# DK Goel Solutions Class 12 Accountancy Chapter 5 Accounting Ratios

Read DK Goel Class 12 Accountancy Solutions for Chapter 5 Accounting Ratios below. These DK Goel Accountancy Class 12 solutions have been prepared based on the latest book for DK Goel Class 12 for the current academic year by expert accounts teachers at studiestoday.com. These DK Goel Class 12 Solutions help commerce students in class 12 understand accountancy and build a strong base in accounts. Students in Class 12 who study accountancy and use the DK Goel Accountancy book to understand concepts of Chapter 5 Accounting Ratios should understand the concepts and solve practice questions and exercises given at the end of the chapter. We have provided solutions for all questions and have also provided short notes for each problem. This will help Class 12 DK Goel Accountancy students to understand the questions properly. Refer to the solutions provided below prepared by CBSE NCERT teachers

## Chapter 5 Accounting Ratios DK Goel Class 12 Solutions

Class 12 Accountancy students should read the following DK Goel Solutions for Class 12 Chapter 5 Accounting Ratios in Standard 12. All solutions provided below can be downloaded in Pdf and are available for free. This DK Goel Book for Grade 12 Accountancy will be very useful for exams and help you to score good marks in Class 12 accountancy examinations. On our website www.studiestoday.com, we have provided solutions for all chapters given in the DK Goel Accountancy Book for Class 12.

### DK Goel Solutions Chapter 5 Accounting Ratios Class 12 Accountancy

Question . 1.      “Accounting Ratios ignore qualitative factors and are also not comparable if different firms follow different accounting policies.” Comment.

Solution  . 1      Ratio analysis is the quantitative measurement of the performance of a business. It ignores the qualitative factors. For example while calculating the credit analysis of a customer seeking credit, he may deserve the credit to be granted on the basis of financial statements submitted by him but in reality his character and credit worthiness mat be doubtful.

Question . 2.      What ratios will you calculate for the following purposes: (a) Analysis for short term debts, and (b) Analysis for long term debts?

Solution  . 2

(a) Analysis for short term debts :- Liquidity Ratio

(b) Analysis for long term debts :- Solution vency Ratio

Question . 3.      The Current Ratio of a Company is 3:1. Give your Comments.

Solution  . 3         The Current Ratio of a Company is 3:1 means that current assets of a business thrice of its current liabilities. The higher the ratio the better it is, because the firm will be able to pay its current liabilities more easily. But a much higher ratio may be considered to be adverse from the view point of management on account of the following reasons:

1.) A much higher ratio indicates that inventory might be pilling up because of poor sales.

2.) Large amount is locked up in trade receivables due to inefficient collection policy.

Question . 4.      State the main limitation of Current Ratio.

Solution  . 4      Window Dressing: Some companies in order to cover up their bad financial position resort to window dressing i.e., showing a better position than the one which really exists. They change their balance sheet in such a way that the important fact and truth may be concealed.

Question . 5.      What is ‘Window Dressing’? Explain with the help of an example.

Solution  . 5      Some companies in order to cover up their bad financial position resort to window dressing i.e., showing a better position than the one which really exists. They change their balance sheet in such a way that the important fact and truth may be concealed. For example, the current assets of a company are Rs. 1,00,000 and its current liabilities are Rs. 50,000, so the current ratio is 2:1. After this, it purchased goods for Rs. 50,000 for credit in the month of March. If it records the purchases, the current assets will increase to Rs. 1,50,000 and current liabilities will increase to Rs. 1,00,000. As a result, the current ratio will be reduced to 3:2. The company may pass the entry for purchase in the beginning of the next year or may postpone the purchase itself for a few days.

Question . 6.      Distinguish between Current Ratio and Question uick Ratio.

Solution  . 6      Current Ratio:- The ratio explains the relationship between current assets and current liabilities of a business. The formula for calculating the ratio is

Quick Ratio:- Quick ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately. As such, the quick ratio is calculated by dividing liquid assets (Quick Current Assets) by current liabilities:

Question . 7.      Why Quick Ratio is considered to be more dependable than Current Ratio? Specify.

Solution  . 7      Quick Ratio is a better test of short-term financial position of the company than the current ratio, as it considers only those assets which can be easily and readily converted into cash. Inventory is not included in liquid assets as it may take a lot of time before it is converted into cash.

Question . 8.      What items are included in the Shareholder’s Fund?

Solution  . 8      Shareholder’s Funds included Share Capital and Reserve & Surplus.

Question . 9.      What items are included in Equity Shareholder’s Fund?

Solution  . 9      Equity shareholders fund included Equity Share Capital.

Question . 10.   What does debts-equity ratio indicate?

Solution  . 10    This ratio expresses the relationship between long term debts and shareholder’s funds. It indicates the proportion of funds which are acquired by long-term borrowings in comparison to shareholder’s funds. This ratio is calculated to ascertain the soundness of the long-term financial policies of the firm.

Question . 11.      What are implications of high and low inventory turnover ratios?

Solution  . 11       The higher ratio of inventory turnover ratio indicates that inventory is selling quickly. In a business where inventory turnover ratio is high goods can be sold at a low margin of profit and even then the profitability may be quite high.

A low inventory turnover ratio indicates that inventory does not sell quickly and remains lying in the godown for quite a long time. This results in increased storage costs, blocking of funds and losses on accounts of goods becoming obsolete or un-sale able.

Question . 12.     Illustrate the method of determining trade receivables turnover ratio. What does it indicate?

Calculation of Trade receivables turnover ratio:-

Total Revenue from Operations for the year (Total Sales)               Rs. 2,00,000

Cash Revenue from Operations for the year (Cash Sales)                Rs. 40,000

Trade Receivables at the beginning of the year                                    Rs. 20,000

Trade Receivables at the end of the year                                                Rs. 60,000

Solution 12.

Working Note:-

Credit Revenue from Operations = Total Revenue from Operations – Cash Revenue from Operations

Credit Revenue from Operations = Rs. 2,00,000 – Rs. 40,000

Credit Revenue from Operations = Rs. 1,60,000

Trade Receivables Turnover Ratio indicates the  relationship between credit Revenue from Operations and average trade receivables during the year.

Question . 13.    What inference would you draw from the following:-

I. A low Trade Receivables Turnover Ratio

II. A high Inventory Turnover Ratio.

Solution . 13       I. A too low trade receivables turnover ratio will indicate the liberal and inefficient credit and collection policy of the management. It shows that more money is being locked-up in trade receivables which will result in higher bad-debts, increase in cost of collection and also the loss of interest on the money due form trade receivables.

II. The higher ratio of inventory turnover ratio indicates that inventory is selling quickly. In a business where inventory turnover ratio is high goods can be sold at a low margin of profit and even then the profitability may be quite high.

Question .14.   What does too low ‘Trade Receivables Turnover Ratio’ indicate?

Solution . 14    A too low trade receivables turnover ratio will indicate the liberal and inefficient credit and collection policy of the management. It shows that more money is being locked-up in trade receivables which will result in higher bad-debts, increase in cost of collection and also the loss of interest on the money due form trade receivables.

Question . 15.  What does too high ‘Trade Receivables Turnover Ratio’ indicate?

Solution . 15    A high trade receivables turnover ratio indicates the prompt payment by trade receivables but a too high ratio may be the result of restrictive credit and collection policy of the management which may curtail the sales and hence may adversely affect the profits.

Question . 16.   “Comparison with the help of ratios is not possible if different firms follow different accounting policies.” Comment.

Solution  . 16    There may be different accounting policies adopted by different firms with regard to providing depreciation, creation of provision for doubtful debts, method of valuation of closing inventory etc. For instance, one firm may adopt the policy of charging depreciation on straight-line basis, while other way charges on written-down value method. Such difference makes the accounting ratios incomparable.

Question . 17.   How ratio analysis does becomes less effective due to price level changes?

Solution  . 17    Price level over the years goes on charging, therefore, the ratio of various years cannot be compared. For example, one firm sells 1,000 Machines for Rs. 10 Lakhs during 2017; it again sells 1,000 Machines of the same type in 2018 but owing to rising price the sale price was Rs. 15 Lakhs. On the basis of ratios it will be concluded that the sales have increased by 50%, whereas in actual, sales have not increased at all. Hence the figures of the past year must be adjusted in the light of price level changes before the ratios for these years are compared.

Question . 18.    Briefly explain the meaning and significance of any two of the following ratio:-

(i) Debt-Equity Ratio,

(ii) Inventory Turnover Ratio and

Solution  . 18       (i) Debt-Equity Ratio:- This ratio expresses the relationship between long term debts and shareholder’s funds. It indicates the proportion of funds which are acquired by long-term borrowings in comparison to shareholder’s funds. This ratio is calculated to ascertain the soundness of the long-term financial policies of the firm.

Question . 19.    Briefly explain the meaning and significance of any two of the following ratio:-

(i) Gross Profit Ratio,

(ii) Inventory Turnover Ratio and

(iii) Current Ratio.

Solution . 19       (i) Gross Profit Ratio:- This Ratio establishes a relationship between Gross Profit and Revenue from Operations i.e. Net Sales. This ratio is computed and presented in percentage. The formula for computing this ratio is:

Question . 20.    Briefly explain the meaning and significance of any two of the following ratio:-

(i) Debt Equity Ratio,

(ii) Operating Ratio and

Solution . 20       (i) Debt-Equity Ratio:- This ratio expresses the relationship between long term debts and shareholder’s funds. It indicates the proportion of funds which are acquired by long-term borrowings in comparison to shareholder’s funds. This ratio is calculated to ascertain the soundness of the long-term financial policies of the firm.

