# TS Grewal Solution Class 12 Chapter 4 Accounting Ratios

Read TS Grewal Accountancy Class 12 Solution Chapter 4 Accounting Ratios 2023 2024. Students should study TS Grewal Solutions Class 12 Accountancy available on Studiestoday.com with solved questions and answers. These chapter-wise answers for Class 12 Accountancy have been prepared by expert teachers of Grade 12. These TS Grewal Class 12 Solutions have been designed as per the latest accountancy TS Grewal Book for Class 12 and if practiced thoroughly can help you to score good marks in standard 12 Accounts class tests and examinations.

## Class 12 Accounts Chapter 4 Accounting Ratios TS Grewal Solutions

TS Grewal Solutions for Chapter 4 Accounting Ratios Class 12 Accounts have been provided below based on the latest TS Grewal Class 12 book. The answers have been prepared based on the latest 2023 2024 book for the current academic year. TS Grewal Solutions Class 12 will help students to improve their concepts and easily solve accountancy questions for Class 12. Class 12 Grewal solutions should be revised regularly as more practice will help you get a better rank and easily solve more questions.

### Chapter 4 Accounting Ratios TS Grewal Class 12 Solutions

About this chapter: TS Grewal Solution Class 12 Chapter 4 Accounting Ratios is a very important topic in class 12 accountancy as it explains about various types of ratios which can be used to understand the financial position of an organisation. In this chapter, various formulas for calculating ratios and the meaning of each ratio has been explained in an easy to understand manner. After explanation of each ratio lot of solved questions have been provided so that the students are able to understand the meaning of the ratios as well as the process of solving the questions relating to ratios in their exams. This is a very scoring topic as once you are able to understand the meaning of the ratios and the process to derive the ratios then you will be able to solve all types of questions and get full marks. Ratio analysis is also been done by financial consultants to understand the financial performance of company. At the end of the chapter there are lot of practical and numerical questions which have been given by the author. We have provided answers to all the questions in this chapter which will help you to understand the concepts and also understand how the ratios have to be derived in a step by step manner.

Solutions for T.S. Grewal's Analysis of Financial Statements
Textbook for CBSE Class 12 TS Grewal Solutions Class 12 Accountancy
TS Grewal Solutions Class 12 Accountancy
Chapter 4 Accounting Ratios

Question 1. From the following compute Current Ratio:

Question 2. Calculate Current Ratio from the following information:

Question 3. Current Ratio is 2.5, Working Capital is Rs. 1,50,000. Calculate the amount of Current Assets and Current Liabilities.

Question 4. Working Capital is Rs. 9,00,000; Trade Payable Rs. 90,000; and Other Current Liabilities are Rs. 2,10,000. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = 12,00,000/3,00,000 = 4/1 = 4 : 1

Working Note:-
Working Capital = Current Assets – Current Liabilities
Rs. 9,00,000 = Current Assets – Trade Payables – Other Current Liabilities
Rs. 9,00,000 = Current Assets – Rs. 90,000 – Rs. 2,10,000
Current Assets = Rs. 9,00,000 + Rs. 90,000 + Rs. 2,10,000
Current Assets = Rs. 12,00,000
Current Liabilities = Trade Payables + Other Current Liabilities
Current Liabilities = Rs. 90,000 + Rs. 2,10,000
Current Liabilities = Rs. 3,00,000

Question 5. Working Capital Rs. 1,80,000; Total Debts Rs. 3,90,000; Long-Term Debts Rs. 3,00,000. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = 2,70,000/90,000 = 4/1 = 3 : 1
Working Note:-
Current Liabilities = Total Debts – Long-term Debts
= Rs. 3,90,000 – Rs. 3,00,000
= Rs. 90,000

Working Capital = Current Assets – Current Liabilities
Rs. 1,80,000 = Current Assets – Rs. 90,000
Current Assets = Rs. 1,80,000 + Rs. 90,000
Current Assets = Rs. 2,70,000

Question 6. Current Assets are Rs. 7,50,000 and Working Capital is Rs. 2,50,000. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = 7,50,000/5,00,000 = 1.5/1 = 1.5 : 1
Working Notes:
Working Capital = Current Assets – Current Liabilities
Rs. 2,50,000 = Rs. 7,50,000 – Current Liabilities
Current Liabilities = Rs. 7,50,000 – Rs. 2,50,000
Current Liabilities = Rs. 5,00,000

Question 7. Trade Payable Rs. 50,000, Working Capital Rs. 9,00,000, Current Liabilities Rs. 3,00,000. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = 12,00,000/3,00,000 = 4/1 = 4 : 1
Working Notes:
Working Capital = Current Assets – Current Liabilities
Rs. 9,00,000 =  Current Assets – Rs. 3,00,000
Current Assets = Rs. 9,00,000 + Rs. 3,00,000
Current Assets = Rs. 12,00,000

Question 8. A company had Current Assets of Rs. 4,50,000 and Current Liabilities of Rs. 2,00,000. Afterwards it purchased goods for Rs. 30,000 on credit. Calculate Current Ratio after the purchase.
Current Ratio = (Current Assets)/(Current Liabilities) = 4,80,000/2,30,000 = 2.08/1 = 2.08 : 1
Working Notes:
Current Assets after Purchase = Existing Current Assets + Purchased Goods
= Rs. 4,50,000 + Rs. 30,000
= Rs. 4,80,000
Current Liabilities after purchase = Existing Current liabilities + Creditors for Purchased Goods
= Rs. 2,00,000 + Rs. 30,000
= Rs. 2,30,000

Question 9. Current Liabilities of a company were Rs. 1,75,000 and its Current Ratio was 2:1. It paid Rs. 30,000 to a Creditor. Calculate Current Ratio after payment.
Current Ratio = (Current Assets)/(Current Liabilities) = 3,20,000/1,45,000 = 2.21/1 = 2.21 : 1

Working Note:-
Current Ratio = (Current Assets)/(Current Liabilities)
2/1 = (Current Assets)/1,75,000
Current Assets = Rs. 1,75,000 × 2
Current Assets = Rs. 3,50,000
Current Assets after Payment = Existing Current Assets – Amount Paid
= Rs. 3,50,000 – Rs. 30,000
= Rs. 3,20,000
Current Liabilities after payment = Existing Current Liabilities – Amount paid
= Rs. 1,75,000 – Rs. 30,000
= Rs. 1,45,000

Question 10. Ratio of Current Assets Rs. 3,00,000 to Current Liabilities Rs. 2,00,000 is 1.5:1. The accountant of the firm is interested in maintain a Current Ratio of 2:1 by paying off a part of the Current Liabilities. Compute amount of the Current Liabilities that should be paid so that the Current Ratio at the level of 2:1 may be maintained.
If we will pay off a part of the current liabilities then we have to do so by giving either cash of bank cheque of draft. So in this case both current assets and current liabilities will be reduced by equal amount, which amount can be assumed to be X.
Let the amount of Current Liabilities to be paid or the amount of current Assets to be given = X
Current Ratio = (Current Assets)/(Current Liabilities)
2/1 = (Current Assets-X)/(Current Liabilities-X)
2/1 = (3,00,000 - X)/(2,00,000 - X)
2(2,00,000 – X) = 3,00,000 – X
4,00,000 – 2X = 3,00,000 – X
X - 2X = 3,00,000 – 4,00,000
-X = - 1,00,000
X = 1,00,000
We have calculated or computed as above the amount of the Current liabilities that should be paid, so that Current Ratio at the Level of 2:1 may be maintained.

Question 11. Ratio of Current Assets Rs. 8,75,000 to Current Liabilities Rs. 3,50,000 is 2:5:1. The firm wants to maintain Current Ratio of 2:1 by purchasing goods on credit. Compute amount of goods that should be purchased on Credit.
If we will buy a part of the current assets on credit then both current assets on credit then both current assets and current liabilities will be increased by equal amount, which amount can be assumed to be X.
Let the amount of Current Liabilities to be increased or the amount of Current Assets to be Purchased = X
Current Ratio = (Current Assets)/(Current Liabilities)
2/1 = (Current Assets + X)/(Current Liabilities + X)
2/1 = (8,75,000+ X)/(3,50,000+ X)
2(3,50,000 + X) = 8,75,000 + X
7,00,000 + 2X = 8,75,000 + X
2X - X = 8,75,000 – 7,00,000
X = 1,75,000
We have calculated or computed as above the amount of the Current Assets that should be purchased, so that Current Ratio at the Level of 2:1 may be maintained.

Question 12. A firm had Current Assets of Rs. 5,00,000. It paid Current Liabilities of Rs. 1,00,000 and the Current Ratio became 2:1. Determine Current Liabilities and Working Capital before and after the payment was made.
Let the Current Liabilities of the company before payment be X.
Current Ratio = (Current Assets)/(Current Liabilities)
2/1 = (5,00,000 - 1,00,000)/(X - 1,00,000)
2 (X - 1,00,000) = 4,00,000
2X- 2,00,000 = 4,00,000
2X = Rs. 4,00,000 + Rs. 2,00,000
2X = Rs. 6,00,000
X = 6,00,000/2
X = 3,00,000
Current Liabilities before payment = Rs. 3,00,000
Current Liabilities after payment = Rs. 3,00,000 – Rs. 1,00,000 = Rs. 2,00,000
Working Capital before payment = Rs. 5,00,000 – Rs. 3,00,000 = Rs. 2,00,000
Working Capital after payment = Rs. 4,00,000 – Rs. 2,00,000 = Rs. 2,00,000

Question 13. State giving reason, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2:1:
(a) Cash paid to Trade Payables.
(b) Bills Payable discharged.
(c) Bills Receivable endorsed to a creditor.
(d) Payment of final Dividend already declared.
(e) Purchase of Stock-in-Trade on credit.
(f) Bills Receivable endorsed to a Creditor dishonoured.
(g) Purchases of Stock-in-Trade for cash.
(h) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 45,000.
(i) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 60,000.
We have given reasons, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 2:1.
Let Current Ratio with imaginary figures be 2:1 for reasoning.
Current Ratio = (Current Assets)/(Current Liabilities) = 2,00,000/1,00,000 = 2/1

(a) Cash paid to Trade Payables – we will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 - 50,000)/(1,00,000 - 50,000) = 1,50,000/50,000 = 3/1
Reason:- This transaction will reduce current assets or cash and Current liabilities or trade payables. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(b) Bills Payable discharged – will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 - 50,000)/(1,00,000 - 50,000) = 1,50,000/50,000 = 3/1
Reason:- This transaction will reduce current assets or cash and Current liabilities or bills payables. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(c) Bills Receivable endorsed to a creditor – will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 - 50,000)/(1,00,000 - 50,000) = 1,50,000/50,000 = 3/1
Reason:- This transaction will reduce current assets or cash and Current liabilities or Creditors. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(d) Payment of final Dividend already declared – will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 - 50,000)/(1,00,000 - 50,000) = 1,50,000/50,000 = 3/1
Reason:- This transaction will reduce current assets or cash and Current liabilities or dividend payable. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(e) Purchase of Stock-in-Trade on credit – will decline the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 + 50,000)/(1,00,000+ 50,000) = 2,50,000/1,50,000 = 1.67/1
Reason:- This transaction will increase current assets or Stock-in-Trade and Current liabilities or Creditors. This can be tested by increasing both current assets and current liabilities by equal amounts say Rs. 50,000.

(f) Bills Receivable endorsed to a Creditor dishonored – will decline the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 + 50,000)/(1,00,000+ 50,000) = 2,50,000/1,50,000 = 1.67/1
Reason:- This transaction will increase current assets or debtors due to dishonor of the bill and current liabilities or creditors. This can be tested by increasing both current assets and current liabilities by equal amounts say Rs. 50,000.

(g) Purchase of Stock-in-Trade for Cash – will have no effect on the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 + 50,000-50,000)/1,00,000 = 2,00,000/1,00,000 = 2/1
Reason:- This transaction will increase current assets or Stock-in-Trade and Current assets or cash by equal amounts. This can be tested by increasing and decreasing current assets by equal amounts say Rs. 50,000.

(h) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 45,000 – will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 + 45,000)/1,00,000 = 2,45,000/1,00,000 = 2.45/1
Reason:- This transaction will reduce fixed assets and increase current assets. This can be tested by increasing current assets by Rs. 45,000.

(i) Sale of Fixed Assets (Book Value of Rs. 50,000) for Rs. 60,000 – will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (2,00,000 + 60,000)/1,00,000 = 2,60,000/1,00,000 = 2.60/1
Reason:- This transaction will reduce fixed assets and increase current assets. This can be tested by increasing current assets by Rs. 60,000.

