3.

Chapter 3
Financial Analysis & Planning- Ratio Analysis

Question 1
The following accounting information and financial ratios of PQR Ltd. relates to the year ended 31st
March, 2021:
I Accounting Information:
Gross Profit 15% of Sales
Net profit 8% of sales
Raw materials consumed 20% of works cost
Direct wages 10% of works cost
Stock of raw materials 3 months9 usage
Stock of finished goods 6% of works cost
Debt collection period 60 days
(All sales are on credit)
II Financial Ratios:
Fixed assets to sales 1:3
Fixed assets to Current assets 13 : 11
Current ratio 2:1
Long-term loans to Current liabilities 2:1
Share Capital to Reserves and Surplus 1:4

If value of Fixed Assets as on 31st March, 2020 amounted to ¹ 26 lakhs, PREPAREa summarised Profit
and Loss Account of the company for the year ended 31st March, 2021 and also the Balance Sheet as
on 31st March, 2021. (Old SM) (Same concept different figures RTP Nov922)
Answer 1

a) Working Notes:
Fixed Assets 1
i. Calculation of Sales= =3
Sales
26,000 1
6 = þSales =¹ 78,00,000
sales 3
Fixed Assets 13
ii. Calculation of Current Assets= =
Current Assets 11

26,000 13
6 Current Assets = 11 þSales =¹ 22,00,000
iii. Calculation of Raw Material Consumption and Direct Wages
¹
Sales 78,00,000
Less: Gross Profit @ 15% 11,70,000
Works Cost 66,30,000

Raw Material Consumption (20% of Works Cost) = ¹ 13,26,000Direct Wages (10% of Works
Cost) = ¹ 6,63,000
iv. Calculation of Stock of Raw Materials (= 3 months usage)
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.2

13
= 13,26,000 ×
12
= ¹ 3,31,500
v. Calculation of Stock of Finished Goods (= 6% of Works Cost)
6
= 66,30,000× =¹ 3,97,800
100

vi. Calculation of Current Liabilities

Current Assets
= Current Liabilities =2

22,000
6 Current Liabilities = 2 þSales =¹¹11,00,000
vii. Calculation of Receivables

receivables
Average collection period= × 365
credit sales

receivables
× 365 = 60
78,00,000
þReceivables = ¹ 12,82,191.78 or ¹ 12,82,192
viii. Calculation of Long term Loan
Long term Loan 2 Long term Loan 2
= = þLong term
Current Liabilities 1 11,00,000 1

loan= ¹22,00,000.
ix. Calculation of Cash Balance
¹
Current assets 22,00,000
Less: Receivables 12,82,192
Raw materials stock 3,31,500
Finished goods stock 3,97,800 20,11,492
Cash balance 1,88,508

x. Calculation of Net worth

Fixed Assets 26,00,000
Current Assets 22,00,000
Total Assets 48,00,000
Less: Long term Loan 22,00,000
Current Liabilities 11,00,000 33,00,000
Net worth 15,00,000
Net worth = Share capital + Reserves = 15,00,000

1 share capital
Also,= =
4 Reserves and Surplus
1
So, Share capital==15,00,000× 4= ¹ 12,00,000
Profit and Loss Account of PQR [Link] the year ended 31st March, 2021
Particulars ¹ Particulars ¹
To Direct Materials 13,26,000 By Sales 78,00,000
To Direct Wages 6,63,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.3

To Works (Overhead) 46,41,000

(Balancing figure)
To Gross Profit c/d 11,70,000
78,00,000 78,00,000
By Gross Profit b/d
To Selling and 5,46,000 11,70,000
Distribution Expenses
(Balancingfigure)

To Net Profit (8% ofSales) 6,24,000

11,70,000 11,70,000

Balance Sheet of PQR Ltd. as at 31st March, 2021

Liabilities ¹ Assets ¹
Share Capital 3,00,000 Fixed Assets 26,00,000
Reserves and Surplus 12,00,000 Current Assets:
Long term loans 22,00,000 Stock of Raw Material 3,31,500
Current liabilities 11,00,000 Stock of Finished 3,97,800
Goods
Receivables 12,82,192
Cash 1,88,508
48,00,000 48,00,000

Question 2
Based on the following particulars, PREPARE a balance sheet showing various assets and liabilities of T
Ltd. (MTP 5 Marks, March918 & March 923, RTP May 918)
Fixed assets turnover ratio 8 times
Capital turnover ratio 2 times
Inventory Turnover 8 times
Receivable turnover 4 times
Payable turnover 6 times
GP Ratio 25%
Gross profit during the year amounts to Rs.8,00,000. There is no long-term loan or overdraft. Reserve
and surplus amount to RS.2,00,000. Ending inventory of the year is RS. 20,000 above the beginning
inventory.
Answer 2
Gross Profit
a. G.P. ratio= Sales

Gross Profit
Sales= 25
× 100
8,00,000
25
× 100=32,00,000
b. Cost of Sales= Sales 3 Gross profit
= RS.32,00,000 - Rs.8,00,000
= RS.24,00,000