Question . 21.    Briefly explain the meaning and significance of any two of the following ratio:-

(i) Gross Profit Ratio,

(ii) Question . uick Ratio and

(iii) Inventory Turnover Ratio.

Solution . 21       (i) Gross Profit Ratio:- This Ratio establishes a relationship between Gross Profit and Revenue from Operations i.e. Net Sales. This ratio is computed and presented in percentage. The formula for computing this ratio is:

Numerical Questions:-

Question .1.       From the following particulars compute the Current Ratio:

Solution .1

Question .2.       From the following compute (a) Current Ratio (b) Quick Ratio:

Solution .2

Question .3.       Following particulars are given to you:

Solution .3.

Comment: The short term financial position of the company is quite satisfactory because its current ratio is 3;2;1, which is more than the ideal current ratio of 2:1. Liquid ratio of the company is 1.4:1, which is also more than the ideal liquid ratio of 1:1.

Therefore, it can be said that the company is in a position to pat its current liabilities instantly.

Question .4         Calculate Current Ratio and Quick Ratio from the following. Also give your opinion about the short -term financial position of the company:

Solution . 4

Comment: The ideal current ratio should be 2:1. But in this case the current ratio is 1.92:1 which is less than the ideal ratio. Therefore, it can be said that the short-term financial position of the company is not satisfactory.

The ideal quick ratio should be 1:1. But in this case the quick ratio is .78: 1, hence, the short- term financial position cannot be said to be satisfactory.

Question .5.       From the following compute Current Ratio:

Solution .5

Question .6.       Calculate Current Ratio from the following information:

Solution .6

Question .7(A)  Current Ratio of a Company is 2:1. Which of the following suggestions would improve the ratio, which would reduce it and which would not change it?

1. Purchase of goods on Credit.
2. Purchase of goods against Cheque.
3. Sale of goods Costing Rs. 50,000 for Rs. 60,000 on credit.
4. To sell a fixed asset at a slight loss.
5. To borrow money on a promissory note (B/P).
6. To give promissory note to a Creditor.
7. To give promissory note to a Creditor.

Solution .7(A)   Current Ratio as given in the question is 2:1. In order to understand the question in a simple manner, it may be assured that current assets are Rs. 2,00,000 and current liabilities are Rs. 1,00,000.

Question .7(B)   The Current Ratio of a company is 2:5:1. Which of the following suggestions would improve, reduce and not change it?

2. Sell machinery against cheque.
3. Sale of inventory at loss against Cheque.
4. Cash collected from trade receivables.
5. B/P dishonored.
6. Issue of shares.
7. Issue of shares against the purchase of a building
8. Redemption (Repayment) of Debentures

Solution .7(B)     Current Ratio as given in the question 2.5:2. Hence, it may be assured that Current Assets are Rs. 2,50,000 and current Liabilities are RS. 1,00,000.

Question .8.       Assuming that the Current ratio is 1.5:1, State giving reasons, which of the following transactions would (i) improve, (ii) reduce, (iii) not alert the current ratio:-

1. Realization of current assets
2. Payment of current liabilities
3. B/R dishonored
4. Sale of goods at par
5. Sale of goods at profit
6. Sale of goods at loss
7. Purchase of goods for cash
8. Purchase of goods on credit of 3 months
9. Sale of furniture for cash
10. Sale of machinery on a credit of 5 months
11. Sale of land on long- term deferred payment basis
12. Purchase of motor car for cash
13. Purchase of building on a credit of 4 months
14. Purchase of a plot of land on long-term deferred payment basis.
15. Repayment of long- term loan which was availed from a bank
16. Issue of shares for cash.

Solution .8           Statement showing the effect of various transactions on Current Ratio:

Question .9.       The Current Ratio of a company is 3:1. State giving reasons which of the following suggestions would (i) improve, (ii) reduce, (iii) not change; the Current Ratio:-

(b)   Sale of goods costing Rs. 20,000 for Rs. 20,000 for Cash .

(c)    Sale of goods costing Rs. 20,000 for Rs. 18,000 for Credit.

(d)   Sale of goods costing Rs. 20,000 at a profit of Rs. 1,000.

(e)    Purchase of goods on Credit.

(f)     Purchase of goods for Cash.

(g)    Purchase of machinery against long- term loan.

Solution .9

Statement showing the effect of various transactions on Current Ratio;

Question .10.     State giving reason, whether the Current Ratio will improve or decline or will have no effect in each one of the following transactions if Current Ratio is (i) 2.5:1, (ii) 1:1, (iii) 0.75:1.

1. paid Rs. 50,000 to a Creditor.
2. Sale of goods at a loss of 10%.
3. Sale of a fixed assets for Rs. 1,00,000 (Book Value Rs. 1,20,000).
4. Payment of outstanding salaries.
5. Received Rs. 25,000 from a debtor of RS. 30,000 in full settlement of his account.
6. Bills payable discharged on maturity.
7.  Bills Receivable drawn on debtor.
8. Purchase goods on credit.
9. Issue debentures to the vendors of machinery.

Solution .10

Question .11.     State giving reason, which of the following transactions would Improve; Reduce or Not Change the Question uick Ratio if Question uick Ratio is (i) 1.5:1, (ii) 1:1, (iii) 0.8:1.

1. Payment of outstanding Liabilities.
2. Debentures of Rs. 2,00,000 converted into Equity shares.
3. Purchase goods on credit of 2 months.
4. B/R endorse to creditors.
5. Sale of goods Costing Rs. 50,000 for Rs. 45,000.
6. B/R drawn on a Debtor.
7. Paid rent Rs. 3,000 in advance.
8. Trade receivables included a debtor sh. Ashok who paid his entire amount Rs. 9,700.

Solution .11

Question .12.     Calculate Current Ratio from the following:

Working Capital Rs. 1,92,000; Long term Debt Rs. 80,000 and Total debt Rs. 2,00,000.

Solution .12

Current liabilities = Total debt – Long term Debt

= Rs. 2,00,000 – Rs. 80,000 = Rs. 1,20,000

Current Assets = Working Capital + Current Liabilities

= Rs. 1,92,000 + Rs. 1,20,000 = Rs. 3,12,000

Question .13.     Calculate Current Ratio from the following:

Working Capital Rs. 4,80,000; Trade Payables Rs. 2,00,000 and Bank Overdraft Rs. 40,000.

Solution .13        Current liabilities = Trade Payables – Bank Overdraft

= Rs. 2,00,000 – Rs. 40,000 = Rs. 2,40,000

Current Assets = Working Capital + Current Liabilities

= Rs. 4,80,000 + Rs. 2,40,000 = Rs. 7,20,000

Question .14.     Calculate Current Ratio from the following:

Working Capital Rs. 4,80,000; Current Assets Rs. 6,00,000; inventory Rs. 4,00,000 and Trade Receivables Rs. 1,50,000.

Solution .14.

Question .15 (A).     A firm had current assets of Rs. 4,10,000. It then paid trade payables of Rs. 50,000. After this payment, the current ratio was 2.4:1. Ascertain the amount of Current Liabilities and working Capital after the payment.

Solution .15 (A)

Question .15 (B).      A firm had current assets of Rs. 7,20,000. It then purchased goods for Rs. 30,000 on Credit. After this purchase, the current ratio was 3:1. Ascertain the amount of Current Liabilities and Working Capital after the purchase.

Solution .15 (B)

Question .16.(A).       Current Ratio 2:1, Question uick Ratio 1.5:1, Current Liabilities RS. 1,60,000. Calculate Current Assets, Question uick Assets and Inventory.

Solution .16 (A)

Given: Question uick Ratio=1.5, Current Liabilities = Rs. 1,60,000

Question uick Assets = Rs. 1,60,000 × 1.5 = RS. 2,40,000

Inventory = Current Assets – liquid Assets

= Rs. 3,20,000 – Rs. 2,40,000 = RS. 80,000

Question .16.(B).       Current Ratio 2.5:1, Question uick Ratio 0.95:1, Current Assets RS. 17,00,000. Calculate Current Liabilities, Question uick Assets and Inventory.

Solution .16 (B)

Given: Quick Ratio=0.95

Calculated: Current Liabilities = Rs. 6,80,000

Quick Assets = Rs. 6,80,000 × 0.95 = RS. 6,46,000

Inventory = Current Assets – liquid Assets

= Rs.17,00,000 – Rs.6,46,000 = RS. 10,54,000

Question .16.(C).         Working capital Rs. 5,40,000; current Ratio 2.8:1; Inventory Rs. 3,30,000.

Calculate Current Assets, Current liabilities and Question uick Ratio.

Solution .16(C)

Question .17.    A business has a Current Ratio of 4:1 and a Question uick Ratio of 1.2 :1. If the working Capital is RS. 1,80,000, Calculate the total current Assets and Inventory.

Solution  .17

Working Capital = Current Assets – Current Liabilities

Current Ratio = 4:1 , therefore, based on current ratio, the working capital is 4-1=3

If Working Capital is 3, Current Assets = 4

Question .18.    Current Ratio 2.4; Current Assets RS. 1,81,10,400; inventories RS. 79,23,300. Calculate the Liquid Ratio.

Solution  .18

Comment: the short term financial position of the enterprise is satisfactory because its liquid ratio is 1.35:1, which is above the ideal ratio of 1:1.

Question .19.    Quick Ratio 1.5; Current Assets Rs. 1,00,000; Current Liabilities Rs. 40,000. Calculate the value of Inventory.

Solution .19

Question .20.  A company’s inventory is RS. 2,00,000. Total liquid assets are RS. 8,00,000 and quick ratio is 2:1. Calculate the current ratio.