Question 14. State giving reasons, which of the following transactions would improve, reduce or not change the Current Ratio, if Current Ratio of a company is (i) 1:1; or (ii) 0.8:1:
(a) Cash paid to Trade Payables.
(b) Purchase of Stock-in-Trade on credit.
(c) Purchase of Stock-in-Trade for cash.
(d) Payment of Dividend payable.
(e) Bills Payable discharged.
(f) Bills Receivable endorsed to a Creditor.
(g) Bills Receivable endorsed to a Creditor dishonoured.
We have given reasons, whether the Current Ratio will improve or decline or will have no effect in each of the following transactions if Current Ratio is 1:1.
Let Current Ratio with imaginary figures be 1:1 for reasoning.
(i) Current Ratio = (Current Assets)/(Current Liabilities) = 1,00,000/1,00,000 = 1/1
(ii) Current Ratio = (Current Assets)/(Current Liabilities) = 80,000/1,00,000 = 0.8/1

(a) Cash paid to Trade Payables
(i) Cash paid to Trade Payables will not change the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 - 50,000)/(1,00,000-50,000)  = 50,000/50,000 = 1/1
Reason:- This transaction will reduce current assets or cash and current liabilities or trade payables. This can be tested by reducing both current assets and current assets and current liabilities by equal amounts say Rs. 50,000.
(ii) Current Ratio = (Current Assets)/(Current Liabilities) = 80,000/1,00,000 = 0.8/1
Reason:- This transaction will reduce current assets or cash and current liabilities or trade payables. This can be tested by reducing both current assets and current liabilities by equal amount say Rs. 50,000.

(b) Purchase of Stock-in-Trade on credit
(i) Purchase of Stock-in-Trade on credit will not change the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 + 50,000)/(1,00,000 +  50,000) = 1,50,000/1,50,000 = 1/1
Reason:- This transaction will increase current assets or Stock-in-Trade and current liabilities or creditors by same amount. This can be tested by increasing both current assets and current liabilities by equal amount say Rs. 50,000.
(ii) Purchase of Stock-in-Trade on credit will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 + 50,000)/(1,00,000 +  50,000) = 1,30,000/1,50,000 = 0.86/1
Reason:- This transaction will increase current assets or Stock-in-Trade and current liabilities or creditors by same amount. This can be tested by increasing both current assets and current liabilities by equal amount say Rs. 50,000.

(c) Purchase of Stock-in-Trade for cash
(i) Purchase of Stock-in-Trade for cash will have no effect on the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 + 50,000 -50,000)/1,00,000 = 1,00,000/1,00,000 = 1/1
Reason:- This transaction will increase current assets or Stock-in-Trade and current assets or cash by equal amounts. This can be tested by increasing and decreasing current assets by equal amount say Rs. 50,000.
(ii) Purchase of Stock-in-Trade for cash will have no effect on the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 + 50,000-50,000)/1,00,000 = 80,000/1,00,000 = 0.80/1
Reason:- This transaction will increase current assets or Stock-in-Trade and current liabilities or cash by equal amounts. This can be tested by increasing and decreasing current assets by equal amounts say Rs. 50,000.

(d) Payment of Dividend
(i) Payment of Dividend will not change the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 - 50,000)/(1,00,000 - 50,000) = 50,000/50,000 = 1/1
Reason:- This transaction will reduce current assets or cash or bank and current liabilities or dividend payable. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.
(ii) Payment of Dividend will reduce the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 - 50,000)/(1,00,000 - 50,000) = 30,000/50,000 = 0.60/1
Reason:- This transaction will reduce current assets or cash or bank and current liabilities or dividend payable. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(e) Bills Payable discharged
(i) Bills Payable discharged will not change the current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 - 50,000)/(1,00,000 - 50,000) = 50,000/50,000 = 1/1
Reason:- This transaction will reduce current assets or cash and current liabilities or bills payable. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.
(ii) Bills Payable discharged will reduce the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 - 50,000)/(1,00,000 - 50,000) = 30,000/50,000 = 0.60/1
Reason:- This transaction will reduce current assets or cash and current liabilities or bills payable. This can be tested by reducing both current assets and current liabilities by equal amounts say Rs. 50,000.

(f) Bills Receivable endorsed to a Creditor
(i) Bills Receivable endorsed to a Creditor will not change the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 - 50,000)/(1,00,000 - 50,000) = 50,000/50,000 = 1/1
Reason:- This transaction will decrease current assets or bills receivable and current liabilities or creditors. This can be tested by decreasing both current assets and current liabilities by equal amount say Rs. 50,000.
(ii) Bills Receivable endorsed to a Creditor reduces the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 - 50,000)/(1,00,000 - 50,000) = 30,000/50,000 = 0.60/1
Reason:- This transaction will decrease current assets or bills receivable and current liabilities or creditors. This can be tested by decreasing both current assets and current liabilities by equal amount say Rs. 50,000.

(g) Bills Receivable endorsed to a Creditor dishonoured
(i) Bills Receivable endorsed to a Creditor dishonoured will not change the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (1,00,000 + 50,000)/(1,00,000 + 50,000) = 1,50,000/1,50,000 = 1/1
Reason:- This transaction will increase current assets or debtors due to dishonor of the bill and current liabilities or creditors. This can be tested by increasing both current assets and current liabilities by equal amount say Rs. 50,000.
(ii) Bills Receivable endorsed to a Creditor dishonoured will improve the Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = (80,000 + 50,000)/(1,00,000 + 50,000) = 1,30,000/1,50,000 = 0.87/1
Reason:- This transaction will increase current assets or debtors due to dishonor of the bill and current liabilities or creditors. This can be tested by increasing both current assets and current liabilities by equal amounts say Rs. 50,000.

Question 15. From the following information, calculate Liquid Ratio:

Liquid Ratio = (Liquid Assets)/(Current Liabilties)

= 1,40,000/70,000 = 2/1 = 2:1

Point of Knowledge:-

Liquid Assets = Current Assets – Inventories – Prepaid Expenses

= Rs. 2,00,000 – Rs. 50,000 – Rs. 10,000

= Rs. 1,40,000

Question 16. Quick Assets Rs. 1,50,000; Inventory (Stock) Rs. 40,000; Prepaid Expenses Rs. 10,000; Working Capital Rs. 1,20,000. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilties)

= 2,00,000/80,000 = 2.5/1 = 2.5:1

Point of Knowledge:-

Current Assets = Quick Assets + Stock + Prepaid Expenses

= Rs. 1,50,000 + Rs. 40,000 + Rs. 10,000

= Rs. 2,00,000

Current Liabilities = Current Assets – Working Capital

= Rs. 2,00,000 – Rs. 1,20,000

= Rs. 80,000

Question 17. Current Assets Rs. 3,00,000; Inventories Rs. 60,000; Working Capital Rs. 2,52,000. Calculate Quick Ratio.

Liquid Ratio = (Liquid Assets)/(Current Liabilties)

= 2,40,000/48,000 = 5/1 = 5:1

Point of Knowledge:-

Liquid Assets = Current Assets – Inventories

= Rs. 3,00,000 – Rs. 60,000

= Rs. 2,40,000

Current Liabilities = Current Assets – Working Capital

= Rs. 3,00,000 – Rs. 2,52,000

= Rs. 48,000

Question 18. Working Capital Rs. 3,60,000; Total :Debts Rs. 7,80,000; Long-term Debts Rs. 6,00,000; Inventories  Rs. 1,80,000. Calculate Liquid Ratio.

Liquid Ratio = (Liquid Assets)/(Current Liabilties)

= 3,60,000/(1,80,000) = 2/1 = 2:1

Point of Knowledge:-

(i) Current Liabilities = Total Debt – Long-term Debt

= Rs. 7,80,000 – Rs. 6,00,000

= Rs. 1,80,000

(ii) Current Assets = Working Capital – Current Liabilities

= Rs. 3,60,000 + Rs. 1,80,000

= Rs. 5,40,000

(iii) Liquid Assets = Current Assets – Inventories

= Rs. 5,40,000 – Rs. 1,80,000

= Rs. 3,60,000

Question 19. Current Liabilities of a company are Rs. 6,00,000. Its Current Ratio is 3 : 1 and Liquid Ratio is 1 : 1. Calculate value of Inventory.

Current Liabilities = Rs. 6,00,000

Current Ratio = Rs. 3:1

Liquid Ratio = Rs. 1:1

Current Ratio = (Current Assets)/(Current Liabilities)

3/1 = (Current Assets)/6,00,000

Current Assets = 3 × Rs. 6,00,000

Current Assets = Rs. 18,00,000

Liquid Ratio = (Liquid Assets)/(Current Liabilties)

1/1 = (Liquid Assets)/6,00,000

Liquid Ratio = Rs. 6,00,000

Inventory = Current Assets – Liquid Assets

Inventory = Rs. 18,00,000 – Rs. 6,00,000

Inventory = Rs. 12,00,000

Question 20. X Ltd. has a Current Ratio of 3.5:1 and Quick Ratio of 2:1. If the Inventories is Rs. 24,000; calculate total Current Liabilities and Current Assets.

Inventory = Current Assets – Liquid Assets

Rs. 24,000 = 3.5 X – 2 X

Rs. 24,000 = 1.5 X

X = 24,000/1.5

X = 16,000

Current Liabilities = Rs. 16,000

Current Assets = 3.5 × X

Current Assets = 3.5 × Rs. 16,000 = Rs. 56,000

Question 21. X Ltd. has Current Ratio of 4.5:1 and a Question uick Ratio of 3:1. If its inventory is Rs. 36,000, find out its total Current Assets and total Current Liabilities.
Inventory = Current Assets – Liquid Assets
Rs. 36,000 = 4.5 X – 3 X
Rs. 36,000 = 1.5 X
X = (36,000)/(1.5)
X = 24,000
Current Liabilities = Rs. 24,000
Current Assets = 4.5 × X
Current Assets = 4.5 × Rs. 24,000 = Rs. 1,08,000

Question 22. Current Ratio 4; Liquid Ratio 2.5; Inventory Rs. 6,00,000. Calculate Current Liabilities, Current Assets and Liquid Assets.
Inventory = Current Assets – Liquid Assets
Rs. 6,00,000 = 4 X – 2.5 X
Rs. 6,00,000 = 1.5 X
X = (6,00,000)/(1.5)
X = 4,00,000
Current Liabilities = Rs. 4,00,000
Current Assets = 4 × X
Current Assets = 4 × Rs. 4,00,000 = Rs. 16,00,000
Liquid Assets = 2.5 × X
Liquid Assets = 2.5 × Rs. 4,00,000 = Rs. 10,00,000

Question 23. Current Liabilities of a company are Rs. 1,50,000. Its Current Ratio is 3:1 and Acid Test Ratio (Liquid Ratio) is 1 : 1. Calculate values of Current Assets, Liquid Assets and Inventory.
Current Liabilities = Rs. 1,50,000
Current Ratio = 3:1
Acid Test Ratio (Liquid Ratio) = 1:1
Current Ratio = (Current Assets)/(Current Liabilities)
3/1 = (Current Assets)/1,50,000
Current Assets = Rs. 1,50,000 × 3
Current Assets = Rs. 4,50,000
Acid Test Ratio (Liquid Ratio) = (Liquid Assets)/(Current Liabilities)
1/1 = (Liquid Assets)/1,50,000
Liquid Assets = Rs. 1,50,000
Inventory = Current Assets – Liquid Assets
Inventory = Rs. 4,50,000 – Rs. 1,50,000
Inventory = Rs. 3,00,000

Question 24. Xolo Ltd.'s Liquidity Ratio is 2.5 : 1. Inventory is Rs. 6,00,000. Current Ratio is 4 : 1. Find out the Current Liabilities.
Inventory = Current Assets – Liquid Assets
Rs. 6,00,000 = 4X – 2.5X
Rs. 6,00,000 = 1.5X
X = 6,00,000/1.5
X = Rs. 4,00,000

Question 25. Current Assets of a company is are Rs. 5,00,000. Its Current Ratio is 2.5 : 1 and Quick Ratio is 1:1. Calculate value of Current Liabilities, Liquid Assets and Inventory.
Current Assets = Rs. 5,00,000
Current Ratio =  2:5:1
Quick Ratio = 1:1
Current Ratio = (Current Assets)/(Current Liabilities)
2.5/1 = 5,00,000/(Current Liabilities)
Current Liabilities = 5,00,000/2.5
Current Liabilities = Rs. 2,00,000
Quick Ratio = (Liquid Assets)/(Current Liabilities)
1/1 = (Liquid Assets)/2,00,000
Liquid Assets = Rs. 2,00,000
Inventory = Current Assets – Liquid Assets
Inventory = Rs. 5,00,000 – Rs. 2,00,000
Inventory = Rs. 3,00,000

Question 26. Quick Ratio of a company is 2:1. State giving reasons, which of the following transactions would (i) improve, (ii) reduce, (iii) Not change the Quick Ratio:
(a) Purchase of goods for cash;
(b) Purchase of goods on credit;
(c) Sale of goods (costing Rs.10,000) for Rs.10,000;
(d) Sale of goods (costing Rs.10,000) for Rs.11,000;
The Quick Ratio of a Company is 2:1. The following are given reasons for the answers.
Quick Ratio = (Liquid Assets)/(Current Liabilities)
Quick Ratio = (Rs.  40,000)/(Rs.  20,000) = 2/1 = 2:1 (Let the expected figures be)
(a) Purchases of goods for cash will decreased cash or quick assets but will increase current assets for increase in stock. Therefore numerator of the fraction will decrease which alternatively reduce the ratio.
(b) Purchase of goods on credit will increase stock i.e., current assets but not the Liquid Assets. The creditors i.e., Current Liabilities will increase due to credit purchases. When numerator remains constant and denominator increases then quick ratio will reduce.
(c) Sale of Goods (Costing Rs. 10,000) for Rs. 10,000 will increase cash and quick assets by Rs. 10,000. The increase in numerator will improve the ratio.
(d) Sale of goods (Costing Rs. 10,000) for Rs. 11,000 will increase quick assets and cash. When only numerator of the fraction is increased the ratio will improve.
(e) Cash received from debtors will no way change quick assets. So the quick ratio will not change.