Sales
c. Receivable turnover r = =4
Receivables
Sales
= Receivables =
4
Rs.32,00,000
= 4
=Rs.8,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.4

Cost of Sales
d. Fixed assets turnover= Fixed Assets = 8

Cost of Sales Rs.24,00,000

Fixed assets = = = RS.3,00,000
8 8

Cost of Sales
e. Inventory turnover= = 8
Average Stock

Cost of Sales Rs.24,00,000

Average Stock= = = RS.3,00,000
Average Stock 8

Opening Stock + Closing Stock

Average Stock=
2

Opening Stock + Closing Stock+20,000

Average Stock=
2

Average Stock = Opening Stock + RS. 10,000

Opening Stock = Average Stock - RS.10,000
= RS.3,00,000 - ¹10,000
= RS.2,90,000
Closing Stock = Opening Stock + RS.20,000
= RS.2,90,000 + RS. 20,000 = RS.3,10,000
f. Payable turnover Purchase
= =2
Capital Emploayed

Purchases= Cost of Sales + Increase in Stock

= RS.24,00,000 + RS. 20,000 = RS.24,20,000
Purchase 24,20.000
Payables= 6
= 2 =12,00,000
Cost of Sales
g. Capital turnover= =2
Capital Emploayed

Cost of Sales 24,20.000

Capital Employed= =2= = 12,00,000
Capital Emploayed 2

h. Capital= Capital Employed 3 Reserves & Surplus

= Rs 12,00,000 3 Rs 2,00,000 = Rs 10,00,000

Balance Sheet of T Ltd as on&&

Liabilities Amount (¹) Assets Amount (¹)
Capital 10,00,000 Fixed Assets 3,00,000
Reserve & Surplus 2,00,000 Inventories 3,10,000
Payables 4,03,333 Receivables 8,00,000
Other Current Assets 1,93,333
16,03,333 16,03,333

Question 3
Following information relate to a concern:
Debtors Velocity 3 months
Credits Velocity 2 months
Stock Turnover Ratio 1.5
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.5

Gross Profit Ratio 25%

Bills Receivables Rs. 25,000
Bills Payables Rs. 10,000
Gross Profit Rs. 4,00,000
Fixed Assets to turnover Ratio 4
Closing stock of the period is Rs. 10,000 above the opening stock. CALCULATE
(i) Sales and cost of goods sold
(ii) Sundry Debtors
(iii) Sundry Creditors
(iv) Closing Stock
(v) Fixed Assets (MTP 5 Marks, Oct918, RTP May 22, Old & New SM)
Answer 3
(I) Determination of Sales and Cost of goods sold:
Gross Profit
Gross Profit Ratio== × 100
Sales

 ,ÿÿ,ÿÿÿ
Or =

ÿÿ þÿýÿ

,ÿÿ,ÿÿÿ
Sales= = Rs. 16,00,000



Cost of Goods Sold = Sales 3 Gross Profit

= Rs. 16,00,000 - Rs. 4,00,000 = Rs. 12,00,000

(ii) Determination of Sundry Debtors:

Debtors velocity is 3 months or Debtors9 collection period is 3 months,
12 month
So, Debtors9 turnover ratio = =4
3month

Credits Sales
Debtors9 turnover ratio =
AverageAccountsReceivable
ý
.
,ÿÿ,ÿÿÿ
= =4
Bills Receivable+ SundryDebtors

Or, Sundry Debtors + Bills receivable = Rs. 4,00,000 Sundry Debtors = Rs. 4,00,000 3 Rs. 25,000
= Rs. 3,75,000
(iii) Determination of Sundry Creditors:
Creditors velocity of 2 months or credit payment period is 2 months
12 month
So, Creditors9 turnover ratio= =6
3month

Credits Sales
Creditors turnover ratio=
AverageAccountsReceivable

ý
.

,
ÿ,ÿÿÿ
= Sundry Creditors+ Bills Payables= 6

So, Sundry Creditors + Bills Payable = Rs. 2,01,667 Or, Sundry Creditors + Rs. 10,000 = Rs.
2,01,667
Or, Sundry Creditors = Rs. 2,01,667 3 Rs. 10,000 = Rs. 1,91,667

(iv) Closing Stock

Stock Turnover Ratio

Cost of Goods Sold ý
.

,ÿÿ,ÿÿÿ

= = =1.5
Average Stock Average Stock

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.6

So, Average Stock = Rs. 8,00,000

Opening Stock + Closing Stock

Now Average Stock=
2

Opening Stock + Rs.10,000

= =Rs.8,00,000
2
Or, Opening Stock = Rs. 7,95,000
So, Closing Stock= Rs. 7,95,000 + Rs. 10,000 = Rs. 8,05,000

(v) Calculation of Fixed Assets

Cost of Good sold
Fixed Assets Turnover Ratio= =4
Fixed Assets

Rs.12,00,000
or= = 4Or, Fixed Asset = Rs. 3,00,000
Fixed Assets

Workings:
*Calculation of Credit purchases:
Cost of goods sold = Opening stock + Purchases 3 Closing stock Rs. 12,00,000 = Rs. 7,95,000 +
Purchases 3 Rs. 8,05,000

Rs. 12,00,000 + Rs. 10,000 = Purchases Rs. 12,10,000 = Purchases (credit).