Solution .20

Question .21.      A firm has current Ratio 4.5:1 and quick Ratio of 3:1. If its inventory is Rs. 72,000, find out its total current assets and total current liabilities.

Solution .21

Current Ratio is 4.5 and Question uick ratio is 3

Difference between current ratio and quick ratio is inventory.

Therefore, inventory is 4.5-3=1.5.

If Inventory is 1.5, Current Assets = 4.5

Question .22.(A)            Current Assets Rs. 85,000; inventory Rs. 22,000; prepaid expenses Rs. 3,000; Working Capital RS. 45,000. Calculate Question uick Ratio.

Solution .22 (A)

Calculation of Quick Ratio:

Quick Assets (Liquid Assets)        = Current Assets – Inventory – Prepaid Expenses

= Rs. 85,000 – Rs. 22,000 – Rs. 3,000

= Rs. 60,000

Current Liabilities                             = Current Assets – working Capital

= Rs. 85,000 -Rs. 45,000

= Rs. 40,000

Question .22.(B)            Question uick Assets Rs. 90,000; Inventory Rs. 1,08,000; prepaid Expenses RS. 2,000; Working Capital RS. 1,50,000. Calculate Current Ratio.

Solution .22(B)              Calculation of Current Ratio:

Current Assets                                  = Quick Assets – Inventory – Prepaid Expenses

= Rs. 90,000 – Rs. 1,08,000 – Rs. 2,000

= Rs. 2,00,000

Current Liabilities                             = Current Assets – working Capital

= Rs. 2,00,000 -Rs. 1,50,000

= Rs. 50,000

Question .23.  Working Capital Rs. 4,80,000; Total Debt Rs. 16,00,000; Long Term Debt Rs. 10,00,000; Inventory Rs. 3,40,000; Prepaid insurance Rs. 20,000. Calculate liquid ratio.

Solution .23.

Current Liabilities                             = Total debt – Long term Debt

= Rs. 16,00,000 – Rs. 10,00,000

= Rs. 6,00,000

Current Assets                                  = Current Liabilities + working Capital

= Rs. 6,00,000 -Rs. 4,80,000

= Rs. 10,80,000

Liquid Assets                                      = Current Assets – Inventory – prepaid Insurance

= Rs. 10,80,000 – Rs. 3,40,000 – RS. 20,00

= Rs. 7,20,000

Question .24       The ratio of current Assets (Rs. 32,00,000) to Current liabilities (RS. 20,00,000) is 1.6:1. The accountant of the firm is interested in maintaining a Current Ratio od 2:1, by paying off a part of the Current Liabilities. Compute the amount of the Current Liabilities that should be paid, so that the Current ratio at the level 2:1 may be maintained.

Solution .24        Payment of current liabilities will result in equivalent reduction both in the amount of current assets as well as current liabilities.

Let the amount of current liabilities to be paid =

Or RS. 40,00,000 – 2

= 8,00,000.

Current liabilities to the extent of Rs. 8,00,000 should be paid to achieve the Current Ratio at the level of 2:1.

Question .25.    The ratio of Current Assets (Rs. 5,00,000) to Current Liabilities is 2.5:1. The accountant of this firm is interested in maintaining a Current Ratio of 2:1 by acquiring some Current Assets on Credit. You are required to suggest him the amount of current Assets which must be acquired for this purpose.

Solution .25

Therefore, current Assets of RS. 1,00,000 should be acquired on credit to maintain a Current Ratio of 2:1

Question .26.     Calculation the debt Equity Ratio from the following:-

Solution .26

Question .27      From the following, ascertain Debt – Equity Ratio:

Solution .27

Question .28.     Balance Sheet of X Ltd. shows the following information as at 31st March, 2016;

Calculate ratios indicating the loan-term and Short -term financial position of the Company.

Solution .28

(i) Long term financial position of the Company can be assessed by calculating Debt-Equity Ratio.

Question .29.     Calculate debt Equity Ratio from the following;

Solution .29

Long term Debts             = Long term Borrowings + Long term Provisions

= Rs. 16,00,000 + Rs. 1,50,000

= Rs. 17,50,000

Shareholder’s Funds     = Non-Current Assets + Working Capital – Non- Current Liabilities

Non- Current Assets     = Tangible Fixed Assets + Intangible Fixed Assets

=Rs. 24,50,000 + Rs. 3,00,000

=Rs. 27,50,000

Working Capital               = Current Assets – Current Liabilities

= Rs. 3,34,000 – Rs. 84,000

= Rs. 2,50,000

Non -Current Liabilities refer to Long term Debts Thus,

Shareholder’s Funds     = RS. 27,50,000 + RS. 2,50,000 – Rs. 17,50,000

= RS. 12,50,000

Question .30.     Calculate Debt Equity Ratio from the following:

Total Assets Rs. 2,30,000; Total Debts Rs. 1,50,000; Current Liabilities Rs. 30,000.

Solution .30

Question .31.     The Debt Equity ratio of a company is 1:2. Which of the following would increase, decrease or not change it?

i)        Issue of equity shares

iii)   Sale of Goods on Cash Basis

iv)  Repayment of long-term borrowing

v)  Purchase Goods on Credit

Solution .31

In the above question, Debt – Equity Ratio is given as 1:2, therefore, it may be assumed that Long term Debts are Rs. 1,00,000 and share holders’ fund shares worth Rs. 2,00,000.

(i) Issue of Equity Shares : Suppose equity shares worth Rs. 1,00,000 are issued them by the issue of Equity shares, shareholder’s Funds will be increases and will stand at Rs. 2,00,000 + Rs. 1,00,000 = Rs. 3,00,000 therefore, the revised ratio will be ;

Therefore, it can be concluded that increased in shareholder’s funds decreased the ratio.

(ii) Cash Received from Trade Receivables: By receiving cash from Trade receivables there will be affect on the cash and trade receivables only. Hence, there will be no change in debt equity ratio because neither the long – term debt nor the shareholder’s funds are affected.

(iii) Sale of goods on cash Basis: Goods sold on cash will affect only the Inventories and Cash. Hence, there will be no change in debt- equity ratio because neither the long -term debts nor the Shareholder’s Funds are affected.

(iv) Repayment of long term Borrowings: Suppose there is repayment of long term borrowings for Rs. 50,000 then by the repayment of long-term borrowing of Rs. 50,000, Long Term Debts will be reduced by Rs. 50,000 and these will stand at Rs. 1,00,000 – Rs. 50,000 = Rs. 50,000. Therefore, the revised ratio will be:

Before the repayment of long term borrowings,the ratio was 1:2 (or .5:1) which is  now Reduced to .25:1.it means that the ratio has decreased.

(v) Purchase of Goods on credit: Goods purchased on Credit will affect only the inventories and trade payables. Hence, there will be no change in debt- equity ratio because neither the long -term debts nor the Shareholder’s Funds are affected.

Question .32.     Assuming that the debt- equity ratio is 2:1, state giving reasons, which of the following transactions would (i) increase (ii) decrease (iii) not alter the debt-equity ratio:-

1. Issue of Preference Shares
2. Buy -back of its own shares by a Company
3. Issue of Debentures
4. Repayment of Bank Loan
5. Sale of a fixed assets at par
6. Sale of a fixed assets at profit
7. Sale of a fixed assets at loss
8. Purchase of a fixed assets on a credit of 3 months
9. Purchase of a fixed assets on long term deferred payment basis

Solution .32

Statement showing the effect of various transactions on Debt-Equity Ratio:-

Question .33.     Compute Total Assets to debt Ratio from the following information;

Solution .33

Question .34.     Calculate total Assets to debt ratio from the following information:

Solution .34.

Note: Reserve and Surplus will be ignored since it is already included in Shareholder’s fund

Question .35      From the following information, calculate total Assets to Debt Ratio:

Solution .35

Note: Surplus i.e., Balance is Statement of profit & loss will be ignored since it is already included in Reserve ad Surplus

Question .36    Total debt Rs. 40,00,000; Share Capital RS. 15,00,000; Reserve and Surplus RS. 8,00,000 ; current Liabilities RS. 5,00,000 Working Capital RS. 7,00,000. Calculate total assets to Debt ratio.

Solution .36

Total Assets to Debt ratio =(Total assets )/( Debt )
Total Term debts = Total Debts- current Liabilities
= Rs.40,00,000 – Rs.5,00,000
= Rs. 35,00,000

Total Assets    =total debt + Share Capital + Reserve and Surplus
=Rs. 40,00,000 + RS.15,00,000 + Rs. 8,00,000
= RS. 63,00,000

Total Assets to Debt Ratio = 63,00,000/( 35,00,000) = 1.8:1
Working capital will be ignored.

Question .37      Calculate total Assets to Debt ratio from the following:

Solution .37.

Question .38      Following particulars are extracted from the books of Bharat Rubber Ltd.

You are required to work out the following ratios:-

(i) Debt- Equity Ratio ; (ii)Total Assets; (iii) Proprietary Ratio; (iv) Quick Ratio

Solution .38

Question .39      Calculation (i) Debt Equity Ratio, (ii) Proprietary Ratio and (iii) Total Assets to Debt Ratio from the following information:

Solution .39

Question .40      Following particulars are given to you:

Solution .40

Question .41.     Calculate the value of Current Assets of X Ltd. from the following information:

Solution .41

Question .42.     The proprietary ratio of m Ltd. is 0.80:1.

State with reasons whether the following transactions will increase, decrease or not change the proprietary ratio:

i)                    Obtain a loan from bank Rs. 2,00,000 payable after five years.

ii)                   Purchased machinery for cash Rs. 75,000.

iii)                 Redeemed 5% redeemable preference shares RS. 1,00,000.

iv)                 Issued equity shares to the vendors of machinery purchased for Rs. 4,00,000.