Question 27. 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:
(i) Purchase of loose tools for Rs.2,000; (ii) Insurance premium paid in advance Rs.500; (iii) Sale of goods on credit Rs.3,000; (iv) Honoured a bills payable of Rs.5,000 on maturity.
The Quick Ratio of a Company is 0.8:1. The following are given reasons for the answers.
Quick Ratio = (Liquid Assets)/(Current Liabilities)
Quick Ratio = (Rs.  8,000)/(Rs.  10,000) = 0.8/1 = 0.8:1 (Let the expected figures be)
(i) Purchase of loose tools for Rs. 2,000 for cash will decrease cash or quick assets but will increase current assets for increase in loose tools. Therefore numerator of the fraction will decrease which alternatively reduce the ratio.
(ii) Insurance premium paid in advance Rs. 500 in cash will decreased cash or quick assets but will increase current assets for increase in prepaid expenses. Therefore numerator of the fraction will decrease which alternatively reduce the ratio.
(iii) Sale of goods on credit Rs. 3,000 will increase debtors and reduce stock Rs. 3,000 which alternatively increase liquid assets and reduce current assets. Therefore numerator of the fraction will increase which alternatively increase the ratio.
(iv) Honored a bill payable of Rs. 5,000 on maturity in cash will decreased cash or quick assets and decrease current liabilities. Therefore numerator and denominator of the fraction will increase which alternatively reduce the ratio.

Question 28. XYZ Limited's Inventory is Rs. 3,00,000. Total Liquid Assets are Rs. 12,00,000 and Quick Ratio is 2:1. Work out Current Ratio.
Inventory = Rs. 3,00,000
Total Liquid Assets = Rs. 12,00,000
Quick Ratio = (Liquid Assets)/(Current Liabilities)
2/1 = 12,00,000/(Current Liabilities)
Current Liabilities =  12,00,000/2
Current Liabilities = Rs. 6,00,000
Current Assets = Liquid Assets + Inventory
Current Assets = Rs. 12,00,000 + Rs. 3,00,000
Current Assets = Rs. 15,00,000
Current Ratio = (Current Assets)/(Current Liabilities)
Current Ratio = 15,00,000/6,00,000 = 2.5/1 = 2.5 : 1

Question 29. Total Assets Rs. 22,00,000; Fixed Assets Rs. 10,00,000; Capital Employed Rs. 20,00,000. There were no Long-term Investments. Calculate Current Ratio.

Current Assets = Total Assets – Fixed Assets
Current Assets = Rs. 22,00,000 – Rs. 10,00,000
Current Assets = Rs. 12,00,000
Current Liabilities = Total Assets – Capital Employed
Current Liabilities = Rs. 22,00,000 – Rs. 20,00,000
Current Liabilities = Rs. 2,00,000
Current Ratio = (Current Assets)/(Current Liabilities)
Current Ratio = 12,00,000/2,00,000 = 6/1 = 6 : 1

Question 30. Total Assets Rs. 22,00,000; Fixed Assets Rs. 10,00,000; Capital Employed Rs. 20,00,000. There were no Long-term Investments. Calculate Current Ratio.
Current Ratio = (Current Assets)/(Current Liabilities)
Current Ratio = 4,00,000/1,00,000 = 4/1 = 4 : 1

Working Notes:-
Current Assets = Capital Employed + Current Liabilities – Fixed Assets
Current Assets = Rs. 10,00,000 + Rs. 1,00,000 – Rs. 7,00,000
Current Assets = Rs. 4,00,000

Question 31. Following is the Balance Sheet of Crescent Chemical Works Limited as at 31st March, 2019:

Question 32. From the following Calculate: (i) Current Ratio; and (ii) Quick Ratio:

Current Ratio = (Current Assets)/(Current Liabilities)

Current Ratio = (Total Assets - Fixed Assets - Non-current Investments - Long-term Loans & Advances)/(Total Debt - Long-term Borrowings - Long-term Provisions)

Current Ratio = (8,00,000 - 3,00,000 - 50,000 - 50,000)/(6,00,000 - 2,00,000 - 2,00,000)

Current Ratio = 4,00,000/2,00,000 = 2/1 = 2 : 1

Quick Ratio = (Liquid Assets)/(Current Liabilities)

Quick Ratio = (Current Assets - Inventories - Prepaid Expenses)/(Total Debt - Long-term Borrowing- Long-term Provisions)

Quick Ratio = (4,00,000 - 95,000 - 5,000)/(6,00,000 + 2,00,000 + 2,00,000)

Quick Ratio = 3,00,000/2,00,000 = 1.5/1 = 1.5 : 1

Question 33. Calculate Debt to Equity Ratio: Equity Share Capital Rs. 5,00,000; General Reserve Rs. 90,000; Accumulated Profits Rs. 50,000; 10% Debentures Rs. 1,30,000; Current Liabilities Rs. 1,00,000.
Debt - Equity Ratio = Debt/Equity
Debt - Equity Ratio = (Long-term Debt)/(Shareholders' Funds)
Debt - Equity Ratio = (10% Debentures)/(Equity Share Capital+General Reserve+Accumulated Profits)
Debt - Equity Ratio = 1,30,000/6,40,000 = 0.203/1 = 0.203 : 1

Question 34. Total Assets Rs. 2,60,000; Total Debts Rs. 1,80,000; Current Liabilities Rs. 20,000. Calculate Debt to Equity Ratio.
Debt - Equity Ratio = Debt/Equity
Debt - Equity Ratio = (Total Debt - Current Liabilities)/(Total Assets - Total Debts)
Debt - Equity Ratio = (1,80,000 - 20,000)/(2,60,000 -1,80,000)
Debt - Equity Ratio = 1,60,000/80,000 = 2/1 = 2:1

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

Debt - Equity Ratio = Debt/Equity
Debt - Equity Ratio = (10% Debentures)/(Equity Share Capital + Preference Share Capital + General Reserve + Surplus)
Debt - Equity Ratio = 75,000/(1,00,000 + 50,000 + 45,000 + 20,000) = 75,000/2,25,000 = 0.35/1 = 0.35:1

Question 36. When Debt to Equity Ratio is 2, state giving reason, whether this ratio will increase or decrease or will have no change in each of the following cases:
(i) Sale of Land (Book value Rs. 4,00,000) for Rs. 5,00,000; (ii) Issue of Equity Shares for the purchase of Plant and Machinery worth Rs. 10,00,000; (iii) Issue of Preference Shares for redemption of 13% Debentures, worth Rs. 10,00,000.

Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds)
(i) Sale of land (Book Value Rs. 4,00,000 for Rs. 5,00,000: Sale of Land at a Profit of Rs. 1,00,000 will increase Shareholders’ Funds. Hence Debt- Equity Ratio will decrease.
(ii) Issue of Equity Shares for the Purchase of Plant and Machinery worth Rs. 10,00,000: Issue of Equity Shares for the Purchase  of Plant and Machinery will increase shareholders’ funds, hence the ratio will decrease.
(iii) Issue of Preference Share for redemption of 13% debentures, worth Rs. 1,00,000: Total Long-term debts are decreased and total Shareholders’ Fund are increased the same amount, hence the ratio will decrease.

Question 37. Total Assets Rs. 12,50,000; Total Debts Rs. 10,00,000; Current Liabilities Rs. 5,00,000. Calculate Debt to Equity Ratio.

Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds) = (Total Debt - Current Liabilities)/(Total Assets - Total Debts)
Debt - Equity Ratio = (10,00,000 - 5,00,000)/(12,50,000 - 10,00,000) = (Rs.  5,00,000)/(Rs.2,50,000) = 2:1

Question 38. Capital Employed Rs. 8,00,000; Shareholders' Funds Rs. 2,00,000. Calculate Debt to Equity Ratio.
Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds) = (Capital Employed - Shareholders^' Funds)/(Shareholders' Funds)
Debt - Equity Ratio = (8,00,000 - 2,00,000)/2,00,000 = (Rs.  6,00,000)/(Rs.2,00,000) = 3:1

Question 39. Balance Sheet had the following amounts as at 31st March, 2019:

Calculate ratios indicating the long-term and the Short-term financial position of the company.
Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds)
= (Loan from IDBI @ 9%)/(10% Preference Share Capital + Equity Share Capital + Reserve & Surplus)
= 30,00,000/(5,00,000 + 15,00,000 + 4,00,000)
= 30,00,000/24,00,000 = 1.25:1
Long-term financial position of the Company is indicated by Debt-Equity Ratio.
Current Ratio = (Current Assets)/(Current Liabilities) = 12,00,000/8,00,000 = 1.5:1
Short-term financial Position of the company is indicated by Current Ratio.

Question 40. Calculate Debt to Equity Ratio from the following information:

Question 41. Debt to Equity Ratio of a company is 0.5:1. Which of the following suggestions would increase, decrease or not change it?
(i) Issue of Equity Shares: (ii) Cash received from debtors:
(iii) Redemption of debentures; (iv) Purchased goods on Credit?
Let Long-term Loan be = Rs. 50,000 and Shareholders’ Funds = Rs. 1,00,000
Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds) = 50,000/1,00,000 = 0.5/1 = 0.5:1
(i) Issue of equity shares: Will increase the Shareholders’ Funds or denominator of the ratio and decrease the Debt-Equity Ratio. Shareholder funds after issue of equity shares Rs. 50,000
Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds) = 50,000/1,50,000 = 0.33/1 = 0.33:1
(ii) Cash received from debtors has nothing to do with long-term debts or shareholders’ funds. So this will not change it.
(iii) Redemption of debentures will reduce Long-term debts or numerator of the ratio and decrease it. Let Debentures of Rs. 20,000.
Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds) = (50,000-20,000)/1,00,000  =  30,000/1,00,000 = 0.3/1 = 0.3:1
(iv) Purchase of goods on credit will affect current assets and current liabilities only and not change it.

Question 42. Assuming That the Debt to Equity Ratio is 2:1, state giving reasons, which of the following transactions would (i) increase; (ii) Decrease; (iii) Not alter Debt to Equity Ratio:
(i) Issue of new shares for cash.
(ii) Conversion of debentures into equity shares
(iii) Sale of a fixed asset at profit.
(iv) Purchase of a fixed asset on long-term deferred payment basis.
(v) Payment to creditors.
Debt to Equity Ratio is 2:1. Reasons are given below for which the following transactions would (i) Increase: (ii) Decrease: (iii) Not alter Debt to Equity Ratio.

(i) Issue of new shares for cash - will decrease the ratio.

Reason - If shares are issued then the denominator of the ratio will increase which will decrease the ratio.

(ii) Conversion of debentures into equity shares - will decrease the ratio.

Reason - If debentures into equity shares then the denominator of the ratio will increase and numerator will decrease which will decrease the ratio.

(iii) Sale of fixed assets at profit - will decrease the ratio.

Reason - If fixed assets are sold at a profit then the denominator of the ratio will increase which will decrease the ratio.

(iv) Purchase of a fixed asset on long-term deferred payment basis - will increase the ratio.

Reason - If fixed asset is purchased on long-term deferred payment basis then the numerator of the ratio will increase which will increase the ratio.

(v) Payment to creditors - will not alter the ratio.

Reason - If payment to creditors is made then it will not affect the debt or equity, hence it will not change the ratio.