Assumption:
(i) All sales are credit sales
(ii) All purchases are credit purchase
(iii) Stock Turnover Ratio and Fixed Asset Turnover Ratio may be calculated either on Sales or
on Cost of Goods Sold.

Question 4
Using the following information, PREPARE and complete the Balance Sheet given below:

(I) Total debt to net worth 1:2

(ii) Total assets turnover 2
(iii) Gross profit on sales 30%
(iv) Average collection period 40 days
(Assume 360 days in a year)
(v) Inventory turnover ratio based on cost of goods sold and 3
year-end inventory
(vi) Acid test ratio 0.75
Balance Sheet as on [MTP 5 Marks, March 19]
Liabilities Rs. Assets Rs.
Equity Shares Capital 4,00,000 Plant and Machinery 4,25,000
Reserves and Surplus 6,00,000 and other Fixed
Assets
Total Debt: Current Assets:
Current Liabilities 5,00,000 Inventory 7,00,000
Debtors 3,33,333
- Cash 41,667
15,00,000 15,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.7

Answer 4
Net worth = Capital + Reserves and surplus
= 4,00,000 + 6,00,000 = Rs.10,00,000
6Total debt = Rs. 5,00,000

Total Liability side = Rs. 4,00,000 + Rs. 6,00,000 + Rs. 5,00,000

= Rs. 15,00,000
Total Debit
= Total Assets=
Networth

Rs. Total debt = Rs. 5,00,000

Total Liability side = Rs. 4,00,000 + Rs. 6,00,000 + Rs. 5,00,000
= Rs. 15,00,000
= Total Assets
Sales
Total Assets Turnover =
Total assets
Sales
2=
Rs.1,50,00,000

6Sales = Rs. 30,00,000 Gross Profit on Sales: 30% i.e. Rs. 9,00,000
6Cost of Goods Sold (COGS) = Rs. 30,00,000 3 Rs. 9,00,000
= Rs. 21,00,000
COGS Rs.21,00,000
Inventory turnover= =3=
Inventory Inventory
6 Inventory = Rs. 7,00,000
Average collection period=

Avragedebtors
=
Salse /day

Debtors
40=
Rs.30,00,000/360

Debtors = Rs.3,33,333.
Acid test ratio=

Current Assets 2 Stock (Quick Assett)

= Current liabilitis

Current Assets 2 Rs.7,00,000

0.70= Rs.5,00,000

6Current Assets = Rs.10,75,000.

6Fixed Assets = Total Assets 3 Current Assets

= Rs.15,00,000 3 Rs.10,75,000 = Rs.4,25,000
Cash and Bank balance = Current Assets 3 Inventory 3 Debtors
= Rs.10,75,000 3 Rs.7,00,000 3 Rs.3,33,333 = Rs. 41,667

Balance Sheet as on March 31, 20X8

Liabilities Rs. Assets Rs.
Equity Share Capital 4,00,000 Plant and Machinery and
Reserves & Surplus 6,00,000 other Fixed Assets 4,25,000
Total Debt: Current Assets:
Current liabilities
Prakshal Shah | 8779794646
5,00,000 Inventory 7,00,000
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.8

Debtors 3,33,333
Cash 41,667
15,00,000 15,00,000

Question 5
MNP Limited has made plans for the year 2019 -20. It is estimated that the company will employ
total assets of Rs.50,00,000; 30% of assets being financed by debt at an interest cost of 9% p.a.
The direct costs for the year are estimated at Rs. 30,00,000 and all other operating expenses are
estimated at Rs. 4,80,000. The sales revenue is estimated at Rs. 45,00,000. Tax rate is assumed
to be 40%. CALCULATE:
(i) Net profit margin (After tax);
(ii) Return on Assets (After tax);
(iii) Asset turnover; and
(iv) Return on Equity. [MTP 5 Marks, Oct919]
Answer 5
The net profit is calculated as follows:
Rs.
Sales Revenue 45,00,000
Less: Direct Costs 30,00,000
Gross Profits 15,00,000
Less: Operating Expense 4,80,000
Earnings before Interest and tax (EBIT) 10,20,000
Less: Interest on debt (9% × 15,00,000) 1,35,000
Earnings before Tax) (EBT) 8,85,000
Less: Taxes (@ 40%) 3,54,000
Profit after Tax (PAT) 5,31,000

(i) Net Profit Margin (After Tax)

Net Profit Margin
EBIT (12 t) Rs.10,20,000 ×(12 0.4)
× 100 = ) = 13.6%
Sales Rs.45,00,000

(ii) Return on Assets (ROA) (After tax)