Solution .42

Question .43.     From the following information, calculate interest coverage ratio and give your comments also:

Solution .43

Question .44.      The following particulars are given to you

Net Profit for the year after interest and tax was Rs. 96,000. Rate of Income Tax was 50 %.

Calculate (i) Debt Equity Ratio;

(ii) proprietary Ratio;

Solution .44

Comment:   Proprietary Ratio is only 20 % which means that the long term financial position of the company is not satisfactory because only 20% of the total assets of the company are funded by equity.

Comment: Normally, acceptable interest- coverage ratio is 6 or 7 times, where as the actual ratio for this company is 4. It means that the company may face difficulty in paying the interest on long- term loans regularly in case of fall of profits.

Question .45.      Calculate inventory turnover ratio from the following:

Solution .45

Question .46.      Calculate Inventory turnover Ratio from the following:

Solution  .46

Note : Carriage outwards, Salaries and Rent will by ignored while calculating Inventory Turnover Ratio.

Question .47.     Following is the Statement of Profit & Loss of Triveni Ltd. Calculate Inventory Turnover Ratio:

Solution .47

Note : Carriage outwards, Salaries and Rent will by ignored while calculating Inventory Turnover Ratio.

Question .48.     Calculate Inventory Turnover ratio and Average Age of inventory from the following:

Solution .48

Question . 49.     From the following data, calculate ‘Inventory turnover Ratio’ when gross profit is given 20%:

Solution . 49

Question .50.      Calculate the (i) Inventory Turnover Ratio and  (II) Average Age of Inventory from the following;-

Opening Inventory Rs. 54,000; Closing Inventory Rs. 66,000; Revenue from Operations (Sales) Rs. 5,00,000; Gross Profit Ratio 40% on Revenue from Operations.

Solution  .50

Question .51      Calculate Inventory Turnover Ratio from the following:

Opening Inventory Rs. 42,500; Closing Inventory Rs. 37,500; Revenue from Operations (Sales) Rs. 3,00,000; Gross Profit Ratio 30% on

Solution .51

Question .52      From the following information, Calculate Inventory Turnover Ratio:

Purchases RS. 10,00,000; Revenue from Operations (Sales) RS. 12,00,000; Direct Expenses RS. 48,000; Gross Profit Ratio 15% on Revenue from Operations; Closing Inventory RS. 1,64,000.

Solution .52

Question .53.     Calculate Opening Inventory from the following information:

Purchases RS. 5,70,000; Freight Rs. 20,000; Miscellaneous Expenses Rs. 10,000; Revenue from Operations (Sales) Rs. 5,00,000; Closing Inventory RS. 70,000;  Gross Loss 16% on Revenue from operations.

Solution .53

Cost of revenue from Operations          = Revenue from Operations (Sales) + Gross Profit

= Rs. 5,00,000 – 16% of 5,00,000 = Rs. 5,80,000

Cost of revenue from Operations          Opening Inventory + Purchases + Freight – Closing Inventory

Rs. 5,80,000                         = Opening Inventory + RS. 5,70,000 + RS. 20,000 – Rs. 70,000

RS. 5,80,000                         = Opening Inventory + RS. 5,20,000

Opening Inventory                 = Rs. 60,000

Question  .54.      From the following information, calculate Inventory Turnover Ratio:

Revenue from Operations (Sales) Rs. 4,00,000, Average Inventory: RS. 55,000. The rate of Gross Loss on Revenue from Operations was 10%.

Solution .54

Question .55.     Compute Inventory Turnover Ratio from the following:

Solution .55.

Cost of revenue from Operations          = Opening Inventory + Purchases + Direct Charges (i.e., Wages, carriage Inwards) – Closing Inventory

Rs. 5,60,000                                     = Rs. 75,000 + Rs. 4,40,000 + RS. 1,30,000 + Rs. 15,000 – Closing Inventory

Closing Inventory                               = RS. 6,60,000 = RS. 5,60,000 + Closing inventory

Question .56      From the give information, calculate the Inventory turnover Ratio:

Revenue from Operations (Sales) Rs. 2,00,000; G.P.: 25%; Opening Inventory was 1/4Th of the value of Closing Inventory. Closing Inventory was 40% of Revenue from Operations.

Solution . 56       Cost of revenue from Operations             = Revenue from operations – Gross profit

= RS. 2,00,000 – 25% of 2,00,000

= RS. 2,00,000 – RS. 50,000= RS. 1,50,000

Question .57.     Calculate Inventory Turnover Ratio from the following:

Solution .57

Gross Profit is 25% on cost. Therefore, goods costing RS. 100 is sold for RS. 125.

Hence, if Revenue from Operations are Rs. 125,

Cost of Revenue from Operations = Rs. 100

If Revenue from Operations are Rs. 10,00,000

Question .58.

Find out the value of Closing Inventory, If Closing Inventory is RS. 16,000 more than the Opening Inventory.

Solution .58

Question .59

Calculate the value of opening and closing Inventory in each of the follow alternative cases:

Cast I: If Closing inventory was RS. 1,00,000 in excess of opening inventory.

Case II: If closing inventory was 2 times that in the beginning.

Case III: If closing inventory was 2 times more than that in the beginning.

Case IV: If Closing inventory was 3 times that in the beginning.

Solution .59

Question .60(A)               RS. 3,00,000 is the cost of Revenue from Operations (Cost of Goods Sold), Inventory turnover 8 Times; Inventory at the Beginning is 2 times more than that inventory at the end. Calculate the value of opening & Closing Inventory.

Solution  .60(A)

Question .60 (B).             RS. 1,50,000 is the cost of Revenue from Operations, Inventory turnover 8 times; Inventory at the beginning is 1.5 times more than the inventory at the end. Calculate the value of Opening & Closing Inventory.

Solution .60 (B)

Question .61.  Average Inventory carried by a trader is Rs. 60,000; Inventory turnover ratio is 10 times. Goods are sold at a profit of 10% on cost. Find out the profit.

Solution .61

Question .62.     Determine the amount of Revenue from operations from the following particulars:-

You are informed that closing inventory is two times in comparison to opening inventories.

Solution .62

Cost of Revenue from Operations        = 6 × 60,000 = Rs. 3,60,000

Revenue from Operations add a profit of 20% on sales.

Goods costing RS. 80 which have been sold for Rs. 100. As such:

If Cost of Revenue from operations is Rs. 80, revenue from Operations are 100.

If Cost of Revenue from Operations is 3,60,000, Revenue from Operations are   100/80× 3,60,000 = RS. 4,50,000

Question .63.     A company’s Inventory turnover is 5 Times. Inventory at the end of the year is RS. 4,000 more than inventory at the beginning of the year. Revenue from Operations during the year (all credit) were RS. 3,00,000. Rate of Gross Profit is 25% on cost of Revenue from Operations. Current Liabilities at the end of the year were RS. 50,000. Question uick Ratio is 1:1. Calculate: -

(i) Cost of revenue from operations (Cost of Goods Sold)

(ii) Opening Inventory.

(iii) Closing Inventory.

(iv) Question uick Assets.

(v) Current Assets at the end.

Solution .63

Gross profit is 25% od cost. Therefore, goods costing RS. 100 is sold for RS. 125.

If Revenue from Operations are 125, Cost is 100

Current Liabilities are RS. 50,000 and Quick Ratio is 1 Therefore,

(iv) Quick Assets                                 = RS. 50,000 × 1 = Rs. 50,000

(v) Current Assets                                             = Quick Assets + Closing Inventory

= RS. 50,000 + Rs. 50,000 = RS. 1,00,000

Question .64.     Following information is given to you:

On the basis of the information given above, calculate any two of the following ratios:

(i) Liquid Ratio,

(ii) Inventory Turnover Ratio, and

(iii) Debt Equity Ratio.

Solution .64

Question .65.     Calculate inventory turnover ratio from the following : Opening inventory RS. 20,000; Purchases Rs. 2,40,000 and Closing Inventory RS. 60,000. State, giving reason, which of the following transactions will (a) increase (b) decrease or (c) not alter the inventory turnover ratio:

(i) Goods purchased for Rs. 40,000.

(ii) Sale of goods for Rs. 25,000 (Cost RS. 30,000).

(iii) Decreases in the value of closing inventory by Rs. 20,000.

(iv) Increase in the value of closing inventory by Rs. 10,000.

(v) Goods costing Rs. 5,000 distributed as free sample.

Solution .65

Question .66.     Calculate trade receivables Turnover ratio from the following;-

Solution .66

Question .67      Calculate Trade receivables Turnover Ratio and Average Collection period from the following:

Solution .67

Question . 68     Calculate Trade Receivables Turnover and Average Collection period from the following:

Solution .68

In order to ascertain the Trade Receivables Turnover ratio, the figure of Credit Revenue from Operations will have to be ascertained. It is as follows:

If credit revenue from operations are 100, Cash revenue from operations will be 20 Therefore, Total revenue from operations will be 100 + 20 = 120

Again, if total revenue from operations are 120,

Credit revenue from operations=100

If total revenue from operations are 4,80,000,

It is to be noted that any fraction of a day such as .48 would, in practice, mean that the payment will be received next day. Hence, in the above case, 68.48 days would imply 69 days.

Question .69.      Calculate Trade Receivables Turnover Ratio and Average Collection Period from the following figures:-

Solution .69

Question .70.      From the following particulars determine the Opening Trade Receivables:-

Credit Revenue from Operations                                                                          RS. 4,32,000

Trade Receivables turnover Ratio                                                                         12 Times

Solution .70

Calculation of closing receivables:

=RS. 36,000 × 2= Rs. 72,000

As Closing Trade Receivables = Rs. 40,000,

Opening Trade Receivables = Rs. 72,000 – Rs. 40,000 = Rs. 32,000.