Question 43. From the following Balance Sheet of ABC Ltd. as at 31st March, 2019, Calculate Debt to Equity Ratio:

Debt - Equity Ratio = Debt/Equity = (Long-term Loans)/(Shareholders' Funds)
= Debentures/(10% Preference Share Capital + Equity Share Capital + Reserve & Surplus)
= 2,50,000/(5,00,000 + 5,00,000 + 2,40,000)
= 2,50,000/12,40,000 = 0.2:1

Question 44. Calculate Total Assets to Debt Ratio from the following information: Long-term Debts Rs. 4,00,000; Total Assets  Rs. 7,70,000.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Total Assets)/(Long-term Loans)
Total Assets to Debt Ratio = 7,70,000/4,00,000 = 1.925/1 = 1.925:1

Question 45. Shareholders' Funds Rs. 1,60,000; Total Debts Rs. 3,60,000; Current Liabilities Rs. 40,000. Calculate Total Assets to Debt Ratio.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Shareholders' Fund + Long-term Debt + Current Liabitlies)/(Total Debt - Current Liabilities) = (Shareholders' Funds + Total Debt)/(Total Debt +Currnet Liabilities)
Total Assets to Debt Ratio = (1,60,000 + 3,60,000)/(3,60,000 - 40,000) = 5,20,000/3,20,000 = 1.625:1

Question 46. On the basis of the following information, calculate Total Assets to Debt Ratio:

Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Land and Building + Trade Received + Cash and Cash Equivalents + Investments)/(10% Debentures)
Total Assets to Debt Ratio = (60,00,000 + 4,00,000 + 5,00,000 + 1,00,000)/10,00,000 = 70,00,000/10,00,000 = 7:1

Question 47. Total Debt Rs. 60,00,000; Shareholders’ Fund Rs. 10,00,000; Reserves and Surplus Rs. 2,50,000; Current Assets Rs. 25,00,000; Working Capital Rs. 5,00,000. Calculate Total Assets to Debt Ratio.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Shareholders' Funds + Total Debt)/(Total Debts - (Current Assets - Working Capital))
Total Assets to Debt Ratio = (10,00,000 + 60,00,000 )/(60,00,000 - (25,00,000 - 5,00,000)) = 70,00,000/40,00,000 = 1.75:1

Question 48. Total Debt Rs. 15,00,000; Current Liabilities Rs. 5,00,000; Capital Employed Rs. 15,00,000. Calculate Total Assets to Debt Ratio.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Capital Employed+Current Liabilities)/((Total Debts - Current Liabilities))
Total Assets to Debt Ratio = (15,00,000 + 5,00,000 )/(15,00,000 -  5,00,000) = 20,00,000/10,00,000 = 2:1

Question 49. Calculate Total Assets to Debt Ratio from the following information:

Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Total Assets)/(Total Debts - Creditors - Bills Payable - Bank Overdraft - Outstanding Expenses)
Total Assets to Debt Ratio = (15,00,000 )/(12,00,000 -  90,000 - 60,000 - 50,000 - 20,000) = 15,00,000/9,80,000 = 1.53/1 = 1.53:1

Question 50. Total Debt Rs. 12,00,000; Shareholders’ Funds Rs. 2,00,000; Reserve and Surplus Rs. 50,000; Current Assets Rs. 5,00,000; Working Capital Rs. 1,00,000. Calculate Total Assets to Debt Ratio.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Shareholders' Funds + Total Debt)/(Total Debts - Current Liabilities) = (Shareholders' Funds + Total Debt)/(Total Debts - (Current Assets - Working Capital))
Total Assets to Debt Ratio = (2,00,000 + 12,00,000)/(12,00,000 -  (5,00,000 - 1,00,000)) = 14,00,000/8,00,000 = 1.75/1 = 1.75:1

Question 51. Total Debt Rs. 12,00,000; Current Liabilities Rs. 4,00,000; Capital Employed Rs. 12,00,000. Calculate Total Assets to Debt Ratio.
Total Assets to Debt Ratio = (Total Assets)/Debt
Total Assets to Debt Ratio = (Capital Employed+Current Liabilities )/(Total Debts - Current Liabilities)
Total Assets to Debt Ratio = (12,00,000 + 4,00,000)/(12,00,000 -  4,00,000) = 16,00,000/8,00,000 = 2/1 = 2:1

Question 52. From the following information, calculate Total Assets to Debt Ratio:

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

Total Assets to Debt Ratio = (Fixed Assets(Gross)-Accumulated Depreciation+Non-current Investments+Long-term Loans and Advances+Current Assets )/(Long-term Borrowing +Long-term Provisions)

Total Assets to Debt Ratio = (6,00,000-1,00,000+10,000+40,000+2,50,000)/(3,00,000 -  1,00,000) = 8,00,000/4,00,000 = 2/1 = 2:1

Question 53. From the following information, calculate Proprietary Ratio:

Proprietary Ratio = (Shareholders' Funds)/(Total Assets)
Proprietary Ratio = (Equity Share Capital+Reserves and Surplus)/(Non-Current Assets-Current Assets)
Proprietary Ratio = (3,00,000+1,80,000)/(13,20,000+6,00,000) = 4,80,000/19,20,000 = 0.25:1
25% if 100 is multiplied to find the answer in %.

Question 54. From the following information, calculate Proprietary Ratio:

Proprietary Ratio = (Shareholders' Funds)/(Total Assets)

Proprietary Ratio = (Equity Share Capital +Preference Share Capital+ Reserves and Surplus)/(Total Assets)

Proprietary Ratio = (3,00,000+1,50,000+75,000)/(7,50,000) = (5,25,000)/(7,50,000) = 0.70:1

Question 55. Calculate Proprietary Ratio from the following:

Proprietary Ratio = (Shareholders' Funds)/(Total Assets)

Proprietary Ratio = (Equity Share Capital + 10% Preference Share Capital+ Reserves and Surplus)/(Fixed Assets+Trade Investments+Current Assets)

Proprietary Ratio = (4,50,000 + 3,20,000 + 65,000)/(7,00,000 + 2,45,000 + 3,00,000) = (8,35,000)/(12,45,000) = 0.67:1

Question 56. From the following information, calculate Proprietary Ratio:
Proprietary Ratio = (Shareholders^' Funds)/(Total Assets)
Proprietary Ratio = (Equity Share Capital + Reserves and Surplus)/(Total Assets)
Proprietary Ratio = (6,00,000 + 1,50,000)/(10,00,000) = (7,50,000)/(10,00,000) = 0.75:1

Question 57. State with reason, whether the Proprietary Ratio will improve, decline or will not change because of the following transactions if Proprietary Ratio is 0.8 : 1:
(i) Obtained a loan of Rs. 5,00,000 from State Bank of India payable after five years.
(ii) Purchased machinery of Rs. 2,00,000 by cheque.
(iii) Redeemed 7% Redeemable Preference Shares Rs. 3,00,000.
(iv) Issued equity shares to the vendor of building purchased for Rs. 7,00,000.
(v) Redeemed 10% redeemable debentures of Rs. 6,00,000.
The Proprietary Ratio of a Company is 0.8:1. The following are given reasons for the answers.
Proprietary Ratio = (Shareholders^' Funds)/(Total Assets) = (8,00,000)/(10,00,000) = (0.8)/1 = 0.8:1 (Let the expected figures be)

(i) Obtained a loan of Z 5,00,000 from State Bank of India payable after five years. Rising of long term loan will not affect Shareholders Funds but due to rising of loan the cash or bank balance will increase for which, the amount of total assets will increase. Therefore denominator of the fraction will increase which alternatively decrease the ratio.

(ii) Purchase of machinery of Z 2,00,000 by cheque. The bank balance will reduce and fixed assets increase by same amount. There will be no effect in the total assets as well as the Shareholders Funds. Therefore no change in the ratio.

(iii) Redeemed 7% Redeemable Preference Shares Z 3,00,000 will reduce Shareholders Funds as well as Total Assets due to payment through bank. Therefore reduction of Z 3,00,000 from both the numerator and denominator will decrease the ratio.

(iv) Issued equity shares to the vendor of building purchased for Rs. 7,00,000 will increase Shareholders Funds as well as Total Assets due to increase in Fixed Assets. Therefore numerator and denominator of the fraction will increase which alternatively increase the ratio.

(v) Redeemed 10% redeemable debentures of Rs. 6,00,000 will not affect Shareholders Funds but the amount of Total Assets decrease due to payment through bank. Therefore denominator of the fraction will decrease which alternatively increase the ratio.

Question 58. If Profit before Interest and Tax is Rs. 5,00,000 and interest on Long-term Funds is Rs. 1,00,000, find Interest Coverage Ratio.
Interest Coverage Ratio = (Net Profit Interest,   Tax and Dividend)/(Interest on Long-term Funds)
Interest Coverage Ratio = 5,00,000/1,00,000 = 5 Times

Question 59. From the following information, calculate Interest Coverage Ratio: Profit after Tax Rs. 1,70,000; Tax Rs. 30,000; Interest on Long-term Funds Rs. 50,000.
Interest Coverage Ratio = (Net Profit Interest,   Tax and Dividend)/(Interest on Long-term Funds)
Interest Coverage Ratio = (Profit after Tax + Interest + Tax + Preference Dividend)/(Interest on Long-term Loans from Banks)
Interest Coverage Ratio = (1,70,000 + 50,000 + 30,000)/(50,000) = 2,50,000/50,000 = 5 Times

Question 60. From the following information, calculate Interest Coverage Ratio:

Interest Coverage Ratio = (Net Profit Interest,   Tax and Dividend)/(Interest on Long-term Funds)
Interest Coverage Ratio = (Net Profit after Tax + Debenture Interest + Interest on Long-term Loans from Bank + Tax)/(Debenture Interest+Interest on Long-term Loans from Bank)
Interest Coverage Ratio = (75,000 + 50,000 ×10% + 5,000 + 9,000)/(50,000×10% + 5,000)
Interest Coverage Ratio = (75,000 + 5,000 +  5,000 + 9,000)/(5,000 + 5,000) = 94,000/10,000 = 9.4 Times

Question 61. From the following details, calculate Inventory Turnover Ratio:
Rs.
Cost of Revenue from Operations (Cost of Goods Sold)           4,50,000
Inventory in the beginning of the year                                     1,25,000
Inventory at the close of the year                                             1,75,000
Inventory or Stock Turnover Ratio = (Cost of Goods Sold)/(Average Inventory)
Inventory or Stock Turnover Ratio = (Cost of Goods Sold)/((Stock in the beginning of the year+Stock at the end of the year )÷2)
Inventory or Stock Turnover Ratio = 4,50,000/((1,25,000 + 1,75,000 )÷2) = 4,50,000/1,50,000 = 3 Times

Question 62. Cost of Revenue from Operations (Cost of Goods Sold) Rs. 5,00,000; Purchases Rs. 5,50,000; Opening Inventory Rs. 1,00,000. Calculate Inventory Turnover Ratio.
Inventory Turnover Ratio = (Const of Revenue from Operations)/(Average Inventory)
Inventory Turnover Ratio = (Const of Revenue from Operations)/((Opening Inventory + Closing Inventory)÷2)
Inventory Turnover Ratio = 5,00,000/((1,00,000 + 1,50,000)÷2) = 5,00,000/1,25,000 = 4 Times

Working Note:-
Cost of Revenue from Operations = Opening Inventory + Purchases – Closing Inventory
Rs. 5,00,000 = Rs. 1,00,000 + Rs. 5,50,000 – Closing Inventory
Closing Inventory = Rs. 1,00,000 + Rs. 5,50,000 – Rs. 5,00,000
Closing Inventory = Rs. 1,50,000

Question 63. Calculate Inventory Turnover Ratio from the following information:
Opening Inventory is Rs. 50,000; Purchases Rs. 3,90,000; Revenue from Operations, i.e., Net Sales Rs. 6,00,000; Gross Profit Ratio 30%.
Inventory Turnover Ratio = (Const of Goods Sold)/(Average Inventory)
Inventory Turnover Ratio = (Const of Goods Sold)/((Opening Inventory + Closing Inventory)÷2)
Inventory Turnover Ratio = (4,20,000)/((50,000 + 20,000)÷2) = (4,20,000)/(35,000) = 12 Times

Working Note:-
(1) Cost of Revenue from Operations = Revenue from Operations – Gross Profit
= Rs. 6,00,000 – Rs. 6,00,000 × 30%
= Rs. 6,00,000 – Rs. 1,80,000
= Rs. 4,20,000

(2) Cost of Revenue from Operations = Opening Inventory + Purchases – Closing Inventory
Rs. 4,20,000 = Rs. 50,000 + Rs. 3,90,000 – Closing Inventory
Closing Inventory = Rs. 50,000 + Rs. 3,90,000 – Rs. 4,20,000
Closing Inventory = Rs. 20,000

Question 64. Calculate Inventory Turnover Ratio from the following:
Rs.
Opening Inventory                                                29,000
Closing Inventory                                                  31,000
Revenue from Operations i.e. Sales                   3,20,000
Gross Profit Ratio 25%
Inventory Turnover Ratio = (Const of Revenue from Operations)/(Average Inventory)
Inventory Turnover Ratio = (2,40,000)/((29,000 + 31,000)÷2) = (2,40,000)/(30,000) = 8 Times

Working Note:-
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
Revenue from Operations = Cost of Revenue from Operations + Revenue from Operations × 25/100
Rs. 3,20,000 = Cost of Revenue from Operations + 3,20,000 × 1/4
Cost of Revenue from Operations = Rs. 3,20,000 – Rs. 80,000
Cost of Revenue from Operations = Rs. 2,40,000

Question 65. From the following information, calculate Inventory Turnover Ratio:
Rs.
Revenue from Operations           16,00,000
Average Inventory                        2,20,000
Gross Loss Ratio 5%
Revenue from Operations = Cost of Revenue from Operations – Gross Loss
Revenue from Operations = Cost of Revenue from Operations – Revenue from Operations × 5%
Rs. 16,00,000 = Cost of Revenue from Operations – Rs. 16,00,000 × 5%
Rs. 16,00,000 = Cost of Revenue from Operations – Rs. 80,000
Rs. 16,00,000 + Rs. 80,000 = Cost of Revenue from Operations
Cost of Revenue from Operations = Rs. 16,80,000
Inventory Turnover Ratio = (Cost of Revenue from Operations )/(Average Inventory) = 16,80,000/2,20,000 = 7.64 Times