ýþýÿ (
2
) ý
.
ÿ,
ÿ,ÿÿÿ (
2 ÿ.) ý
.,

,ÿÿÿ
ROA=ÿ

ÿý ý

ÿ

= ý
.ÿ,ÿÿ,ÿÿÿ
= ý
.ÿ,ÿÿ,ÿÿÿ
= 0.1224 = 12.24 %

þÿýÿ
ý
.,ÿÿ,ÿÿÿ
(iii) Asset Turnover = = 0.9
ý

ÿ

ý
.ÿ,ÿÿ,ÿÿÿ
Asset Turnover = 0.9 times

(iv) Return on Equity (ROE)

ROE=
RAT Rs.5,31,000
=
Equity Rs.35,00,000
= 15.17%

ROE= 15.17%

Question 6
The following accounting information and financial ratios of A&R Limited relate to the year ended
31st March, 2020:
Inventory Turnover Ratio 6 Times
Creditors
Prakshal Shah | 8779794646
Turnover Ratio 10 Times
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.9

Debtors Turnover Ratio 8 Times

Current Ratio 2.4
Gross Profit Ratio 25%
Total sales Rs.6,00,00,000; cash sales 25% of credit sales; cash purchases Rs.46,00,000; working
capital Rs.56,00,000; closing inventory is Rs.16,00,000 more than opening inventory.
You are required to CALCULATE:
(i) Average Inventory
(ii) Purchases
(iii) Average Debtors
(iv) Average Creditors
(v) Average Payment Period
(vi) Average Collection Period
(vii) Current Assets
(viii) Current Liabilities.
Take 365 days a year [MTP 10 Marks, May920]
Answer 6
(i) Computation of Average Inventory
Gross Profit = 25% of Rs.6,00,00,000 = Rs.1,50,00,000
Cost of goods sold (COGS) = Sales - Gross Profit
= Rs.6,00,00,000 3 Rs.1,50,00,000
= Rs.4,50,00,000
ÿÿÿþ
Inventory Turnover Ratio=
ýÿÿÿýÿ ÿÿÿ

ÿÿ
ý
.,ÿ,ÿÿÿ,ÿÿÿ
=6 = ýÿÿÿýÿ ÿÿÿ

ÿÿ

Average inventory = Rs.75,00,000

Computation of Purchases
Purchases = COGS + (Closing Stock 3 Opening Stock)
= Rs.4,50,00,000 + 16,00,000*
Purchases = Rs.4,66,00,000
* Increase in Stock = Closing Stock 3 Opening Stock = Rs.16,00,000
Computation of Average Debtors
25
Let Credit Sales be Rs.100, Cash sales = 100 × 100 = Rs.25
Total Sales = 100 + 25= Rs.125
Total sales are Rs.125 credit sales is Rs.100
Rs.6,00,00,000
If total sales is Rs.6,00,00,000, then credit sales is= 125
× 100
Credit Sales = Rs.4,80,00,000
Cash Sales = (Rs.6,00,00,000 3 Rs.4,80,00,000) = Rs.1,20,00,000

Debtors Turnover Ratio=

Net credit sales
= =8
average debtors

Rs.4,80,00,000
= =8
average debtors
Rs.4,80,00,000
average debtors =
8
Average Debtors = Rs.60,00,000

(ii) Computation of Average Creditors

Credit Purchases = Purchases 3 Cash Purchases
= Rs.4,66,00,000 3 Rs.46,00,000 = Rs.4,20,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.10

credit purcheses
Creditors Turnover Ratio=
average creditors
Rs.4,20,00,000
10 = average creditors

Average Creditors = Rs.42,00,000

(iii) Computation of Average Payment Period

verage creditors
Average Payment Period=
average Daily Credit Purchases

Rs.42,00,000 Rs.42,00,000
= Credit Purchases = Rs.4,20,00,0000
365 365

Rs.42,00,0000
× 365 = 36.5 days
RS.4,20,00,000
Alternatively
Average Payment Period = 365/Creditors Turnover Ratio

365
= 10 = 36.5 days

(iv) Computation of Average Collection Period

Average Collection Period=

Average Debtors
= × 365
Net Credit Sales

= Rs.60,00,000
= × 365 = 45.625 days
Rs.4,80,00,000

Alternatively
365
Average collection period=Debtors Turnover Ratio
365
= = 45.625 days
8

(v) Computation of Current Assets

Current Assets (CA)=
Current Ratio=CurrentLiabilities (CL)
2.4 Current Liabilities = Current Assets
CA
or CL=
2.4
Further, Working capital = Current Assets 3 Current liabilities
CA
So, Rs.56,00,000 = CA2
2.4

1.4CA
Rs.56,00,000 = = Or, 1.4 CA = Rs.1,34,40,000
2.4
CA = Rs.96,00,000

(vi) Computation of Current Liabilities

Current liabilities
ý
. ,ÿÿ,ÿÿÿ
= = Rs.40,00,000

.