Question .71    Credit Revenue from operations of X Ltd. during the year ended 31st March, 2016 were Rs. 5,64,000. If trade receivables turnover ratio is 6 times, calculate trade receivables in the beginning and at the end of the year. Trade Receivables at the end were Rs. 10,000 more than that at the beginning of the year.

Solution .71

Question .72      A company made Credit Revenue Credit from Operations of Rs. 8,76,000 during the year ended 31st March, 2016. If Trade Receivables Turnover Ratio is 18.25 rimes calculate:

Solution .72

Question .73.     Calculate the amount of Opening Trade Receivables and Closing Trade Receivable from the following particulars:

Solution .73

Question .74.     Calculate closing Trade receivables from the following information:

Solution .74

Question .75.     Following figures have been obtained from the books of Pawan roadways Ltd:

Calculate the Trade Receivables Turnover Ratio. Also Calculate Inventory turnover Ratio. Give necessary Comments.

Solution .75

Comment: 1.

In 2017, Trade Receivables Turnover ratio has increased from 6 times to 7.5 times. It indicates that amount from trade receivables is being collected more quickly.

2. In 2017, Inventory Turnover Ratio has also increased. It indicates that inventory is being rotated into revenue from operations more quickly. As such, the sales policy of the management is quite efficient.

Question .76.     Calculate trade receivables turnover ratio from the following:

State given reason, what will be the effect of the following on trade receivables turnover ratio:

(i) Received Rs. 20,000 from a customer.

(ii) sale of goods on credit Rs. 30,000.

(iii) cash revenue from operations Rs. 40,000.

Solution .76

Question .77      Calculate Trade Payable Turnover Ratio and Average Payment period of the following:

Solution .77

Question .78      On the basis of the following information calculate (I) trade Receivables Turnover Ratio; (ii) Average Collection period; (iii) trade Payables Turnover Ratio and (iv) Average Payment Period.

Solution .78

Question .79.     Calculate Working Capital Turnover Ratio from the following:

Solution .79.

Net Revenue from Operations           =Credit Revenue from Operations + Cash Revenue from operations- Revenue from Operations return

= Rs. 8,00,000 + Rs. 12,60,000 – Rs. 80,000

= Rs. 19,80,000

Working Capital                                =Current Assets – Current liabilities

= Rs. 7,20,000 – Rs. 3,24,000 = Rs. 3,96,000

Question .80      Calculate Working Capital Turnover Ratio from the following:

Solution .80

Current Assets = Inventory + Trade receivables + cash

= Rs. 6,00,000 + Rs. 5,00,000 + Rs. 1,00,000

= Rs. 12,00,000

Current Liabilities             = Trade Payables + Bank Overdraft

= Rs. 2,00,000 + Rs. 1,20,000

= Rs. 3,20,000

Working Capital                        =Current Assets – Current liabilities

= Rs. 12,00,000 – Rs. 3,20,000

= Rs. 8,80,000

Question .81.     Calculate Working Capital Turnover Ratio from the following information:

Solution .81

Question .82.     Calculate Working Capital turnover Ratio from the following information:

Solution .82

Question .83      Following information is Given to you:

Calculate:

1. Revenue from operations
1. Working Capital
2. Current Assets.

Solution .83

Question .84.     Calculate Working Capital Turnover Ratio from the following:

Solution .84

Question .85.(A)               Calculate Gross profit Ratio from the following figures: -

Solution .85(A)

Question .85. (B)              The following figures have been taken from the published accounts of G. Associates for the successive years:

Comment upon the profitability for the two years.

Solution .85(B)

Comment: Gross Profit Ratio has decreased considerably, which indicates that the price of  materials Purchased, wages and other direct changes ,may have gone up but the sales price may not have increased in the same proportion.

Question .86(A)                Calculate Gross Profit Ratio from the following figures: -

Opening Inventory Rs. 40,000; Closing Inventory Rs. 60,000; Purchases Rs. 7,10,000; Return Outwards Rs. 10,000; Wages Rs. 80,000; Cash revenue from Operations Rs. 3,45,000; Credit Revenue from operations Rs. 6,30,000; return Inward Rs. 25,000.

Solution .86(A)

Question .86 (B)               Calculate Gross profit Ratio from the following figures: -

Cash Revenue from Operations Rs. 4,20,000; Credit Revenue from Operations Rs. 6,00,000; Revenue from Operations Returns Rs. 20,000; Cost of Revenue from Operations Rs. 7,50,000.

Solution .86(B)

Question .87.     Calculate G.P. ratio from the following: -

Net profit Rs. 40,000; Office Expenses Rs. 20,000; Selling Expenses Rs. 36,000; Net Revenue from Operations Rs. 6,00,000.

Solution .87

Question .88.     Calculate G.P. Ratio from the following: -

Solution .88.

If total Revenue from Operations is Rs. 100, Cash revenue from operations will be and credit revenue from operations Rs. 80.
Hence, If credit revenue from operations is Rs. 80 total Revenue from operations will be = (100 )/80   × 2,40,000 = Rs. 3,00,000
Cost of Revenue from operations = purchases + Excess of Opening Inventory over Closing Inventory
=Rs. 2,20,000 – Rs. 14,000 =Rs. 2,34,000
Gross Profit = Total Revenue from Operations – Cost of Revenue from Operations
= Rs. 3,00,000 – Rs. 2,34,000 = Rs. 66,000

Question .89         Calculate G.P. Ratio from the following: -
Credit Revenue from operations were  (1 )/4 th of Total Revenue from Operations. Credit Revenue from Operations were Rs. 1,20,000. Credit Purchases were   (1 )/5 th of cash Purchases. Credit Purchases were Rs. 40,000. Opening Inventory Rs. 70,000. It was Rs. 20,000 more than Closing Inventory; Carriage Rs. 15,000, Wages Rs. 45,000.
Solution .89

Step i. If Credit Revenue from Operations is Rs. 1,
Total revenue from Operations will be Rs. 4
If Credit Revenue from Operations is RS. 1,20,000,
Total Revenue from Operations will be Rs. 1,20,000 × 4 = Rs. 4,80,000

Step ii. If Credit Purchases is Rs. 1, Cash purchase will be RS. 5 and hence total Purchases will be Rs. 6.
If credit Purchases is RS. 1, total purchases = Rs. 6
If Credit Purchase is Rs. 40,000, Total Purchases = (Rs.6 )/(Rs.1) × Rs. 40,000 = Rs. 2,40,000

Step iii. Cost of Revenue from Operations = Opening Inventory + Purchase + Carriage + Wages – Closing Inventory
= Rs. 70,000 + Rs. 2,40,000 + Rs. 15,000 + Rs. 45,000 – Rs. 50,000
= Rs. 3,20,000
Gross profit = Total Revenue from Operation – Cost of Revenue from Operations
= Rs. 4,80,000 – Rs. 3,20,000
=1,60,000

Question .90      Compute the Gross Profit Ratio from the following:

Revenue from Operations (Sales) Rs. 5,60,000; Gross Profit 40% on cost.

Solution .90

Gross Profit is 40% of Cost

Therefore, goods costing Rs. 100 must have been sold for Rs. 140

Hence, If Revenue from operations are Rs. 140, G.P. = Rs. 40

Question .91 (A)            A company earns a gross profit of 25% on cost. Its credit revenue from operations are twice its cash revenue from operations. If the credit revenue from operations ae Rs. 8,00,000, calculate the gross profit ratio of the company.

Solution .91(A).

Question .91 (B)             Gross Profit of a Company is 20% of Cost of revenue from operations. Its Cash Revenue from Operations are 1/3rd of its Credit revenue from operations. Calculate the G.P. Ratio if the Cash Revenue from Operations are Rs. 3,00,000.

Solution .91(B)

Question .92      Following information is available for the year ending 31st March, 2018. Calculate gross profit ratio:

Solution .92

Net Revenue from operations   = Cash revenue from operations + Credit Revenue from Operations

= Rs. 25,000 + Rs. 75,000 = Rs. 1,00,000

Net Purchases   = Cash Purchases + Credit Purchases – Return Outwards

= Rs. 15,000 + Rs. 60,000 – Rs. 2,000 = Rs. 73,000

Cost of Revenue from operations            = Purchases + (Opening Inventory – Closing Inventory) + Direct expenses Purchases + Decrease in inventory + Carriage inwards = wages

= Rs. 73,000 + Rs. 10,000 + Rs. 2,000 + Rs. 5,000

= Rs. 90,000

Gross profit        = Revenue from Operations – Cost of Revenue from operations

= Rs. 1,00,000 – Rs. 90,000

= Rs. 10,000

Question .93    Average Inventory Rs. 60,000; Inventory Turnover Ratio 5 Times; Selling price 40% above cost. Calculate Gross Profit Ratio.

Solution  .93

Question .94.     Given the following information:

Calculate Gross profit Ratio and Operating Ratio.