Question 66. Revenue from Operations Rs. 4,00,000; Gross Profit Rs. 1,00,000; Closing Inventory Rs. 1,20,000; Excess of Closing Inventory over Opening Inventory Rs. 40,000. Calculate Inventory Turnover Ratio.
Inventory Turnover Ratio = (Cost of Revenue from Operations )/(Average Inventory)
Inventory Turnover Ratio = (Revenue from Operations - Gross Profit )/((Opening Inventory + Closing Ineventory)  ÷ 2)
Inventory Turnover Ratio = (Revenue from Operations - Gross Profit )/((Closing Inventory - 40,000 + Closing Ineventory)  ÷ 2)
Inventory Turnover Ratio = (4,00,000 - 1,00,000 )/((1,20,000 - 40,000 + 1,20,000)  ÷ 2)
Inventory Turnover Ratio = (3,00,000 )/1,00,000 = 3 Times

Question 67. From the following data, calculate Inventory Turnover Ratio:
Total Sales Rs. 5,00,000; Sales Return Rs. 50,000; Gross Profit Rs. 90,000; Closing Inventory Rs. 1,00,000; Excess of Closing Inventory over Opening Inventory Rs. 20,000.
Inventory Turnover Ratio = (Cost of goods Sold )/(Average Inventory) = 3,60,000/90,000 = 4 Times
Working Notes:-
Cost of Goods Sold = Total Sales – Sales Return – Gross Profit
= Rs. 5,00,000 – Rs. 50,000 – Rs. 90,000
= Rs. 3,60,000
Opening Inventory = Closing Inventory – Rs. 20,000
= Rs. 1,00,000 – Rs. 20,000
= Rs. 80,000

Question 68. Rs. 2,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold), during the year. If Inventory Turnover Ratio is 8 times, calculate inventories at the end of the year. Inventories at the end are 1.5 times that of in the beginning.
Let Inventories at the beginning is X and Inventories at the end is 1.5X
Inventory Turnover Ratio = (Cost of Revenue from Operations )/(Average Inventory)
= 3,60,000/90,000 = 4 Times
8 = (Cost of Revenue from Operations)/((Inventories at the beginning+Inventories at the end)÷2)
8/1 = 2,00,000/((X+ 1.5X)÷2)
8/1 = (2,00,000 × 2)/(2.5 X)
8 × 2.5 X = Rs. 4,00,000
20X = Rs. 4,00,000
X = 4,00,000/20
Inventories at the beginning = Rs. 20,000
Inventories at the end is 1.5 X = 1.5 × Rs. 20,000 = Rs. 30,000

Question 69. Calculate Inventory Turnover Ratio from the following information:
Opening Inventory Rs. 40,000; Purchases Rs. 3,20,000; and Closing Inventory Rs. 1,20,000. State, giving reason, which of the following transactions would (i) increase, (ii) decrease, (iii) neither increase nor decrease the Inventory Turnover Ratio:
(a) Sale of goods for Rs. 40,000 (Cost Rs. 32,000).
(b) Increase in the value of Closing Inventory by Rs. 40,000.
(c) Goods purchased for Rs. 80,000.
(d) Purchases Return Rs. 20,000.
(e) Goods costing Rs. 10,000 withdrawn for personal use.
(f) Goods costing Rs. 20,000 distributed as free samples.
Calculation of Inventory turnover ratio from the following information:
Opening Inventory = Rs. 40,000, Purchases = Rs. 3,20,000, Closing Inventory = Rs. 1,20,000
Inventory Turnover Ratio = (Cost of Goods Sold )/(Average Inventory)
Inventory Turnover Ratio = (Opening Inventory + Purchases - Closing Inventory)/((Opening Inventory + Closing Inventory)  ÷ 2)
= ((40,000 + 3,20,00 - 1,20,000))/((40,000 + 1,20,000)  ÷ 2) = (Rs.2,40,000)/80,000 = 3 Times

(a) Sale of goods for Rs. 40,000 (cost Rs. 32,000) will change the ratio as:
= ((2,40,000-32,000))/((80,000-32,000)÷2) = 3.25 times
The average inventory is reduced by half. The ratio will increase as shown above.

(b) Increase in the value of Closing Inventory by Rs. 40,000 will increase the cost of goods by Rs. 40,000 as given below:
(2,40,000+40,000-40,000)/(80,000+20,000) = 2.4 Times
This will decrease the ratio as shown above.

(c) Goods purchased for Rs, 80,000 will increase cost of goods sold by Rs, 80,000 and reduce the closing inventory for cost of goods sold by Rs. 80,000 but the average inventory in the denominator in the ratio will increase by Rs. 80,000/2 = Rs. 40,000. This will result in:
= ((2,40,000+80,000-80,000))/((80,000+40,000)÷2)  = 2,40,000/1,20,000 = 2 Times
This will decrease in inventory turnover ratio.

(d) Purchases return Rs. 20,000 will reduce cost of goods sold by Rs. 20,000 and closing inventory by Rs. 20,000 in the numerator and the average inventory in the denominator by Rs. 10,000 as shown below:
= ((2,40,000 + 20,000 - 20,000))/((80,000 - 10,000))  = 2,40,000/70,000 = 3.42 Times
This will increase the inventory turnover ratio as calculated above.

(e) Good costing Rs. 10,000 withdrawn for personal use will reduce Rs. 10,000 from cost of goods sold and closing inventory in the numerator and reduce closing average inventory by Rs. 5,000. So the result will be:
= ((2,40,000 + 10,000 - 10,000))/((80,000 + 5,000))  = 2,20,000/75,000 = 2.93 Times
Decrease the inventory Turnover Ratio.

(f) Goods costing Rs. 20,000 distributed as free samples will reduce Rs. 20,000 from cost of goods sold and Closing inventory in the numerator of the ratio and reduce average inventory in the denominator by Rs. 10,000 as shown below:
= ((2,40,000 + 20,000 - 20,000))/((80,000 - 10,000))  = 2,40,000/70,000 = 3.42 Times
So the above translation will increase the inventory Turnover Ratio.

Question 70. Calculate Inventory Turnover Ratio from the data given Below:
Rs.                                                                                 Rs.
Inventory in the beginning of the year   20,000       Carriage Inwards                                           5,000
Inventory at the end of the year             10,000       Revenue from Operations i.e. Sales         1,00,000
Purchases                                                 50,000
Inventory Turnover Ratio = (Cost of Revenue from Operations )/(Average Inventory)
Inventory Turnover Ratio = (Inventory in the beginning of the year+PUrchases+Carriage Inwards-Inventory at the end of the year )/((Inventory in the beginning of the year+Inventory at the end of the year)  ÷ 2)
Inventory Turnover Ratio = (20,000 + 50,000 + 5,000 - 10,000 )/((20,000 + 10,000)  ÷ 2)
Inventory Turnover Ratio = (65,000 )/15,000 = 4.33 Times

Question 71. From the following information, calculate value of Opening Inventory:
Closing Inventory = Rs. 68,000
Total Sales = Rs. 4,80,000 (including Cash Sales Rs. 1,20,000)
Total Purchases = Rs. 3,60,000 (including Credit Purchases Rs. 2,39,200)
Goods are sold at a profit of 25% on cost.
Sales = Cost of goods Sold + Gross Profit
Sales = Cost of goods Sold + COGS × 25/100
Rs. 4,80,000 = X + X/4
Rs. 4,80,000 = (4X-X)/4
Rs. 4,80,000 = 5X/4
Rs. (4,80,000 × 4)/5 = X
Rs. 3,84,000 = X
Cost of goods sold = Rs. 3,84,000
Cost of goods sold = Opening Inventory + Total Purchases – Closing Inventory
Rs. 3,84,000 = Opening Inventory + Rs. 3,60,000 – Rs. 68,000
Opening Inventory = - Rs. 3,60,000 + Rs. 68,000 + Rs. 3,84,000
Opening Inventory = Rs. 92,000

Question 72. From the following information, determine Opening and Closing inventories:
Inventory Turnover Ratio 5 Times, Total sales Rs. 2,00,000, Gross Profit Ratio 25%. Closing Inventory is more by Rs. 4,000 than the Opening Inventory.
Inventory Turnover Ratio = (Cost of goods Sold)/(Average Inventory)
5/1 = (Sales - Gross Profit)/((Opening Inventory + Clsoing Inventory)  ÷ 2)
(Let opening Inventory be X and Closing Inventory will be X + Rs. 4,000)
5/1 = ((2,00,000 - 2,00,000×25%))/((X + X+4,000)  ÷ 2)
10X + Rs. 20,000 = Rs. (2,00,000 – 50,000) × 2
X = (Rs.3,00,000 - Rs.20,000)/10
X = (Rs.2,80,000)/10
Opening Inventory = Rs. 28,000
Closing Inventory = X + Rs. 4,000
Closing Inventory = Rs. 28,000 + Rs. 4,000 = Rs. 32,000

Question 73. Following figures have been extracted from Shivalika Mills Ltd.:
Inventory in the beginning of the year Rs. 60,000.
Inventory at the end of the year Rs. 1,00,000.
Inventory Turnover Ratio 8 times.
Selling price 25% above cost.
Compute amount of Gross Profit and Revenue from Operations (Net Sales).
Revenue from Operations = Cost of Revenue from Operations + Profit
Revenue from Operations = Cost of Revenue from Operations + Cost of Goods Sold × 25/100
Revenue from Operations = Rs. 6,40,000 + Rs. 6,40,000 × 1/4
Revenue from Operations = Rs. 6,40,000 + Rs. 1,60,000
Revenue from Operations = Rs. 8,00,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= Rs. 8,00,000 – Rs. 6,40,000
= Rs. 1,60,000

Working Note:-
Inventory Turnover Ratio = (Cost of Revenue from Operations)/(Average Inventory)
8/1 =  (Cost of Revenue from Operations)/((Opening Inventory + Closing Ineventory)  ÷ 2)
8/1 =  (Cost of Revenue from Operations)/((60,000 + 1,00,000)  ÷ 2)
Cost of Revenue from Operation = 8 × Rs. 80,000
Cost of Revenue from Operation = Rs. 6,40,000

Question 74. Inventory Turnover Ratio 5 times; Cost of Revenue from Operations (Cost of Goods Sold) Rs. 18,90,000. Calculate Opening Inventory and Closing Inventory if Inventory at the end is 2.5 times more than that in the beginning.
Let opening Inventory be X, Therefor Closing Inventory be 3.5X
As it is given in the problem that 2.5 times more.
Inventory Turnover Ratio = (Cost of Revenue from Operations)/(Average Inventory)
5/1 = 18,90,000/(Average Inventory)
Average Inventory = Rs. 3,78,000
(Opening Inventory+Closing Inevntory)/2 = Rs. 3,78,000
(X+3.5X)/2 = Rs. 3,78,000
4.5X = Rs. 3,78,000 × 2
X = 7,56,000/4.5
X = 1,68,000
Opening Inventory = Rs. 1,68,000
Closing Inventory = 3.5X = 3.5 × Rs. 1,68,000 = Rs. 5,88,000

Question 75. Rs. 3,00,000 is the Cost of Revenue from Operations (Cost of Goods Sold).
Inventory Turnover Ratio 8 times; Inventory in the beginning is 2 times more than the inventory at the end. Calculate value of Opening and Closing Inventories.

Let Closing Inventory be X
Therefore Opening Inventory be 3X, as it is 2 times more
Inventory Turnover Ratio = (Cost of Revenue from Operations)/(Average Inventory)
8 = (Rs.3,00,000)/((Opening Inventory+Closing Inventory)  ÷ 2)
8 = Rs. ( 3,00,000)/((3X+X)  ÷ 2)
8/1 = Rs. ( 3,00,000 × 2)/4X
8 × 4X = Rs. 6,00,000
X = 6,00,000/32
X = 18,750
Therefore Opening Inventory = 3 × X = 3 × 18,750 = Rs. 56,250

Q76. From the following Information, calculate Inventory Turnover Ratio:
Credit Revenue from Operations Rs. 3,00,000; Cash Revenue from Operations Rs. 1,00,000, Gross Profit 25% of Cost, Closing Inventory was 3 times the Opening Inventory. Opening Inventory was 10% of Cost of Revenue from Operations.

Working Capital:-
Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations
Total Revenue from Operations = Rs. 3,00,000 + Rs. 1,00,000
Total Revenue from Operations = Rs. 4,00,000
Let Cost of Revenue from Operations be X.
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
Revenue from Operations = Cost of Revenue from Operations + Cost of Revenue from Operations × 25%

Q77. Calculate Inventory Turnover Ratio in each of the following alternative cases:
Case 1: Cash Sales 25% of Credit Sales; Credit Sales Rs. 3,00,000; Gross Profit 20% on Revenue from Operations, i.e., Net Sales; Closing Inventory Rs. 1,60,000; Opening Inventory Rs. 40,000.
Case 2: Cash Sales 20% of Total Sales; Credit Sales Rs. 4,50,000; Gross Profit 25% on Cost; Opening Inventory Rs. 37,500; Closing Inventory Rs. 1,12,500.