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.11

Question 7
Using the information given below, PREPARE the Balance Sheet of SKY Private Limited:

(I) Current ratio 1.6 :1

(ii) Cash and Bank balance 15% of total current assets
(iii) Debtors turnover ratio 12 times
(iv) Stock turnover (cost of goods sold) ratio 16 times
(v) Creditors turnover (cost of goods sold) ratio 10 times
(vi) Gross profit ratio 20%
(vii) Capital gearing ratio 0.6
(viii) Depreciation rate 15% on W.D.V.
(ix) Net fixed Assets 20% of total assets
(Assume all purchase and sales are on credit)
Balance Sheet of SKY Private Limited as at 31.03.2020
Liabilities Amount in Assets Amount in
¹ ¹
Share Capital 25,00,000 Fixed assets
Reserve & surplus ? Opening WDV ?
12% Long term debt ? Less: ? ?
Depreciation
Current liabilities
Creditors ? Current Assets
Provisions outstanding Stock ?
expenses ? 68,50,000
Debtors ?
Cash and bank balance ? ?
Total ? Total ?
(Detailed working notes are not required to be shown) [MTP 5 Marks, Oct920]
Answer 7
Working Notes
1. Computation of Current Assets and Cash & Bank Balance
Current Ratio=
Current Assets(CA)
= Current Liabilities (CL)
Current Assets = 1.6 Current Liabilities = 1.6 × ¹ 68,50,000 = RS.1,09,60,000/- So, Cash and Bank
Balance=15% of Current Assets = RS.16,44,000
2. Computation of Total Assets, Fixed assets and Depreciation
Total Assets = Net Fixed assets+ Current Asset
Or, Total Assets = 20% of Total Asset + RS.1,09,60,000 Or, Total Assets = RS.1,37,00,000
So, Net Fixed assets = 20% of Total Asset = RS.27,40,000
27,40,000
Depreciation = 58% =15% = Rs4,83,

Fixed Assets = RS.27,40,000 + Rs 4,83,529 = RS.32,23,529

3. Calculation of stock, Debtors and Creditors

Stock + Debtors = Current Assets 3 Cash & Bank
= RS.1,09,60,000 3 RS.16,44,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.12

= ¹ 93,16,000

Now, let Sales be x

Cresdit Sales X
So, Debtors (Credit Sales) = =
Debit turnover ratio 12

= Further, Stock (on Cost of Goods Sold) =

Sales220% of Sales
=
16

X220% of X
= 16

X 4X
X2 X
5 5
= 16
= 16 =20
X X
So = +
12 20

10X+6X
OR = =Rs. 93,16,000
120

16X
OR =120 =Rs. 93,16,000

Or, x = ¹ 6,98,70,000 So, Sales = ¹ 6,98,70,000

Cash of Goods Sold (COGS) = ¹ 5,58,96,000 Stock (COGS/16) = RS.34,93,500
Debtors (Sales/12) = ¹ 58,22,500
Creditors (COGS/10) = ¹ 55,89,600

4. Calculation of Provision of outstanding Expenses

= ¹ 68,50,000 3 ¹ 55,89,600
= RS.12,60,400

5. Share Capital + Reserve of surplus + long term debt = Total Asset or total liability 3 Current
liability
Or, Reserve & surplus + long term debt = RS.1,37,00,000 3 68,50,000 3 25,00,000
= ¹ 43,50,000
Calculation of long term Debt and Reserve & Surplus Now, Capital Earning ratio = 0.6
12% long term Debt
So, =Equity Share Capital + Reserve & Surplu =0.6

43,50,000 2 Reserve & Surplus

Or=25,00,000 + Reserve & Surplus =8

Or, Reserve & Surplus = RS.17,81,250

So, 12% long term debt = RS.25,68,750

Balance Sheet of SKY Private Limited as at 31.03.2020

Liabilities ¹ Assets ¹
Share Capital 25,00,000 Fixed assets
Reserve & Surplus 17,81,250 Opening WDV 32,23,529
12% Long term debt 25,68,750 Less: Depreciation 4,83,529 27,40,000
Current Liabilities
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.13

Creditors 55,89,600 Current Assets

Provisions & Stock 34,93,500
outstanding
expenses 12,60,400 68,50,000
Debtors 58,22,500
Cash and bank 16,44,000
balance 1,09,60,000
Total 1,37,00,000 1,37,00,000

Question 8
XYZ Ltd. has Owner's equity of Rs. 2,00,000 and the ratios of the company are as follows: (MTP 5 Marks,
April921) (Same concept different figures MTP 5 Marks March 22, PYP 5 Marks Jan921, MTP 5 Marks
Apr919)
Current debt to total debt 0.3
Total debt to Owner's equity 0.5
Fixed assets to Owner's equity 0.6
Total assets turnover Inventory 2 times
Inventory turnover 10 times
COMPLETE the following Balance Sheet from the information given above:
Liabilities (Rs.) Assets (Rs.)
Current Debt - Cash -
Long-term Debt - Inventory -
Total Debt - Total Current Assets -
Owner's Equity - Fixed Assets -

Answer 8
Balance Sheet
Liabilities (Rs.) Assets (Rs.)
Current debt 30,000 Cash (balancing figure) 1,20,000
Long term debt 70,000 Inventory 60,000
Total Debt 1,00,000 Total Current Assets 1,80,000
Owner's Equity 2,00,000 Fixed Assets 1,20,000
Total liabilities 3,00,000 Total Assets 3,00,000