Solution .94

Gross Profit                                             = Revenue from Operations – Cost of Revenue from Operations

= Rs. 3,40,000 – Rs. 1,20,000

= Rs. 2,20,000

Question .95.     From the following information, calculate Operating Ratio:

Solution .95

Question .96.     Calculate operating ratio from the following;

Solution .96

Question .97      Compute operating Ratio from the following Statement of Profit and Loss of X Ltd. for the year ended 31st march ,2018:

Solution .97

Question .98      Calculate Cost of Goods Sold from the following information:

Solution .98

Hence, Cost of Revenue from Operations + Operating Expenses         = 90% of Net Revenue from Operations

Cost of Revenue from Operations + Rs. 30,000 + Rs. 20,000            = 90% of Rs. 6,60,000

Cost of Revenue from Operations + Rs. 50,000                                = Rs. 5,94,000

Cost of Revenue from Operations                                                    =Rs. 5,94,000 -Rs.50,000

= Rs. 5,44,000

Question .99      Calculate Operating Ratio Profit ratio in the following cases;

Solution .99

Question .100.     Calculate Operating Profit Ratio from the following:

Revenue from Operations                                           RS. 7,00,000

Gross profit                                                                  40% on Cost

Office and Administrative Expenses                           Rs. 30,000

Selling expenses                                                          Rs. 16,000

Interest on debentures                                                Rs. 8,000

Solution .100

Question .101.   From the following information calculate operating profit Ratio?

Opening Stock Rs. 10,000; Purchases Rs. 1,20,000; revenue from Operations Rs. 4,00,000; Purchase Return Rs. 5,000; return from Reserve from operations Rs. 15,000; Selling expenses Rs. 70,000; Administrative EXPENSES Rs. 40,000; Closing Stock Rs. 60,000.

Solution .101

Net Revenue from Operations                 = Rs. 4,00,000- Rs. 15,000 = Rs. 3,85,000

Cost of revenue from operations             = Rs.. 4,00,000 – RS. 15,000 = Rs. 3,85,000

Cost of revenue from Operations             = Opening Stock + purchases – Purchases returns – Closing Stock

= Rs. 10,000 + Rs. 1,20,000 – Rs. 5,000 – RS. 60,000 = Rs. 65,000

Gross Profit                                           = Net Revenue from operations – Cost of Revenue from operations

=Rs. 70,000 – Rs. 40,000

= Rs.  1,10,000

Operating Expenses                               = Selling Expenses + Administrative Expenses

= Rs. 70,000 + Rs. 40,000

= Rs. 1,10,000

Question .102.   Calculate (i) operating profit Ratio and (ii) Net profit Ratio from the following:-

Solution . 102.

Question .103    Calculate (i) Gross Profit Ratio, (ii) Operating Ratio, (iii) Operating profit Ratio, (iv) Inventory Turnover Ratio and (v) Working Capital Turnover Ratio from the following figures:

Solution .103.

Question .104                 Gross Profit Ratio of a Company was 25%. Its cash revenue from operations were Rs. 5,00,000 and its credit revenue from operations were 90% of the total revenue from operations. If the indirect expenses of the company were Rs. 1,50,000, calculate its net profit ratio.

Solution .104      Credit revenue from operations were 90% of total revenue from Operations.

It means cash revenue from operations were 10% of total revenue from operations.

If cash revenue from operations were 10, total revenue from operations were 1000

If cash revenue from operations were RS. 5,00,000. Total revenue from operations were

Question .105    Calculate Net Profit ratio from the following information:

Revenue from Operations Rs. 25,00,000; Operating Ratio 90%; Loss on Sale of Fixed Assets Rs. 25,000; Interest on Long term Borrowings RS. 30,000; Income from Investments RS. 40,000.

Solution .105

Question .106.   Following is the Balance Sheet of Ganesh Ltd. as at 31st March, 2018:

Solution .106

Question .107    Calculate Return on Capital Employed from the following:

Net Profit before tax Rs. 2,50,000.

Solution .107

Question .108.                Net Profit after Interest but before Tax Rs. 65,000; Shareholder’s Funds Rs. 3,00,000; 15 % Long Term Debt RS. 1,00,000. Calculate Return on Investment.

Solution .108

Question .109.                Net Profit after interest and tax RS. 4,20,000, Current Assets Rs. 12,00,000; Current Liabilities Rs. 4,00,000; Tax Rate 30%; Fixed Assets Rs. 22,00,000; 9% Long Term debt Rs. 5,00,000.

Solution .109

Question .110.   Calculate ‘Return on capital Employed’ from the following details:

Gross Profit Rs. 2,70,000; Administration Expenses Rs. 60,000; Selling Expenses Rs. 30,000; 12% Long Term Debts Rs. 2,00,000; Tax Rate 40%; Non- Current Assets Rs. 6,00,000; Current Assets Rs. 2,00,000; and Current Liabilities RS. 50,000.

Solution .110

Question .111.   Calculate return on Investment from the following:-

Solution .111

Question .112.   Calculate Return on Investment from the following details:-

Solution .112

Question .113.                A Company has a loan of RS. 30,0,000 as Part of its capital employed. Interest payable on the loan is 12% and the R.O.I. of the company is 25%. The rate of income tax is 49%. What is the gain to shareholders due to the loan raised by the company?

Solution .113

Question .114.   Following particulars are obtained from the books of Assam Tea Ltd. as at 31st march, 2018:-

Solution .114.

Question .115    On the basis of the following information calculate (i) Liquid Ratio, (ii) Gross Profit Ratio and (iii) Operating Ratio:

Solution .115

Question .116    Calculate any three of the following ratios with the help of the following information:

(i) Operating Ratio, (ii) Current Ratio, (iii) gross Profit Ratio, (iv) inventory Turnover Ratio; and (v) Debt Equity Ratio.

Information: Equity Share Capital Rs. 5,00,000; 12% Debentures RS. 6,00,000; 9% Preference Share Capital Rs. 3,00,000; General reserve Rs. 1,00,000; Reserve from Operations RS. 10,00,000; Opening Inventory RS. 80,000; Purchases Rs. 6,00,000; Wages Rs. 1,00,000; Closing Inventory RS. 1,00,000; Selling and Distribution expenses Rs. 20,000; Other current assets Rs. 5,00,000 and Current liabilities RS. 3,00,000.

Solution .116

Question .117    Calculate Current Ratio and Question uick Ratio from the following Balance Sheet: -

Solution .117

Question .118.   Following is the Balance Sheet of Vikas Ltd. as at 31st March, 2018:

Solution .118

Short Term financial position can be ascertained by analyzing its Liquidity Ratios.

Liquidity Ratio include the following two ratios:

(a)    Current Ratio and (b) Quick Ratio

Comments: Short Term finance position of the company is sound because its Current Ratio is 3:1 which is more than the ideal ratio of 2:1. Similarly, quick ratio is 1.7:1 which is more than the ideal ratio of 1:1.

Question .119.   Comment upon the short-term financial position of the basis of the following:

Goodwill Rs. 1,00,000; Sundry Debtors Rs. 2,50,000; Machinery Rs. 4,00,000; Inventory RS. 5,00,000; Bills Payable RS. 30,000; Sundry Creditors Rs. 4,20,000; Prepaid Expenses Rs. 25,000; Cash Rs. 40,000; Marketable Securities Rs. 80,000; Bills Receivables Rs. 30,000; Debentures Rs. 1,00,000; Expenses Payable Rs. 10,000; Lice Stock Rs. 50,000; Patents RS. 20,000; Provision for Taxation Rs. 40,000.

Solution .119

Short term financial position can be commented upon with the help of Liquidity Ratios. Liquidity Ratios include the following two ratios:

(a)    Current Ratio and (b) Quick Ratio

Comments: Short Term finance position of the company is unsatisfactory because its Current Ratio is 1.85:1 which is less  than the ideal ratio of 2:1. Similarly, quick ratio is .8:1 which is more than the ideal ratio of 1:1.

Question .120.                Current Liabilities of a Company were Rs. 80,000 and its Current Ratio was 2.5:1. After this,, it purchased goods for Rs. 40,000 on Credit. Calculate the revised Current Ratio.

Solution .120

Question .121.                Current Assets of a Company are Rs. 3,06,000 and its Current ratio is 1.8. Afterwards, it issued new equity shares of RS. 1,00,000. Calculate the revised current ratio.

Solution .121

Question .122.     The Current Ratio of a Company is 0.8:1. State giving reasons which of the following transactions would (i) Improve (ii) Reduce; (iii) Not Change; the Current Ratio:

(a) Payment of Outstanding liabilities

(b) Purchase of goods on Credit.

(c) Sale of furniture costing RS. 10,000 at a loss of RS. 2,000.

(d) Sale of goods costing RS. 15,000 at a profit of RS. 1,000.

(e) Payment of dividend payable.

Solution .122

Question .123.   The Quick ratio of a company is 0.8:1. State with reason whether the following transactions will increase, decrease or not change the quick ratio:

(1)    Purchase of loose tools Rs. 2,000.

(3)    Sale of goods on Credit Rs. 3,000.

(4)    Honoured a bills payable of Rs. 5,000 on maturity.

Solution .123.

Question .124    The quick ratio of a company is 1:1. State giving reasons, which of the following would improve, reduce or not change the ratio?

I.            Purchase of machinery for cash

II.            Purchase of goods on Credit

III.            Sale of furniture at cost

IV.            Sale of goods at a profit

V.            Redemption of debentures

Solution .124

Question .125.                Current Assets Rs. 5,00,000; Working Capital RS. 3,00,000. Calculate Current Ratio.

Solution .125

Question .126.                Current Liabilities RS. 20,000; Working Capital Rs. 80,000. Calculate Current Ratio.

Solution .126

Question .127.         Current Ratio 3:1; Current Assets Rs. 60,000. Calculate Current Liabilities.

Solution .127

Question .128.                Current Ratio 4.2:1; Current Liabilities Rs. 2,00,000. Calculate Current assets.

Solution .128

Question .129.   Quick Ratio 2:1; Current Liabilities RS. 2,00,000; Inventory Rs. 1,60,000.