Credit Sales = Rs. 3,00,000
Case 1:
Cash Sales = Credit Sales × 25/100
= Rs. 3,00,000 × 25/100
= Rs. 75,000
Total Sales = Cash Sales + Credit Sales
= Rs. 75,000 + Rs. 3,00,000
= Rs. 3,75,000
Total Sales = Cost of goods sold + Gross Profit
Total sales = Cost of goods sold + Total Sales × 20/100
Rs. 3,75,000 = Cost of goods sold + 3,75,000 × 20/100
Cost of goods sold = Rs. 3,75,000 – Rs. 75,000
Cost of goods sold = Rs. 3,00,000

Q78. From the following Statement of Profit and Loss for the year ended 31st March, 2019 of Rex Ltd., calculate Inventory Turnover Ratio:

Q79. Credit Revenue from Operations, i.e., Net Credit Sales for the year Rs. 1,20,000, Debtors Rs.12,000, Bill’s Receivable Rs. 8,000. Calculate Trade Receivables Turnover Ratio.

Q80. Calculate Trade Receivables Turnover Ratio from the following information:

Q81. Closing Trade Receivables Rs. 1,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 40,000; Revenue from Operations, i.e., Net Sales Rs. 6,00,000. Calculate Trade Receivables Turnover Ratio.

Q82. Compute Trade Receivables Turnover Ratio from the following:

Q83. Rs. 1,75,000 is the Credit Revenue from Operations, i.e., Net Credit Sales of an enterprise. If Trade Receivables Turnover Ratio is 8 times, calculate Trade Receivables in the Beginning and at the end of the year. Trade Receivables at the end is Rs. 7,000 more than that in the beginning.

Let Trade Receivables in the beginning be X
Therefore Trade Receivables at the end is X + 7,000

Q84. From the following particulars, determine Trade Receivables Turnover Ratio:

Debtors will not be averages as only figure is given in the question. Single figure of debtors in the information is taken as closing debtors.

Q85. Closing Trade Receivables Rs. 1,20,000, Revenue from Operations Rs. 14,40,000. Provision for Doubtful Debts Rs. 20,000. Calculate Trade Receivables Turnover Ratio.

Debtors will not be averaged as only one figure is given in the question. Single figure of debtors in the information is taken as closing debtors. Provision for Doubtful Debts will not be deducted from debtors.

Q86. Closing Trade Receivables Rs. 4,00,000; Cash Sales being 25% of Credit Sales; Excess of Closing Trade Receivables over Opening Trade Receivables Rs. 2,00,000; Revenue from Operations, i.e., Revenue from Operations, i.e., Net Sales Rs. 15,00,000. Calculate Trade Receivables Turnover Ratio.

Q87. A firm normally has trade Receivables equal to two months' credit Sales. During the coming year it expects Credit Sales of Rs. 7,20,000 spread evenly over the year (12 months). What is the estimated amount of Trade Receivables at the end of the year?

Q88. A limited company made Credit Sales of Rs. 4,00,000 during the financial period. If the collection period is 36 days and year is assumed to be 360 days, calculate:
(iii) Trade Receivables at the end when Trade Receivables at the end are more than that in the beginning by Rs. 6,000.

Let opening Trade Receivables be X and Closing be X + Rs. 6,000

Rs. 40,000 × 2 = 2X + Rs. 6,000
Rs. 80,000 – Rs. 6,000 = 2X
Rs. 74,000 = 2X
X = 74,000/2
X = 37,000
Opening Trade Receivables = Rs. 37,000
Closing Trade Receivables = X + Rs. 6,000 = Rs. 37,000 + Rs. 6,000 = Rs. 43,000

Q89. Cash Revenue from Operations (Cash Sales) Rs. 2,00,000, Cost of Revenue from Operations or Cost of Goods Solds Rs. 3,50,000; Gross Profit Rs. 1,50,000; Trade Receivables Turnover Ratio 3 Times. Calculate Opening and Closing Trade Receivables in each of the following alternative cases;
Case 1: If Closing Trade Receivables were Rs. 1,00,000 in excess of Opening Trade Receivables.
Case 2: If trade Receivables at the end were 3 times than in the beginning.
Case 3: If Trade Receivables at the end were 3 times more than that of in the beginning.
Case 1:
If Closing Trade Receivables were Rs. 1,00,000 in excess of Opening Trade Receivables:

Opening Trade Receivables = Rs. 50,000
Therefore Closing Trade Receivables = X + Rs. 1,00,000
= Rs. 50,000 + Rs. 1,00,000
= Rs. 1,50,000
Case 2:
If Trade Receivables at the end are 3 times than in the beginning:
Let Opening Trade Receivables be X and Closing Trade Receivables = 3X
Rs. 1,00,000 = X+3X/2
Rs. 1,00,000 = 4X/2
Opening Trade Receivables = Rs. 50,000
Therefore Closing Trade Receivables = 3X = 3 × Rs. 50,000 = Rs. 1,50,000
Case 3:
If debtors at the end were 3 times more than that in the beginning:
Let opening Trade Receivables be X and Closing Trade Receivables be 4X
Rs. 1,00,000 = (X + 4X)/2
Rs. 1,00,000 × 2 = 5X
Rs. 2,00,000 = 5X
Rs. 2,00,000/5 = X
Opening Trade Receivables = Rs. 40,000
Therefore Closing Trade Receivables = 4X = 4 × Rs. 40,000 = Rs. 1,60,000
Working Notes:-
Total Sales = Cost of Goods Sold + Gross Profit
= Rs. 3,50,000 + Rs. 1,50,000
= Rs. 5,00,000
Credit Sales = Total Sales – Cash Sales
= Rs. 5,00,000 – Rs. 2,00,000
= Rs. 3,00,000

Q90. From the following information, calculate Opening and Closing Trade Receivables, if Trade Receivables Turnover Ratio is 3 Times:
(i) Cash Revenue from Operations is 1/3rd of Credit Revenue from Operations.
(ii) Cost of Revenue from Operations is Rs. 3,00,000.
(iii) Gross Profit is 25% of the Revenue from Operations.
(iv) Trade Receivables at the end are 3 Times more than that of in the beginning.
Let Revenue from Operations be X.
Total Revenue from Operations = Cost of Revenue from Operations + Gross Profit
Revenue from Operations = Cost of Revenue from Operations + Revenue from Operations × 25%

Z = Rs. 40,000
Opening Trade Receivables = Rs. 40,000
Closing Trade Receivables = 4 Z = 4 × Rs. 40,000 = Rs. 1,60,000

Q91. Calculate Trade Receivables Turnover Ratio in each of the following alternative cases:
Case 1: Net Credit Sales Rs. 4,00,000; Average Trade Receivables Rs. 1,00,000.
Case 2: Revenue from Operations (Net Sales) Rs. 30,00,000; Cash Revenue from Operations, i.e., Cash Sales Rs. 6,00,000; Opening Trade Receivables Rs. 2,00,000; Closing Trade Receivables Rs. 6,00,000.
Case 3: Cost of Revenue from Operations or Cost of Goods Sold Rs. 3,00,000; Gross Profit on Cost 25%; Cash Sales 20% of Total Sales; Opening Trade Receivables Rs. 50,000; Closing Trade Receivables Rs. 1,00,000.
Case 4: Cost of Revenue from Operations or Cost of Goods Sold Rs. 4,50,000; Gross Profit on Sales 20%; Cash Sales 25% of Net Credit Sales, Opening Trade Receivables Rs. 90,000; Closing Trade Receivables Rs. 60,000.

Working Note:-
Total Revenue from Operations = Cost of goods sold + Gross Profit
Total Revenue from Operations = Cost of Goods sold + Cost of goods sold × 25/100
Total Revenue from Operations = Rs. 3,00,000 + Rs. 3,00,000 × 25/100
Total Revenue from Operations = Rs. 3,00,000 + Rs. 75,000
Total Revenue from Operations = Rs. 3,75,000
Total Revenue from Operations = Cash Revenue from Operations + Credit Revenue from Operations
Total Revenue from Operations = Total Revenue from Operations × 20/100 + Credit Revenue from Operations
Rs. 3,75,000 = Rs. 3,75,000 × 20/100 + Credit Revenue from Operations
Credit Revenue from Operations = Rs. 3,00,000

Working Note:-
Total Sales = Cost of goods sold + Gross Profit
Total Sales = Cost of goods sold + Total Sales × 20/100 (Let total Sales be X)
X = Rs. 4,50,000 + X/5
X - X/5 = Rs. 4,50,000
5X-X/5 = Rs. 4,50,000
4X/5 = Rs. 4,50,000
X = Rs. 4,50,000 × 5/4
Total Sales = Rs. 5,62,500
Total Sales = 25/100 × Credit Sales + Credit Sales
Rs. 5,62,500 = Y/4 + Y (Let Y be credit Sales)
Rs. 5,62,500 = Y+4Y/4
Rs. 5,62,500 = 5Y/4
Y = Rs. 5,62,500 × 4/5
Net Credit Sales = Rs. 4,50,000

Q92. From the information given below, calculate Trade Receivables Turnover Ratio:
Credit Revenue from Operations, i.e., Credit Sales Rs. 8,00,000; Opening Trade Receivables Rs. 1,20,000; and Closing Trade Receivables Rs. 2,00,000.
State giving reason, which of the following would increase, decrease or not change Trade Receivables Turnover Ratio:
(i) Collection from Trade Receivables Rs. 40,000.
(ii) Credit Revenue from Operations, i.e., Credit Sales Rs. 80,000.
(iii) Sales Return Rs. 20,000.
(iv) Credit Purchase Rs. 1,60,000.

(iv) Credit purchases of goods will increase cost of goods sold and closing creditors. It has nothing to do with net credit sales or closing debtors or average debtors or average debtors. So this transactions will not change the trade Receivables Turnover Ratio.

Q93. Calculate Trade Payables Turnover Ratio and Average Debt payment Period from the following information:

Total Purchases Rs. 21,00,000; Purchases Return Rs. 1,00,000; Cash Purchases Rs. 4,00,000.

Q94. Calculate Trade payables Turnover Ratio from the following information:
Opening Creditors Rs. 1,25,000; Opening Bills Payable Rs. 10,000; Closing Creditors Rs. 90,000; Closing bills Payable Rs. 5,000; Purchases Rs. 9,50,000; Cash Purchases Rs. 1,00,000; Purchases Return Rs. 45,000.

Q95. Calculate Trade Payables Turnover Ratio for the year 2018-19 in each of the alternative cases:
Case 1: Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000; Purchases Return Rs. 60,000; Cash Purchases Rs. 90,000.
Case 2: Opening Trade Payables Rs. 15,000; Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000.
Case 3: Closing Trade Payables Rs. 45,000; Net Purchases Rs. 3,60,000.
Case 4: Closing Trade Payables (including Rs. 25,000 due to a supplier of machinery) Rs. 55,000; Net Credit Purchases Rs. 3,60,000.

Q97. Revenue from Operations: Cash Sales Rs. 5,00,000; Credit Sales Rs. 6,00,000; Sales Return Rs. 1,00,000. Current Assets Rs. 3,00,000; Current Liabilities Rs. 1,00,000. Calculate Working Capital Turnover Ratio.

Q98. Equity Share Capital Rs. 15,00,000; Gross Profit on Revenue from Operations, i.e., Net Sales 331/3%; Cost Revenue from Operations or Cost of Goods Sold Rs. 20,00,000; Current Assets Rs. 10,00,000; Current Liabilities Rs. 2,50,000. Calculate Working Capital Turnover Ratio.

Working Note:-
Revenue from Operations = Cost of Goods Sold or Cost of Revenue from Operations + Gross Profit
X = Cost of goods sold + X/3 (Let Revenue from Operations be X)
X = Rs. 20,00,000 + X/3
X - X/3 = Rs. 20,00,000
3X-X/3 = Rs. 20,00,000
2X/3 = Rs. 20,00,000
X = 20,00,000 × 3/2
Revenue from Operations = Rs. 30,00,000

Q99. Gross Profit at 25% on cost; Gross profit Rs. 5,00,000; Equity Share Capital Rs. 10,00,000; Reserves and Surplus 2,00,000; Long-term Loan 3,00,000; Fixed Assets (Net) Rs. 10,00,000. Calculate Working Capital Turnover Ratio.

Working Note:-
Gross Profit = Cost of Revenue from Operations × 25/100
Rs. 5,00,000 = Cost of Revenue from Operations × 1/4
Cost of Revenue from Operations = Rs. 20,00,000
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
= Rs. 20,00,000 + Rs. 5,00,000
= Rs. 25,00,000
Working Capital = Equity Share Capital + Reserves and Surplus + Long term Loan – Fixed Assets
= Rs. 10,00,000 + Rs. 2,00,000 + Rs. 3,00,000 – Rs. 10,00,000
= Rs. 5,00,000

Q100. Capital Employed Rs. 12,00,000; Net Fixed Assets Rs. 8,00,000; Cost of Goods Sold or Cost of Revenue from Operations Rs. 40,00,000; Gross Profit is 20% on Cost. Calculate Working Capital Turnover Ratio.