Workings:
Total debt = 0.50 x Owner's Equity = 0.50 x Rs. 2,00,000 = Rs. 1,00,000 Further, Current debt to
Total debt = 0.30
So, Current debt = 0.30 × Rs. 1,00,000 = Rs. 30,000 Long term debt = Rs. 1,00,000 - Rs. 30,000 = Rs.
70,000
[Link] assets = 0.60 × Owner's Equity = 0.60 × Rs. 2,00,000 = Rs. 1,20,000
[Link] Liabilities = Total Debt + Owner9s Equity
= Rs. 1,00,000 + Rs. 2,00,000 = Rs. 3,00,000
Total Assets = Total Liabilities = Rs. 3,00,000
Total assets to turnover = 2 Times; Inventory turnover = 10 Times
Hence, Inventory /Total assets = 2/10=1/5,
Therefore, Inventory = Rs. 3,00,000/5 = Rs. 60,000

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.14

Question 9
SN Ltd. has furnished the following ratios and information relating to the year ended 31 st March
2021:
Share Capital Rs. 6,25,000
Working Capital Rs. 2,00,000
Gross Margin 25%
Inventory Turnover 5 times
Average Collection Period 1.5 months
Current Ratio 1.5:1
Quick Ratio 0.7:1
Reserves & Surplus to Bank & Cash 3 times
Further, the assets of the company consist of fixed assets and current assets, while its current liabilities
comprise bank credit and others in the ratio of 3:1. Assume 360 days in a year.
You are required to PREPARE the Balance Sheet as on 31st March 2021.
(Note- Balance sheet may be prepared in traditional T Format.) (MTP 5 Marks, March 21)

Answer 9
Workings:
Current Assets(CA) 1.5
1. Current Ratio= = =
Current Liabilities(CL) 1

6 CA = 1.5 CL
Also, CA - CL = Rs. 2,00,000 1.5 CL- CL = Rs. 2,00,000
2,00,000
CL=
0.5
CA= 1.5 × Rs. 4,00,000 = Rs. 6,00,000

2. Bank Credit (BC) to Other Current Liabilities (OCL) ratio = 3:1

Bank Credit (BC) 3
=Other Current Liabilities(OCL) = 1

BC = 3 OCL
Also, BC + OCL = CL
3 OCL + OCL = Rs. 4,00,000
Rs.4,00,000
OCL= = Rs. 1,00,000
4
Bank Credit = 3 × Rs. 1,00,000 = Rs. 3,00,000

Current Assets2Invetores
3. Quick Ratio= =
Current Liabilities

Rs.6,00,0002Inventories
0.7 = Rs.4,00,000

Inventories = Rs. 6,00,000 3 Rs. 2,80,000 = Rs. 3,20,000

4. Inventory Turnover = 5 times

Cost of Goods Sold (COGS)

Inventory Turnover =
Everage Invetory
Average Inventory
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.15

Cost of Goods Sold (COGS)

= Invetory Turnover

COGS= Rs. 3,20,000 × 5 = Rs. 16,00,000

Sales2COGE
5. Gross Margin= × 100 = 25%
Sales
Sales=
16,00,000
0.75
=Rs. 21,33,333.33

6. Average Collection Period (ACP) = 1.5 months = 45 days

360 360
Debtors Turnover=ACP = 45 =8 times

= Also, Debtors Turnover

Sales
=Average debtors

Rs.21,33,333.33
Hence, Debtors= = Rs.2,66,667
8

7. Bank & Cash = CA - (Debtors + Inventory)

= Rs. 6,00,000 3 (Rs. 2,66,667 + 3,20,000) = Rs. 13,333

Reserves & Surplus

8. =3
Bank & Cash

Reserves & Surplus = 3 × Rs. 13,333 = Rs. 40,000

Balance Sheet of SN Ltd. as on 31st March 2021

Liabilities (Rs.) Assets (Rs.)
Share Capital 6,25,000 Fixed Assets 4,65,000
Reserves & Surplus 40,000 (Balancing Figure)
Current Liabilities: Current Assets:
Bank Credit 3,00,000 Inventories 3,20,000
Other Current Liabilities 1,00,000 Debtors 2,66,667
Bank & Cash 13,333
10,65,000 10,65,000

Question 10
(a) ABC Ltd. has total sales of 10,00,000 all of which are credit sales. It has a gross profit ratio of 25%
and a current ratio of 2. The company9s current liabilities are RS.2,00,000. Further, it has
inventories of Rs. 80,000, marketable securities of ¹ 50,000 and cash of RS. 30,000. From the above
information:
(b) CALCULATE the average inventory, if the expected inventory turnover ratio is three times?
(c) Also CALCULATE the average collection period if the opening balance of debtors is expected to be
RS.1,50,000.
(d) Assume 360 days a year. (MTP 5 Marks, Oct921 & Oct 823)(Same concept different figures Old &
New SM)
Answer 10
I. Calculation of Average Inventory
Since gross profit is 25% of sales, the cost of goods sold should be 75% of the sales.