Calculate Current Ratio.

Solution .129

Question .130.                Liquid Ratio 7:3; Current Liabilities Rs. 75,000; Inventory Rs. 25,000. Calculate Current Ratio.

Solution .130

Question .131.                Quick ratio 1.6:1; Liquid Assets Rs. 4,80,000; Inventory RS. 1,50,000. Calculate Current Ratio.

Solution .131

Question .132.                Quick ratio 3; Current Assets Rs. 2,50,000; Inventory RS. 40,000. Calculate Current Liabilities.

Solution .132

Question .133.                Quick ratio 2.2; Current Liabilities Rs. 40,000; Inventory RS. 32,000. Calculate Current Assets.

Solution .133

Question .134.             Current Assets RS. 1,00,000; Inventory RS. 55,000; Working Capital Rs. 70,000. Calculate Quick

Solution .134.

Question .135.             Current Liabilities Rs. 80,000; Working Capital Rs. 1,70,000; Inventory Rs. 85,000; Prepaid Expenses RS. 5,000. Calculate Question uick Ratio.

Solution .135

Question .136.           Current Ratio 3:1; working Capital Rs. 4,00,000; Inventory Rs. 2,50,000. Calculate Current Assets, Current Liabilities, Quick Ratio.

Solution .136

Question .137            Current Ratio 3.6:1; working Capital RS. 84,000; inventory RS. 50,000. Calculate Current Assets, Current Liabilities; Quick Ratio.

Solution .137.

Question .138.          Current Ratio 5:2; Quick Ratio 2:1; Current Liabilities Rs. 5,60,000. Calculate the value of inventory

Solution .138

Question .139.          Current Ratio 3:1; Acid Test Ratio 0.9:1; Current Liabilities Rs. 1,20,000.

Calculate Current Assets; Liquid Assets and Inventory.

Solution .139

Question .140.             Current Ratio 2.5:1; Question uick Ratio 1:1; Current Assets RS. 5,00,000. Calculate Current Liabilities; Liquid Assets and Inventory.

Solution .140

Question .141.                Current Ratio 3:1; Question uick Ratio 1.2:1; Working Capital Rs. 1,50,000. Calculate Current Assets, Current Liabilities and Inventory.

Solution .141

Question .142.                 Current Ratio 2.2:1; Acid Test Ratio .95:1; Working Capital Rs. 36,000. Calculate Current Assets, Current Liabilities and Inventory.

Solution .142

Question .143.                Current Ratio 3.5:1; Question uick Ratio 2:1; Inventory Rs. 24,000. Calculate Current Assets; Current Liabilities and Question uick Assets.

Solution .143

Question .144.             Current Ratio 2.8:1; Liquid Ratio 1.6:1; Inventory Rs. 48,000. Calculate Current Assets; Current Liabilities and Liquid Assets.

Solution .144

Question .145.              Current Ratio 2.6:1; Current Assets Rs. 1,95,000; Inventory Rs. 90,000. Calculate Acid Test Ratio.

Solution .145

Question .146            The ratio of Current Assets (Rs. 9,00,000) to Current Liabilities is 1.5:1. The accountant of this firm is interested in maintaining a Current Ratio of 2:1 by Paying some part of Current Liabilities. You are required to suggest him the amount of Current Liabilities which must be paid for this purpose.

Solution .146

Therefore, Current Liabilities of Rs. 3,00,000 must be paid maintain the Current Ratio of 2:1.

Question .147.   From the following, calculate the Debt- Equity Ratio and Current Ratio: -

Solution .147

Question .148.   From the following information, calculate the Debt- Equity Ratio and Current Ratio: -

Solution .148

Question .149.   From the following, ascertain Debt- Equity Ratio and Proprietary Ratio:-

Solution .149

Question .150    Calculate Current Ratio, Quick Ratio, Debt- Equity Ratio and the Proprietary Ratio from the figure given below:-

Solution .150.

Question . 151   The following balance are extracted from thr books of Rajhans Products Ltd.as at 31st March, 2018: -

Net Profit after Payment of interest and income tax amounted to Rs. 60,000. Rate of Income Tax 50%.

i. Current Ratio;

ii. Proprietary Ratio;

iii. Total Assets to Debt Ratio;

iv. Interest Coverage Ratio.

Solution . 151

Comment:     Interest coverage ratio of the company is satisfactory because, the interest coverage ratio is equal to the acceptable interest coverage ratio of 6 or 7 times.

Question .152       Assuming that Debt to Equity Ratio is 0.5:1, state, giving reasons, whether this ratio will increase or decrease or will have no change in each one of the following cases:

(i) Issue of preference Share for Cash.

(ii) Issue of Debentures for Cash.

(iii) Issue of bonus Shares.

(iv) Redemption of debentures for cash.

(v) Conversion of Debentures into Equity Shares.

(vi) Purchase of a fixed assets for cash.

(vii) Purchase of a fixed assets by taking long term loan.

(viii) sale of fixed assets (Book value Rs. 5,00,000) for Rs. 4,00,000.

(ix) Sale of Fixed assets (Book value Rs. 2,00,000 ) at a profit of Rs. 50,000.

Solution .152

Question .153.                The net profit after interest and tax of a company was Rs. 1,20,000; Rate of income tax is 40%. The company has 10% debentures of Rs. 1,00,000. Calculate interest coverage ratio.

Solution .153

Question .154    Following is the Balance Sheet of Vikas Ltd. as at 31st March, 2018:

Solution .154

Question .155.   Calculate (i) Inventory Turnover Ratio; (ii) Average Age of Inventory and (iii) Working Capital Turnover Ratio from the following details: -

Cash & Cash Equivalents                                                                                                                    1,00,000

Outstanding Expenses                                                                                                                          20,000

Solution .155.

Question .156    From the following details, calculate Inventory Turnover Ratio: -

Solution .156

Question .157.   From the following details, calculate Inventory Turnover Ratio:-

Solution .157

Question .158.                Opening Inventory Rs. 19,000; Closing Inventory Rs. 21,000; Revenue from Operations Rs. 2,00,000; Gross Profit Ratio 25%. Calculate Inventory Turnover Ratio.

Solution .158

Question .159.             Opening inventory Rs. 28,000; Closing inventory Rs. 52,000; Revenue from Operations Rs. 6,00,000; Gross profit 331/3% on Revenue from operations. Calculate Inventory Turnover Ratio.

Solution .159

Question .160.     Opening Inventory Rs. 28,000; Closing Inventory Rs. 52,000; Revenue from Operations Rs. 6,00,000; Gross Profit 331/3% on cost. Calculate Inventory Turnover Ratio.

Solution .160

Question .161.      Opening Inventory Rs. 29,000; Purchases Rs. 2,42,000; Revenue from Operations Rs. 3,20,000; Gross profit Ratio is 255 on revenue from Operations. Calculate Inventory Turnover ratio.

Solution .161

Question .162.            Closing Inventory Rs. 22,000; Purchases Rs. 1,48,000; Purchase Return Rs. 8,000; Carriage Rs. 4,000; Revenue from Operations (Sales) Rs. 1,90,000; Revenue from Operations Return (Sales Return) Rs. 10,000; Gross Profit 20% on cost. Calculate Inventory Turnover Ratio.

Solution .162

Since figure of opening inventory is not given, it may be calculated as follows:

Cost of revenue from operations  = Opening Inventory + Purchases – Carriage- Closing Inventory

Hence, Opening Inventory          = Cost of reserve from Operations – Purchases – Carriage + closing Inventory

= RS. 1,50,000 – Rs. 1,40,000 – 4,000 + 22,000

=Rs. 28,000

Question .163.      From the following data, calculate Inventory turnover ratio: -

Total Revenue from Operations (Total sales) Rs. 4,00,000; Revenue from Operations Return (Sales Returns) Rs. 34,000; Gross Profit Rs. 80,000; Closing Inventory Rs. 52,000; Excess of closing Inventory over Opening Inventory Rs. 16,000.

Solution .163

Question .164.   Find out the value of opening inventory from the following particulars: -

You are informed that closing inventory is Rs. 8,000 more than the opening inventory.

Solution .164

Question .165.                From the following details, calculate (i) Opening Inventory; (ii) Closing Inventory: Inventory Turnover Ratio 6 times; Gross Profit 20% on Revenue from Operations; Revenue from Operations Rs. 1,80,000; Closing Inventory is RS. 15,000 in excess of Opening Inventory.

Solution .165

Question .166.                Rs. 6,30,000 is the cost of revenue from operations of a firm for the year 2018. If inventory turnover ratio is 7 times, calculate inventory at the end of the year. Inventory at the end is twice than that in the beginning.

Solution .166.

Question .167           Rs. 1,50,000 is the cost of revenue from operations of a firm for the year 2014. If inventory turnover ratio is 6 times, calculate inventory at the end of the year. Inventory at the end is 1.5 times than that in the beginning.

Solution .167

Question . 168     Following figures have been extracted from Shivalik Mills Ltd.:  -

Solution .168

Question .169    Calculate current assets of a company from the following information:

1. Inventory turnover 4 times.
2. Inventory in the end is Rs. 20,000 more than inventory in the beginning.
3. Revenue from Operations Rs. 3,00,000.
4. Gross profit ratio 20%.
5. Current Liabilities Rs. 40,000
6. Question uick ratio 0.75.