Working Notes:-
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
Sales = Cost of Revenue from Operations + Cost of Revenue from Operations × 20/100
Revenue from Operations = Rs. 40,00,000 + Rs. 40,00,000 × 1/5
Revenue from Operations = Rs. 40,00,000 + Rs. 8,00,000
Revenue from Operations = Rs. 48,00,000
Working Capital = Capital Employed – Net Fixed Assets
= Rs. 12,00,000 – Rs. 8,00,000
= Rs. 4,00,000

Q101. Calculate Working Capital Turnover Ratio from the following information:
Revenue from Operations Rs. 30,00,000; Current Assets Rs. 12,50,000; Total Assets Rs. 20,00,000; Non-current Liabilities Rs. 10,00,000, Shareholders' Funds Rs. 5,00,000.

Working Notes:-
Current Liabilities = Total Assets – Shareholders’ Fund – non-current Liabilities
= Rs. 20,00,000 – Rs. 5,00,000 – Rs. 10,00,000
= Rs. 5,00,000
Working Capital = Current Assets – Current Liabilities
= Rs. 12,50,000 – Rs. 5,00,000
= Rs. 7,50,000

Q102. A company earns Gross Profit of 25% on cost. For the year ended 31st March, 2017 its Gross Profit was Rs. 5,00,000; Equity Share Capital of the company was Rs. 10,00,000; Reserves and Surplus Rs. 2,00,000; Long-term Loan Rs. 3,00,000 and Non-current Assets were Rs. 10,00,000. Compute the 'Working Capital Turnover Ratio' of the company.

Working Note:-
Revenue from Operations = Cost of revenue from Operations + Gross Profit
= Gross Profit × Reverse of Rate of Return + Gross Profit
= Rs. 5,00,000 × 100/25 × Rs. 5,00,000
= Rs. 20,00,000 + Rs. 5,00,000
= Rs. 25,00,000
Working Capital = Equity Share Capital + Reserves and Surplus + Long term Loan – Non-current Assets
= Rs. 10,00,000 – Rs. 2,00,000 + Rs. 3,00,000 – Rs. 10,00,000
= Rs. 5,00,000

Q103. Compute Gross Profit Ratio from the following information:
Cost of Revenue from Operations (Cost of Goods Sold) Rs. 5,40,000; Revenue from Operations (Net Sales) Rs. 6,00,000.

Q104. From the following, calculate Gross Profit Ratio:
Gross Profit: Rs. 50,000; Revenue from Operations Rs. 5,00,000; Sales Return: Rs. 50,000.

Q105. Compute Gross Profit Ratio from the following information:
Revenue from Operations, i.e., Net Sales = Rs. 4,00,000; Gross Profit 25% on Cost.

Working Note:-
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
Cost of Revenue from Operations + Cost of Revenue from Operations × 25/100 = Sales
Rs. 4,00,000 = X + X/4
Rs. 4,00,000 = 4X + X/4
Rs. 4,00,000 = 5X/4
X = Rs. 4,00,000 × 4/5
Cost of Revenue from Operations = Rs. 3,20,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= Rs. 4,00,000 – Rs. 3,20,000
= Rs. 80,000

Q106. Calculate Gross Profit Ratio from the following data:
Cash Sales are 20% of Total Sales; Credit Sales are Rs. 5,00,000; Purchases are Rs. 4,00,000; Excess of Closing Inventory over Opening Inventory Rs. 25,000.

Sales = Rs. 6,25,000
Closing Inventory = Opening Inventory + Purchases – Closing Inventory
= Rs. 1,00,000 + Rs. 4,00,000 – Rs. 1,25,000
= Rs. 3,75,000
Gross Profit = Sales – Cost of Goods Sold
= Rs. 6,25,000 – Rs. 3,75,000
= Rs. 2,50,000

Q107. From the following information, calculate Gross Profit Ratio:

Working Note:-
Cash Sales = Credit Sales × 1/4
= Rs. 5,00,000 × 1/4
= Rs. 1,25,000
Total Sales = Cash Sales + Credit Sales
= Rs. 1,25,000 + Rs. 5,00,000
= Rs. 6,25,000
Cost of Revenue from Operations = Purchases + Decrease in Inventory – Returns Outward + Carriage Inwards + Wages
= Rs. 3,00,000 + Rs. 10,000 – Rs. 10,000 + Rs. 50,000
= Rs. 3,60,000
Gross Profit = Total Sales – Cost of Revenue from Operations
= Rs. 6,25,000 – Rs. 3,60,000
= Rs. 2,65,000

Q108. Calculate Gross Profit Ratio from the following data:
Average Inventory Rs. 3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables Rs. 4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales.

Rs. 24,00,000 = Credit Revenue from Operations
Net Revenue from Operations = Credit Revenue from Operations + Cash Revenue from Operations
X = Rs. 24,00,000 + X/4 (Let Net Revenue from Operations be X)
X - X/4 = Rs. 24,00,000
4X-X/4 = Rs. 24,00,000
3X/4 = Rs. 24,00,000
Net Revenue from Operations = Rs. 24,00,000 × 4/3
Net Revenue from Operations = Rs. 32,00,000
Gross Profit = Revenue from Operations – Cost of Revenue from Operations
= Rs. 32,00,000 – Rs. 25,60,000
= Rs. 6,40,000

Q109. (i) Revenue from Operations: Cash Sales Rs. 4,20,000; Credit Sales Rs. 6,00,000; Return Rs. 20,000. Cost of Revenue from Operations or Cost of Goods Sold Rs. 8,00,000. Calculate Gross Profit Ratio.
(ii) Average Inventory Rs. 1,60,000; Inventory Turnover Ratio is 6 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.
(iii) Opening Inventory Rs. 1,00,000; Closing Inventory Rs. 60,000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio.

6 Times × Rs. 1,60,000 = Cost of Revenue from Operations
Cost of Revenue from Operations = Rs. 9,60,000
Sales = Cost of goods sold + Gross Profit
= Cost of Goods sold + Cost of goods sold × 25/100
= Rs. 9,60,00 + Rs. 9,60,000 × 25/100
= Rs. 9,60,000 + Rs. 2,40,000
= Rs. 1,20,000
Sales = Cost of goods sold + Gross Profit
Rs. 12,00,000 = Rs. 9,60,000 + Gross Profit
Gross Profit = Rs. 2,40,000

8 Times × Rs. 80,000 = Cost of Revenue from Operations
Cost of Revenue from Operations = Rs. 6,40,000
Gross Profit = Cost of Goods Sold × 25/100
= Rs. 6,40,000 × 25/100
= 1,60,000
Sales = Cost of goods sold + Gross Profit
Sales = Rs. 6,40,000 + Rs. 1,60,000
Sales = Rs. 8,00,000

Q110. Gross Profit Ratio of a company is 25%. State giving reason, which of the following transactions will (a) increase or (b) decrease or (c) not alter the Gross Profit Ratio.
(i) Purchases of Stock-in-Trade Rs. 50,000.
(ii) Purchases Return Rs. 15,000.
(iii) Cash Sale of Stock-in-Trade Rs. 40,000.
(iv) Stock-in-Trade costing Rs. 20,000 withdrawn for personal use.
(v) Stock-in-Trade costing Rs. 15,000 distributed as free sample.

(i) Purchases of Stock-in-Trade Rs. 50,000- will not alter the Gross Profit Ratio.
Reason- Purchases of Stock-in-Trade will increase purchase and closing inventory but there will be no change in gross profit and gross profit ratio.
(ii) Purchases Return Rs. 15,000- will not alter the Gross Profit Ratio.
Reason- Purchases return will increase purchases return and reduce closing inventory but there will be no change in profit and gross profit ratio.
(iii) Cash Sales of Stock-in-trade Rs. 40,000- will not alter the gross profit Ratio.
Reason- Cash sale of Stock-in-Trade will increase sales and reduce closing inventory but there will be no change in gross profit and gross profit ratio as the inventory is sold at cost price.
(iv) Stock-in-Trade costing Rs. 20,000 withdrawn for personal use – will not alter the gross profit Ratio.
Reason- Stock-in-Trade costing Rs. 20,000 withdrawn for personal use will increase drawings and reduce closing inventory but there will be no change in gross profit and gross profit ratio.
(v) Stock-in-Trade costing Rs. 15,000 distributed as free samples – will not alter the gross profit Ratio.
Reason – Stock-in-Trade costing Rs. 15,000 distributed as free samples will increase advertisement expenses and reduce closing inventory but there will be no change in gross profit and gross profit ratio.

Q111. Cost of Revenue from Operations (Cost of Goods Sold) Rs. 3,00,000. Operating Expenses Rs. 1,20,000. Revenue from Operations: Cash Sales Rs. 5,20,000; Return Rs. 20,000. Calculate Operating Ratio.

Q112. Operating Ratio 92%; Operating Expenses Rs. 94,000; Revenue from Operations Rs. 6,00,000; Sales Return Rs. 40,000. Calculate Cost of Revenue from Operations (Cost of Goods Sold).

Q113. (i) Cost of Revenue from Operations (Cost of Goods Sold) Rs. 2,20,000; Revenue from Operations (Net Sales) Rs. 3,20,000; Selling Expenses Rs. 12,000; Office Expenses Rs. 8,000; Depreciation Rs. 6,000. Calculate Operating Ratio.
(ii) Revenue from Operations, Cash Sales Rs. 4,00,000; Credit Sales Rs. 1,00,000; Gross Profit Rs. 1,00,000; Office and Selling Expenses Rs. 50,000. Calculate Operating Ratio.

Q114. From the following information, calculate Operating Ratio:

]

Q115. Calculate Cost of Revenue from Operations from the following information:
Revenue from Operations Rs. 12,00,000; Operating Ratio 75%; Operating Expenses Rs. 1,00,000.

Q116. Calculate Operating Ratio from the following information:
Operating Cost Rs. 6,80,000; Gross Profit 25%; Operating Expenses Rs. 80,000.

Q117. Calculate Operating Profit Ratio from the following information:

Working Note:-
Cost of Revenue from Operations = Opening Inventory + Purchases – Closing Inventory
= Rs. 1,00,000 + Rs. 10,00,000 – Rs. 15,000
= Rs. 9,50,000
Operating Net Profit = Revenue from Operations – Cost of Revenue from Operations – Administrative and Selling Expenses
= Rs. 14,70,000 – Rs. 9,50,000 – Rs. 1,70,000
= Rs. 3,50,000

Q118. Calculate Operating Profit Ratio from the Following:

Working Note:-
Operating Net Profit = Revenue from Operations (Net Sales) – Cost of Revenue from Operations – Office and Administration Expenses
= Rs. 5,00,000 – Rs. 2,00,000 – Rs. 50,000
= Rs. 2,50,000

Q119. What will be the Operating Profit Ratio, if Operating Ratio is 82.59%?

Operating Profit = Total Sales – (Cost of Goods Sold + Operating Expenses)
If Sales will be 100% and Operating Ratio is 82.59% then:
Operating Profit Ratio = Sales Ratio – Operating Ratio
= 100% - 82.59% = 17.41%

Q120. Calculate Operating Profit Ratio, in each of the following alternative cases:
Case 1:  Revenue from Operations (Net Sales) Rs. 10,00,000; Operating Profit Rs. 1,50,000.
Case 2:  Revenue from Operations (Net Sales) Rs. 6,00,000; Operating Cost Rs. 5,10,000.
Case 3: Revenue from Operations (Net Sales) Rs. 3,60,000; Gross Profit 20% on Sales; Operating Expenses Rs. 18,000
Case 4: Revenue from Operations (Net Sales) Rs. 4,50,000; Cost of Revenue from Operations Rs. 3,60,000; Operating Expenses Rs. 22,500.
Case 5: Cost of Goods Sold, i.e., Cost of Revenue from Operations Rs. 8,00,000; Gross Profit 20% on Sales; Operating Expenses Rs. 50,000.

Working Notes:-
Net Sales = Cost of goods sold + Gross profit
Net Sales = Cost of goods sold + Net sales × 20/100
Rs. 3,60,000 = Cost of goods sold + Rs. 3,60,000 × 20/100
Rs. 3,60,000 = Cost of goods sold + Rs. 72,000
Cost of goods sold = Rs. 3,60,000 – Rs. 72,000
Cost of goods sold = Rs. 2,88,000
Operating Profit = Net Sales – Cost of goods sold – Operating Expenses
= Rs. 3,60,000 – Rs. 2,88,000 – Rs. 18,000
= Rs. 54,000

Working Note:-
Total Sales = Cost of goods sold + Gross Profit
Total Sales = Cost of goods sold + Total Sales × 20/100
X = Rs. 8,00,000 + X/5
X - (X/5) = Rs. 8,00,000
5X-X/5 = Rs. 8,00,000
X = Rs. 8,00,000 × 5/4
X = Rs. 10,00,000
Total Sales = Rs. 10,00,000
Net Sales = Rs. 10,00,000

Q121. Revenue from Operations Rs. 9,00,000; Gross Profit 25% on Cost; Operating Expenses Rs. 45,000. Calculate Operating Profit Ratio.

Working Note:-
Gross Profit = Rs. 9,00,000 × 25/100 = Rs. 1,80,000
Operating Profit = Gross Profit – Operating Expenses
= Rs. 1,80,000 – Rs. 45,000
= Rs. 1,35,000

Q122. Operating Cost Rs. 3,40,000; Gross Profit Ratio 20%; Operating Expenses Rs. 20,000. Calculate Operating Profit Ratio.

