ratios?

SOLUTION 5.

(i) Debt Equity Ratio = Debt/Equity or Long term Loans/Shareholder's Funds

Shareholder’s Funds = Equity Share Capital + Pref. Share Capital + Reserves + P & L Balance – Share Issue Exp.

= 3,00,000 + 1,00,000 + 50,000 + 65,000 – 15,000

= 5,00,000

Mortgage Loan is Long Term Loan,

Hence, Debt Equity Ratio = 1,80,000/5,00,000 =.36 : 1

Comments: This ratio indicates what proportion of funds is provided by Longterm loans in comparison to Shareholder’s funds. Generally, the ratio should not be more than 2 : 1. Debt-Equity ratio of the above company is .36:1,

which indicates that long-term loans are only .36 in comparison to shareholder’s funds. Hence, it may be considered that the long-term financial position of the company is very sound.

(ii) Total Assets to Debt Ratio = Total Assets/Debt

                                                   = Fixed Assets+ Current Assets/Long-term Loans

                                                   = 4,50,000 + 3,50,000/1,80,000 =4.44 : 1

Comments: Total assets of this company are 4.44 times in comparison to long-term debts of the company. The higher ratio indicates the use of lower debts in financing the assets which means higher security to lenders.

(iii) Proprietary Ratio = Equity/Total Assets

                                    = Shareholder's Funds/Fixed Assets + Current Assets

                                    = 5, 00,000

                                        4, 50,000 + 3, 50,000

                                     = 0.625 or 62.5%

Comments: Shareholder’s Funds of this Company are 62.5% in comparison to total assets of the company. In other words, 62.5% of the total assets of the company are funded by equity which indicates that the long-term financial position of the company is very sound.

QUESTION 6.
From the following balance sheet and other information calculate (i) Working Capital Turnover Ratio, (ii) Debt Equity Ratio and (iii) Trade Receivables Turnover Ratio.

                                                       BALANCE SHHET

                                                   As at 31st March, 2012

                                                            Particulars

I. EQUITY AND LIABILITIES

Share Capital                                                                       2,00,000

General Reserve                                                                  80,000

Profit and Loss                                                                     1,20,000

Loan @ 15%                                                                         2,40,000

Trade Payables                                                                     1,00,000

                                                                  TOTAL                 7,40,000

II. ASSETS:

Fixed Assets                                                                          3,60,000

Inventory                                                                                80,000

Trade Receivables                                                                 1,80,000

Cash                                                                                      1,00,000

Preliminary Expenses                                                             20,000

                                                                        TOTAL            7,40,000

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