Solution .169

Question .170    Following are the details available: -

If the closing inventory is more by Rs. 4,000 than opening inventory, determine the following: -

(i) Opening Inventory (ii) Liquid Ratio

Solution .170

Question .171    From the following information, calculate Trade Receivables Turnover Ratio :

Solution .171

Question .172    From the following information, calculate trade receivables turnover ratio and average collection period: -

Solution .172

Question .173.     Calculate Trade Receivables turnover ratio from the following: -

Credit Revenue from operations for the year RS. 60,000, Debtors Rs. 5,000, Bill Receivables RS. 5,000

Solution .173

Question .174.                Closing Trade Receivables RS. 4,00,000; Cash Revenue from Operations being 25% of credit Revenue from Operations. Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 2,00,000. Total Revenue from Operations Rs. 15,00,000. Calculate Trade Receivables Turnover Ratio.

Solution .174

Question .175.                Opening Trade Receivables Rs. 3,60,000; Cash Revenue from Operations being 20% of Credit Revenue from Operations. Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 60,000. Cost of Revenue from Operations Rs. 18,00,000; Gross Profit Rs. 5,40,000. Calculate Trade Receivables Turnover Ratio.

Solution .175

Question .176.                Opening Trade Receivables Rs. 10,000; Total Revenue from Operations (Total Sales) Rs. 4,00,000; Cash Revenue from Operations being 2/5th of total Revenue from operations; Revenue from Operations Return (Sales Return) Rs. 60,000 (1/3rd out of cash Revenue from Operations); Closing Trade Receivables were four times than that in the beginning. Calculate Trade Receivables Turnover Ratio and Average Collection period.

Solution .176

Question .177.      Credit Revenue from Operations RS. 5,60,000; Trade Receivables Turnover Ratio 7 times; Closing Trade Receivables were three times than that in the beginning. Calculate opening and closing trade receivables.

Solution .177

Question .178.      Credit Revenue from Operations RS. 6,00,000; Trade Receivables Turnover Ratio 8 times; Closing Trade Receivables were 1.5 times than that in the beginning. Calculate opening and closing trade receivables.

Solution .178

Question .179.   Calculate the amount of opening Trade Receivables and Closing Trade Receivables from the following: -

You are informed that closing trade receivables were three times than that in the beginning. Cash Revenue from Operations being 25% of Credit Revenue from Operations.

Solution .179.

Question .180.    From the following particulars determine the Closing Debtors: -

Solution .180

Question .181.   From the following Balance Sheet and other information, calculate any three of the following ratio:-

i. Debt – Equity Ratio,

ii. Proprietary Ratio,

iii. Total Assets to Debt Ratio,

iv. Working Capital Turnover Ratio,  and

Other Information: -

Revenue from operations during the year amounted to Rs. 1,80,000.

Solution .181

Question .182.   Following Particulars are obtained from the books of A Ltd. as on 31.3.2018: -

(a)    Working Capital Ratio

(b) Debt equity Ratio and

(c) Trade Receivables Turnover Ratio if Credit revenue from Operations are Rs. 7,20,000.

Solution .182

Question .183.     Calculate Gross profit Ratio from the following: -

Opening Inventory Rs. 30,000; Closing Inventory Rs. 25,000; Purchases Rs. 3,05,000;

Return Outwards Rs. 20,000; wages Rs. 32,000; Cash Revenue from Operations Rs. 1,40,000; Return Inwards Rs. 10,000; credit Revenue from Operations Rs. 3,30,000.

Solution .183

Question .184.      Calculate Gross Profit Ratio from the following: -

Cash Revenue from Operations Rs. 1,70,000; Credit Revenue from Operations Rs. 3,50,000; Revenue from Operations Returns (Sales Returns) Rs. 20,000; Cash of revenue from Operations Rs. 4,00,000.

Solution .184

Question .185.      Calculate G.P. Ratio from the following: -

Solution .185

If Total Revenue from Operations is Rs. 100, cash Revenue from Operations will be RS. 25 and Credit Revenue from Operations RS. 75

Hence, If Credit Revenue from Operations is Rs. 75

Total Revenue from operations will be RS. 100

If Credit Revenue from Operations is RS. 6,00,000

Question .186.    Calculate Gross Profit ratio from the following data :-

Solution .186

Question .187.      Calculate Gross Profit ratio from the following data :
Cash revenue from Operations are  1/3 rd of Total Revenue from Operations, Cash Revenue from Operations were Rs. 6,00,000; Credit Purchase are 25% of total purchases, credit Purchases were Rs. 3,00,000. Opening Inventory Rs. 1,00,000; Closing Inventory was Rs. 50,000 more than opening Inventory. Carriage RS. 15,000. Wages Rs. 35,000.
Solution .187

If Cash Revenue from Operations is Rs. 1
Total Revenue from operations will be RS. 3

If Credit Revenue from Operations is RS. 6,00,000
Total Revenue from Operations will be =  3/1 ×RS.6,00,000
= Rs. 18,00,000

If Credit purchase is Rs. 25       Total Purchase will be RS. 100
If Credit Purchases is RS. 3,00,000

Total Purchase will be =  100/25×3,00,000
= Rs. 12,00,000

Cost of Revenue from Operations = Purchases + Carriage Inwards + wages  – excess of Closing Inventory over Opening Inventory
= RS. 12,00,000 + Rs. 15,000 + Rs. 35,000– Rs. 50,000
= Rs. 12,00,000

Question .188.                A company earns a gross profit of 20% on cost. Its credit revenue from operations are twice its cash revenue from operations. If the credit revenue from operations are Rs. 4,00,000. Calculate the gross profit ratio of the company.

Solution .188.

Question .189.    From the following information’s calculate:

a)      Current Ratio,

b)      Quick Ratio,

c)       Operating Ratio, and

d)      Gross Profit Ratio

Solution .189

Question .190    Calculate:- (i) Gross Profit ratio; (ii) Operating Ratio; (iii) operating Profit Ratio; and (iv) Net Profit from the following: -

Solution .190

Question .191.    Mr. Arun Birla owns a business and gives the following figures for two successive years:-

Mr. Arun Birla speaks very high of his Manager who has increased the profit from RS. 15,000 to Rs. 24,000 and describes him very ‘Efficient’. Do you agree with him? If not, why?

Solution .191

We do not coincide with Mr. Arun Birla. The manager is not very effective. Although his revenue from operations has doubled this year compared to the last year, his gross profit ratio has come down from 25% to 20%. This can either be due to lower selling prices or higher purchase prices or due to disorganization.

Question .192.    From the following information, calculate :- (I) Gross Profit Ratio, and (ii) Inventory Turnover ratio:-

Solution .192

Question .193.    From the following information, calculate :- Inventory Turnover ratio and Gross Profit Ratio :-

Solution .193

Question .194.                Average Inventory Rs. 80,000; Inventory Turnover Ratio 6 Times; Revenue from Operations 25% above cost. Calculate Gross Profit Ratio.

Solution .194

Question .195.         A trader carries an average inventory of RS. 40,000. His inventory turnover Ratio is 8Times. If he sells goods at a profit of 20% on revenue from Operations, find out his profit.

Solution .195

Question .196.   From the following data calculate : -

i. Gross Profit Ratio; ii. Operating Ratio; iii. Net Profit Ratio; iv. Inventory turnover ratio; and v. Current Ratio.

Solution .196

Question .197.    The following is the Balance Sheet of Arvind Mills Ltd. as at 31st March, 2018:

Other information’s supplied is as follows:-

(a)    Net Revenue from operations                  RS. 30,00,000

(b)   Cost of revenue from operations              RS. 25,80,000

(c)    Operating exp.                                             RS. 2,20,000

You are require to calculate:-

i)                    Quick Ratio; ii) Total Assets to Debt Ratio; iii) Current Ratio; iv) Gross Profit

i)                    Operating Ratio vi) Net Profit Ratio.

Solution .197

Question  .198.       Calculate Operating Profit Ratio and Operating Ratio from the following :-

Cash Revenue from Operations RS. 2,00,000; credit Revenue from Operations RS. 1,30,000; Revenue from Operations Return (sales Return) Rs. 10,000; Cost of Revenue from operations RS. 1,80,000; office and Administration Expenses Rs. 40,000; Selling expenses Rs. 36,000; Interest on Debentures Rs. 23,000.

Solution .198

Operating Profit                          = Gross Profit – Operating Expenses

Gross Profit                               = Net Revenue from operations – Cost of Revenue from operations

=(Cash Revenue from Operations – Credit Revenue from Operations – Revenue from Operations Return ) -Cost of Revenue from Operations

=(Rs. 2,00,000 + Rs. 1,30,000 – Rs. 10,000) – Rs. 1,80,000

= Rs. 3,20,000 – Rs. 1,80,000

= Rs.  1,40,000

Operating Expenses       = Selling Expenses +Office Administrative Expenses

= Rs. 36,000 + Rs. 40,000

= Rs. 76,000

Operating Profit               = Gross Profit – Operating Expenses

=Rs. 1,40,000 – Rs. 76,000 = Rs. 64,000

Question .199.      Calculate Operating Profit Ratio and Operating Ratio from the following:-

Net Revenue from Operations RS. 4,00,000; Cost of Revenue from Operations RS. 2,50,000; Operating Expenses RS. 90,000.

Solution .199

Question .200.     Calculate Operating Profit Ratio and Operating Ratio from the following:-

Net Revenue from Operations RS. 3,00,000; Gross Profit Rs. 1,20,000; Operating Expenses Rs. 45,000.

Solution .200

Question  .201.      Calculate Operating Profit Ratio if Operating Ratio is 78%.

Solution   .201

Operating Profit Ratio = 100 -  Operating Ratio

Operating Profit Ratio = 100 – 78%

Operating Profit Ratio = 22%

Question .202.    From the following information, calculate Inventory Turnover Ratio, Operating ratio and Working Capital Turnover Ratio:-

Solution . 202