Working Note:-
Cost of Revenue from Operations = Operating Cost – Operating Expenses
= Rs. 3,40,000 – Rs. 20,000
= Rs. 3,20,000
Gross Profit = (3,20,000 × 20)/80 = Rs. 80,000
Revenue from Operations = Cost of Revenue from Operations + Gross Profit
= Rs. 3,20,000 + Rs. 80,000
= Rs. 4,00,000
Operating Profit = Revenue from Operations – Operating Cost
= Rs. 4,00,000 – Rs. 3,00,000
= Rs. 60,000

Q123. Cash Sales Rs. 2,20,000; Credit Sales Rs. 3,00,000; Sales Return Rs. 20,000; Gross Profit Rs. 1,00,000; Operating Expenses Rs.  25,000; Non-operating incomes Rs. 30,000; Non-operating Expenses Rs. 5,000. Calculate Net Profit Ratio.

Working Notes:-
Net Sales = Cash Sales + Credit Sales – Sales Return
= Rs. 2,20,000 + Rs.3,00,000 – Rs. 20,000
= Rs. 5,00,000
Net Profit = Gross Profit – Operating Expenses + Non-Operating Income – Non-Operating Expenses
= Rs. 1,00,000 – Rs. 25,000 + Rs. 30,000 – Rs. 5,000
= Rs. 1,00,000

Q124. Revenue from Operations, i.e., Net Sales Rs. 6,00,000 and Net Profit Rs.60,000. Calculate Net Profit Ratio.

Q125. Revenue from Operations, i.e., Net Sales Rs. 8,20,000; Return Rs. 10,000; Cost of Revenue from Operations (Cost of Goods Sold) Rs. 5,20,000; Operating Expenses Rs. 2,09,000; Interest on Debentures Rs. 40,500; Gain (Profit) on Sale of a Fixed Asset Rs. 81,000. Calculate Net Profit Ratio

Working Note:-
Revenue from Operations = Rs. 8,20,000
Net Profit = Revenue from Operations – Cost of Revenue from Operations – Operating Expenses – Interest on Debentures + Profit on Sale of a Fixed Asset
= Rs. 8,20,000 – Rs. 5,20,000 – Rs. 2,09,000 – Rs. 40,500 + Rs. 81,000
= Rs. 1,31,500

Q126. Revenue from Operations Rs. 4,00,000; Gross Profit Ratio 25%; Operating Ratio 90%. Non-operating Expenses Rs. 2,000; Non-operating Income Rs. 22,000. Calculate Net Profit Ratio.

Working Note:-
Cost of Revenue from Operations + Operating Expenses
= Revenue from Operations × 90%
= Rs. 4,00,000 × 90% = Rs. 3,60,000
Net Profit = Revenue from Operations – Cost of Revenue from Operations – Operating Expenses – Non-operating Expenses + Non-operating income
= Rs. 4,00,000 – Rs. 3,60,000 – Rs. 2,000 + Rs. 22,000 = Rs. 60,000

Q127. Calculate Return on Investment (ROI) from the following details: Net Profit after Tax Rs. 6,50,000; Rate of Income Tax 50%; 10% Debentures of Rs. 100 each Rs. 10,00,000; Fixed Assets at cost Rs. 22,50,000; Accumulated Depreciation on Fixed Assets up to date Rs. 2,50,000; Current Assets Rs. 12,00,000; Current Liabilities Rs. 4,00,000.

Working Note:-
Net Profit before Interest, Tax and Dividend
= Net Profit after Tax + 10% Debentures Interest + Income Tax + Preference Dividend
= Rs. 6,50,000 + Rs. 10,00,000 × 10/100 + Rs. 6,50,000 × 100/50 × 50/100 + 0
= Rs. 6,50,000 + Rs. 1,00,000 + Rs. 6,50,000 + 0
= Rs. 14,00,000
Capital Employed = Fixed Assets – Accumulated Depreciation on Fixed Assets up to date + Current Assets – Current liabilities
Rs. 22,50,000 – RS. 2,50,000 + Rs. 12,00,000 – Rs. 4,00,000 = Rs. 28,00,000

Q128. Net Profit before Interest and Tax Rs. 2,50,000; Capital Employed Rs. 10,00,000. Calculate Return on Investment.

Q130. Net Profit before Interest and Tax Rs. 4,00,000; 15% Long-term Debt Rs. 8,00,000; Shareholders' Funds Rs. 4,00,000. Calculate Return on Investment.

Q131. Y Ltd.'s profit after interest and tax was Rs.  1,00,000. Its Current Assets were Rs.  4,00,000; Current Liabilities Rs.  2,00,000; Fixed Assets Rs.  6,00,000 and 10% Long-term Debt Rs.  4,00,000. The rate of tax was 20%. Calculate 'Return on Investment' of Y Ltd.

Profit after interest and Tax = Rs. (1,25,000 + 40,000) = Rs. 1,65,000
Capital Employed = Fixed Assets + Current Assets – Current Liabilities
= (Rs. 6,00,000 + Rs. 4,00,000) – 2,00,000
= Rs. 8,00,000

Q132. From the following Balance Sheet of Global Ltd., you are required to calculate Return on Investment for the year 2018-19:

Additional Information: Net Profit before Tax for the year 2018-19 is Rs. 9,72,000.

Q133. Following is the Balance Sheet of the Bharati Ltd. as at 31st March, 2019:

You are required to Calculate Return on Investment for the year 2018-19 with reference to Opening Capital Employed.

Q134. State with reason whether the following transactions will increase, decrease or not change the 'Return on Investment' Ratio:
(i) Purchase of machinery worth Rs.10,00,000 by issue of equity shares.
(ii) Charging depreciation of Rs. 25,000 on machinery.
(iii) Redemption of debentures by cheque Rs. 2,00,000.
(iv) Conversion of 9% Debentures of Rs. 1,00,000 into equity shares.

(i) Purchase of machinery worth Rs. 10,00,000 by issue of equity shares. This transaction will affect the value of the denominator of the ratio as we are issuing equity shares. There will be no effect on the numerator of the fraction in ratio. Therefore denominator of the fraction will increase which alternatively decrease the ratio.
(ii) Charging depreciation of Rs. 25,000 on machinery. The net profit in the numerator of the fraction will decrease due to depreciation charge. There will be no effect on the denominator. Therefore due to only decrease in numerator the ratio will decrease.
(iii) Redemption of debentures by cheque Rs. 2,00,000 will reduce capital employed or denominator of the ratio. There will be no effect on the profit on numerator. Therefore denominator of the fraction will decrease which alternatively increase the ratio.
(iv) Conversion of 9% Debentures of Rs. 1,00,000 into equity shares. The conversion of debentures into equity shares will not change the capital employed in the denominator of the ratio. Therefore there will be no change in ratio.

Q135. Opening Inventory Rs. 80,000; Purchases Rs. 4,30,900; Direct Expenses Rs. 4,000; Closing Inventory Rs. 1,60,000; Administrative Expenses Rs. 21,100; Selling and Distribution Expenses Rs. 40,000; Revenue from Operations, i.e., Net Sales Rs. 10,00,000. Calculate Inventory Turnover Ratio; Gross Profit Ratio; and Opening Ratio.

Q136. Following information is given about a company:

Q137. From the following information, calculate any two of the following ratios:
(i) Current Ratio;
(ii) Debt to Equity Ratio; and
(iii) Operating Ratio.
Revenue from Operations (Net Sales) Rs. 1,00,000; cost of Revenue from Operations (Cost of Goods Sold) was 80% of sales; Equity Share Capital Rs. 7,00,000; General Reserve Rs. 3,00,000; Operating Expenses Rs. 10,000; Quick Assets Rs. 6,00,000; 9% Debentures Rs. 5,00,000; Closing Inventory Rs. 50,000; Prepaid Expenses Rs. 10,000 and Current Liabilities Rs. 4,00,000.

Q138. From the following information, calculate Inventory Turnover Ratio; Operating Ratio and Working Capital Turnover Ratio:
Opening Inventory Rs. 28,000; Closing Inventory Rs. 22,000; Purchases Rs. 46,000; Revenue from Operations, i.e., Net Sales Rs. 80,000; Return Rs. 10,000; Carriage Inwards Rs. 4,000; Office Expenses Rs. 4,000; Selling and Distribution Expenses Rs. 2,000; Working Capital Rs. 40,000.

Q139. From the following calculate:
(a) Current Ratio; and
(b) Working Capital Turnover Ratio.

Q140. Calculate following ratios on the basis of the following information:
(i) Gross Profit Ratio;
(ii) Current Ratio;
(iii) Acid Test Ratio; and
(iv) Inventory Turnover Ratio

Q141. Calculate following ratios on the basis of the given information:
(i) Current Ratio;
(ii) Acid Test Ratio;
(iii) Operating Ratio; and
(iv) Gross Profit Ratio.

Q142. From the information given below, calculate any three of the following ratio:
(i) Gross Profit Ratio;
(ii) Working Capital Turnover Ratio:
(iii) Debt to Equity Ratio; and
(iv) Proprietary Ratio.

Q143. On the basis of the following information calculate:
(i) Debt to Equity Ratio; and
(ii) Working Capital Turnover Ratio.
Information:

Q144. From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:

Q145. From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio:
Information: Fixed Assets Rs. 75,00,000; Current Assets Rs. 40,00,000; Current Liabilities Rs. 27,00,000; 12% Debentures Rs. 80,00,000 and Net Profit before Interest, Tax and Dividend Rs. 14,50,000.

Q146. Calculate Current Ratio, Quick Ratio and Debt to Equity Ratio from the figures given below:

Q147. From the following information’s, calculate Return on Investment (or Return on Capital Employed):

Working Note:-
Net Profit before Interest, Tax and Dividend = Net Profit before Tax + Interest on 10% Long-term Borrowings
= Rs. 6,00,000 + Rs. 20,00,000 × 10/100
= Rs. 6,00,000 + Rs. 2,00,000
= Rs. 8,00,000
Capital Employed = Share Capital + Reserve and Surplus + 10% Long-term Borrowings
= Rs. 5,00,000 + Rs. 2,50,000 + Rs. 20,00,000
= Rs. 27,50,000
Point of Knowledge:-
Other Method to Calculate Capital Employed
Capital Employed = Net Fixed Assets + Non-Current Trade Investments + Current Assets – Current Liabilities
= Rs. 22,50,000 + Rs. 2,50,000 + Rs. 11,00,000 – Rs. 8,50,000
= Rs. 27,50,000

 DK Goel Solutions Class 12 Accountancy Chapter 1 Financial Statements of Not for Profit Organisations DK Goel Solutions Class 12 Accountancy Chapter 2 Accounting for Partnership Firms Fundamentals DK Goel Solutions Class 12 Accountancy Chapter 3 Change in Profit Sharing Ratio Among the Existing Partners DK Goel Solutions Class 12 Accountancy Chapter 4 Admission of a Partner DK Goel Solutions Class 12 Accountancy Chapter 5 Retirement or Death of a Partner DK Goel Solutions Class 12 Accountancy Chapter 6 Dissolution of a Partnership Firm DK Goel Solutions Class 12 Accountancy Chapter 7 Company Accounts Issue of Share DK Goel Solutions Class 12 Accountancy Chapter 8 Company Accounts Issue of Debentures DK Goel Solutions Class 12 Accountancy Chapter 9 Company Accounts Redemption of Debentures
 DK Goel Solutions Class 12 Accountancy Chapter 1 Financial Statements of Companies DK Goel Solutions Class 12 Accountancy Chapter 2 Financial Statements Analysis DK Goel Solutions Class 12 Accountancy Chapter 3 Tools for Financial Analysis DK Goel Solutions Class 12 Accountancy Chapter 4 Common Size Statements DK Goel Solutions Class 12 Accountancy Chapter 5 Accounting Ratios DK Goel Solutions Class 12 Accountancy Chapter 6 Cash Flow Statement
 TS Grewal Solution Class 12 Chapter 1 Financial Statement of Not for Profit Organisations TS Grewal Solution Class 12 Chapter 2 Accounting for Partnership Firms Fundamentals TS Grewal Solution Class 12 Chapter 3 Goodwill Nature and Valuation TS Grewal Solution Class 12 Chapter 4 Change in Profit Sharing Ratio Among the Existing Partners TS Grewal Solution Class 12 Chapter 5 Admission of a Partner TS Grewal Solution Class 12 Chapter 6 Retirement of a Partner TS Grewal Solution Class 12 Chapter 7 Death of a Partner TS Grewal Solution Class 12 Chapter 8 Dissolution of a Partnership Firm
 TS Grewal Solution Class 12 Chapter 8 Company Accounts Accounting for Share Capital TS Grewal Solution Class 12 Chapter 9 Company Accounts Issue of Debentures TS Grewal Solution Class 12 Chapter 10 Company Accounts Redemption of Debentures
 TS Grewal Solution Class 12 Chapter 1 Financial Statement of a Company TS Grewal Solution Class 12 Chapter 2 Financial Statement Analysis TS Grewal Solution Class 12 Chapter 3 Tools of Financial Statement Analysis TS Grewal Solution Class 12 Chapter 4 Accounting Ratios TS Grewal Solution Class 12 Chapter 5 Cash Flow Statement

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