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.16

75
Cost of goods sold = 10,00,000 x =7,50,000
100

Cost of goods sold

Inventory Turnover=
Average Iventory

7,50,000
3=AverageInventory

7,50,000
Average Inventory= 3
= 2,50,000

II. Calculation of Average Collection Period

Average Collection Period=

Average debetors
= × 360
Credits Sales

= OpeningDebtors+ClosingDebtors
Where, Average Debtors==
2
Calculation of Closing balance of debtors
¹ ¹
Current Assets (2 x 2,00,000) 4,00,000
Less: Inventories 80,000
Marketable Securities 50,000
Cash 30,000 1,60,000
Debtors Closing Balance 2,40,000

1,50,00,00+2,40,000
Now, Average Debtors = = 1,95,000
2

So, Average Collection Period=

1,95,000
= x 360 = 70.2 or 70 days
10,00,000

Question 11
Jensen and spencer pharmaceutical is in the business of manufacturing pharmaceutical drugs
including the newly invented Coved vaccine. Due to increase in demand of Coved vaccines, the
production had increased at all-time high level and the company urgently needs a loan to meet the
cash and investment requirements. It had already submitted a detailed loan proposal and project
report to Expo-Imp bank, along with the financial statements of previous three years as follows:
Statement of Profit and Loss (In ¹ 8000)
2018319 2019320 2020321
Sales
Cash 400 960 1,600
Credit 3,600 8,640 14,400
Total sales 4,000 9,600 16,000
Cost of goods sold 2,480 5,664 9,600
Gross profit 1,520 3,936 6,400
Operating expenses:
General, administration, and selling expenses 160 900 2,000
Depreciation 200 800 1,320
Interest expenses (on borrowings) 120 316 680
Profit before tax (PBT) 1,040 1,920 2,400
Tax @ 30% 312 576 720
Profit after tax (PAT)
Prakshal Shah | 8779794646 728 1,344 1,680
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.17

BALANCE SHEET (In ¹ 8000)

2018319 2019320 2020321
Assets
Non-Current Assets
Fixed assets (net of depreciation) 3,800 5,000 9,400
Current Assets
Cash and cash equivalents 80 200 212
Accounts receivable 600 3,000 4,200
Inventories 640 3,000 4,500
Total 5,120 11,200 18,312
Equity & Liabilities
Equity share capital (shares of ¹10 each) 2,400 3,200 4,000
Other Equity 728 2,072 3,752
Non-Current borrowings 1,472 2,472 5,000
Current liabilities 520 3,456 5,560
Total 5,120 11,200 18,312

INDUSTRY AVERAGE OF KEY RATIOS

Ratio Sector Average
Current ratio 2.30:1
Acid test ratio (quick ratio) 1.20:1
Receivable turnover ratio 7 times
Inventory turnover ratio 4.85 times
Long-term debt to total debt 24%
Debt-to-equity ratio 35%
Net profit ratio 18%
Return on total assets 10%
Interest coverage ratio (times interest earned) 10
As a loan officer of Expo-Imp Bank, you are REQUIRED to apprise the loan proposal on the basis of
comparison with industry average of key ratios considering closing balance for accounts receivable
of ¹ 6,00,000 and inventories of ¹ 6,40,000 respectively as on 31set March, 2018. [MTP 10 Marks,
Nov921]
Answer 11
(In ¹ 8000)
Ratio Formula 2018319 2019320 2020321 Industry
Average
Current Current Assets 1,320 6,200 8,912 2.30:1
ratio Current Liabilities 520 3,456 5,560

= 2.54 = 1.80 = 1.60

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.18

Acid test 680 3,200 4,412 1.20:1

ratio Quick Assets 520 3,456 5,560
(quick CurrentLiabilities = 1.31 = 0.93 = 0.79
ratio)

Receivable Credit Sales 8,640 14,400 7 times

(600+3000) (3000+4,200)/2
turnover AverageAccountsReceivable 3,600
(600+600) = 4.80 =4
ratio
=6

Inventory COGS 2,480 5,664 9,600 4.85

(640+640)/2 (640+3000)/2 (3,000+4,500)/2
turnover AverageInventory times
= 3.88 3.11 2.56
ratio

Long-term 1472 2472 24%

× 100 × 100 5,000
Long term Debt 1992 5,948
10,560
× 100 =
× 100 =41.70%
Total Debt 73.90% 47.35%

debt to
total debt

Debt-to- Long term Debt

× 100
equity Shareholders2Equuity 1472
× 100
2472
× 100
5,000
× 100 35%
3,128 5272 7,752
ratio
73.90% 4689% 64.50%

= 47.07%
1344 1680 18%
Net profit
728 × 100 × 100
Net Profit × 100 9,600 16,000
ratio × 100 5,120 14% 10.5%
Sales 14.22%

728 1344 1680 10%

Return on × 100 × 100 × 100
total assets Net Profit after taxes × 100
5,120 11,200 18,312
14.22% 12% 9.17%
Total asset

Interest EBIT 1160

× 100 2236 3080 10
120
coverage Interest 9.67% 316 680
ratio (times = 7.08 = 4.53
interest
earned)

