BBA (WOW) MANAGEMENT ACCOUNTING

MODULE - 2
RATIO ANALYSIS
(Problems)

1. The net profit (after taxes) of a firm is Rs. 75,000 and its fixed interest charges on long- term
borrowings are Rs.10,000. The rate of income tax is 50%. Calculate interest coverage ratio.

2. Calculate Return on capital employed from the following details:

Particulars Amount (Rs.)
Net profit after tax 3,00,000
Rate of income tax 50%
5,000, 8% convertible debentures of Rs.100 5,00,000
each, fully paid up
Current assets 5,50,000
Fixed assets (at cost) 21,25,000
Depreciation up to date 1,25,000
Current liabilities 2,50,000

3. Calculate (a) Return on shareholders’ investment; (b) return on equity capital and (c) EPS.
Particulars Amt. (Rs.)
2,000 equity shares of Rs.100 each 2,00,000
1,000, 8% preference shares of Rs.100 each 1,00,000
Revenue reserve 30,000
Capital reserve 50,000
Share premium 20,000
Net profit before interest and tax 1,50,000
Interest charges 30,000
Tax rate 30%

4. The cost of goods sold of sarthak limited is Rs.5,00,000. The opening stock is Rs.40,000 and the
closing stock is Rs.60,000 (at cost). Find out inventory turnover ratio.

5. Find out opening and closing stocks from the following information:
 Stock: 5 times
 Total sales: Rs.2,00,000
 Gross profit: 25% of sales
The value of closing stock is more by 4000 than the opening stock.

6. Find out (a) Debtors turnover ratio; (b) Average collection period.
Particulars 31/03/2020 31/03/2021
Annual credit sales 5,00,000 6,00,000
Debtors in the beginning 80,000 1,00,000
Debtors at the end 1,00,000 1,10,000
Days to be taken for the year: 360 days

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7. Pari Limited provides the following information. Calculate Debtors’ Turnover Ratio and
Average Collection Period. Assume 240 working days in a year.
Particulars Amt. (Rs.)
Credit sales 2,70,000
Cash sales 1,50,000
Return inwards 20,000
Trade debtors in the beginning 55,000
Trade debtors at the end 45,000
Bad debts provision 5,000

8. From the following information, Calculate Creditor’s Turnover Ratio. Assume 365 days in a year.
Particulars Amt.(Rs.)
Total purchases 4,00,000
Cash purchases (included above) 50,000
Purchase returns 20,000
Creditors at the end 60,000
Bills payable at the end 20,000
Reserve for discount on creditors 5,000

9. From the following information, calculate creditors’ turnover ratio and Average Payment Period.
Assume 360 days in a year.
Particulars 2020 2021
Annual credit purchases 6,80,000 7,50,000
Creditors on 1st January 80,000 60,000
Creditors on 31st December 60,000 90,000

10. Calculate (A) Average Stock; (B) Purchases; (C) Creditors Turnover Ratio; (D) Average Payment
Period; (E) Average Collection Period; (F) Working Capital Turnover Ratio Of M/s Pranav limited for
the year ending 2021.
Particulars
Stock turnover ratio 6 times
Gross profit ratio 20% on sales
Sales for the year 2021 Rs. 3,00,000
Closing stock is Rs.10,000 more than Opening Stock
Opening creditors Rs. 20,000
Closing creditors Rs. 30,000
Trade debtors at the end Rs. 60,000
Net working capital Rs. 50,000

11. Calculate (i) Current ratio; (ii) Acid test ratio; (iii) Absolute liquid ratio, from the balance sheet of
Bangalore Limited as on 31/12/2021.
Liabilities Amt. (Rs.) Assets Amt.(Rs.)
9% preference share capital 5,00,000 Goodwill 1,00,000
Equity share capital 10,00,000 Land and building 6,50,000
8% debentures 2,00,000 Plant 8,00,000

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Long-term loan 1,00,000 Furniture & fixture 1,50,000
Bills payable 60,000 Bills receivable 70,000
Sundry creditors 70,000 Sundry debtors 90,000
Bank overdraft 30,000 Bank balance 45,000
Outstanding expenses 5,000 Marketable securities 25,000
Preliminary expenses 5,000
Stock 30,000
1965000 1965000

12. Calculate Current Assets and Current Liabilities from the information given below:
(a) Working Capital: Rs. 90,000
(b) Current Ratio : 2.5

13. Calculate the amount of (a) current assets; (b) liquid assets; and (c) Inventory from the information
given below:
Current ratio= 2.5:1
Acid test ratio= 1.5:1
Current liabilities = Rs. 50,000

14. Calculate the amount of (a) current assets; (b) liquid assets; and (c) current liabilities from the
information given below:
Current ratio= 3:1
Inventory= Rs.2,20,000
Net Working capital= Rs.2,00,000

15. Given below is the balance sheet of pai limited. Calculate (i) Debt-equity ratio; (ii) Capital Gearing
ratio; (iii) Fixed assets to long term funds; (iv) fixed assets ratio; (v) fixed assets to proprietors’ fund ratio;
(vi) solvency ratio.
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
2,000 Equity shares of 2,00,000 Goodwill 20,000
Rs.100 each
1,000, 9% preference 1,00,000 Land & Building 2,00,000
shares of Rs.100 each
1,000, 10% debentures of 1,00,000 Plant and Machinery 2,40,000
Rs.100 each
General reserve 50,000 Furniture and fixture 30,000
Reserve for contingencies 50,000 Stock 60,000
Current liabilities 1,00,000 Debtors 35,000
Cash 15,000
6,00,000 6,00,000

16. Given below is the balance sheet of Varun limited. Calculate (i) Debt-equity ratio; (ii) Capital Gearing
ratio; (iii) Proprietary ratio; (iv)solvency ratio; (v) fixed assets to net- worth ratio; (vi) fixed assets
to long term funds ratio
Liabilities Amt. (Rs.) Assets Amt. (Rs.)
2,500 equity shares of 2,50,000 Land & Buildings 4,50,000
Rs.100 each

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2,000, 8% preference shares 2,00,000 Plant & Machinery 4,00,000
of Rs.100 each,
fully paid up
Reserves 2,00,000 Stock-in-trade 1,50,000
3,000, 9% debentures of 3,00,000 Sundry debtors 1,00,000
Rs.100 each
Current liabilities 2,00,000 Cash and bank balance 45,000
Prepaid expenses 5,000
11,50,000 11,50,000

17. Prepare a statement of proprietor’s funds, with as many details as possible, from the following
information.
Particulars
Current ratio 2.5
Liquid ratio 1.5
Proprietary ratio (fixed assets/proprietor’s funds) 0.75
Working capital Rs.60,000
Reserves & surplus Rs.40,000
Bank overdraft Rs.10,000
There is no long-term loan or fictitious assets

[Link] a balance sheet with as many details as possible, from the following
particulars:
Particulars
Stock velocity 6
Capital turnover ratio 2
Fixed assets turnover ratio 4
Gross profit turnover ratio 20%
Debtor’s velocity 2 months
Creditor’s velocity 73 days
The gross profit was Rs.60,000. Reserves and surplus amounts to Rs.20,000. Closing stock is Rs.5,000
in excess of opening stock. Cash and bank balance was Rs.31,500.

19. Prepare a balance sheet from the following information:

Current ratio= 2.5
Liquid ratio= 1.5
Net working capital= Rs.3,00,000
Stock turnover ratio (cost of sales/closing stock) = 6 times
Fixed assets turnover ratio= 2 times
Average debt collection period= 2 months Fixed
Assets to shareholders’ net worth= 1:1
Reserves to share capital= 0.5:1

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