Conclusion:
In the last two years, the current ratio and quick ratio are less than the ideal ratio (2:1 and 1:1
respectively) indicating that the company is not having enough resources to meet its current
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.19

obligations. Receivables are growing slower. Inventory turnover is slowing down as well, indicating
a relative build-up in inventories or increased investment in stock. High Long-term debt to total
debt ratio and Debt to equity ratio compared to that of industry average indicates high
dependency on
long term debt by the company. The net profit ratio is declining substantially and is much lower
than the industry norm. Additionally, though the Return on Total Asset(ROTA) is near to industry
average, it is declining as well. The interest coverage ratio measures how many times a company
can cover its current interest payment with its available earnings. A high interest coverage ratio
means that an enterprise can easily meet its interest obligations, however, it is declining in the
case of Jensen & Spencer and is also below the industry average indicating excessive use of debt
or inefficient operations.
On overall comparison of the industry average of key ratios than that of Jensen & Spencer, the
company is in deterioration position. The company9s profitability has declined steadily over the
period. However, before jumping to the conclusion relying only on the key ratios, it is pertinent to
keep in mind the industry, the company dealing in with i.e. manufacturing of pharmaceutical drugs.
The pharmaceutical industry is one of the major contributors to the economy and is expected to
grow further. After the coved situation, people are more cautious towards their health and are
going to spend relatively more on health medicines. Thus, while analyzing the loan proposal, both
the factors, financial and non-financial, needs to be kept in mind.

Question 12
From the following information, you are required to PREPARE a summarised Balance Sheet for
Rudra Ltd. for the year ended 31st March, 2022

Debt Equity Ratio 1:1

Current Ratio 3:1
Acid Test Ratio 8:3
Fixed Asset Turnover (on the basis of4
sales)
Stock Turnover (on the basis of sales) 6
Cash in hand 5,00,000
Stock to Debtor 1:1
Sales to Net Worth 4
Capital to Reserve 1:2
Gross Profit 20% of Cost
COGS to Creditor 10:1
Interest for entire year is yet to be paid on Long Term loan @ 10%.
(MTP 5 Marks April 22, New SM)
Answer 12
Balance Sheet of Rudra Ltd.
Liabilities Amount (¹) Assets Amount (¹)
Capital 10,00,000 Fixed Assets 30,00,000
Reserves 20,00,000 Current Assets:
Long Term Loan @ 10% 30,00,000 Stock in Trade 20,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.20

Current Liabilities: Debtors 20,00,000

Creditors 10,00,000 Cash 5,00,000
Other Short-term 2,00,000
Current Liability
(Other STCL)
Outstanding Interest 3,00,000
75,00,000 75,00,000
Working Notes:
Let sales be ¹ x
Balance Sheet of Rudra Ltd.
Liabilities Amount (¹) Assets Amount
(¹)
Capital Fixed Assets x/4
Reserves Current Assets:
Net Worth x/4 Stock in Trade x/6
Long Term Loan @ 10% x/4 Debtors x/6
Cash 5,00,000
Current liabilities:
Creditors x/12
Other Short-term Current
Liability
Outstanding Interest
Total Current Liabilities x/9+5,00,000/
3
Total Total
ÿ
1. Fixed Asset Turnover = 4 =
ÿ  ý
ÿ
Fixed Assets =
4

ÿ
2. Stock Turnover =6 =


ý
ÿ
Stock =
6

ÿ
3. Sales to net worth = 4 =


/
ÿ
Net worth =
4

4. Debt : Equity = 1:1

ÿ

 ÿ ÿ
ÿ
1
=
ý
/ 1
ÿ
Long term loan = Net worth = 4

5. Gross Profit to cost = 20%

ÿ
= 20%
ÿþ2ÿ

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.21

ÿ
= 20%
ÿ2ÿ
ÿ
= 0.2 X -0.2 GP
1.2 ÿ
= 0.2X
0.2ÿ
ÿ
=
1.2
ÿ
= X/6
ÿ



ÿ ÿ

ý
þ
ýý = x-x/6 = 5/6 x

6. COGS to creditors = 10:1

ÿ

= 10/1
ÿÿ


5
ÿ
6
ÿÿ

= 10/1

5
ÿÿþýÿ

ÿ
= = X/12
60



ý
7. =1





þ


ÿ = Stock = X/6

8. ÿÿÿþÿ
ýÿ
ÿ
= 3:1



ý+


+ÿÿ/
ÿ
 ÿÿÿ
þÿÿ
= 3/1

ÿ ý
+ +5,00,000
6 6
=3
ÿ
 ÿÿÿ
þÿÿ

ý
+5,00,000
3
= CL
3

ÿ 5,00,000
CL = +
9 3

9. CA = 3CL

ÿ 5,00,000
= 3(= + )
9 3

ÿ
CA = = + 5,00,000
3

10. Net worth + Long Term Loan + Current Liability = Fixed Asset + Current Assets

ÿ ÿ ÿ ÿ ÿ
4
+ + + 5,00,000/3 = + +5,00,000
4 9 4 3

ÿ ÿ ÿ 5,00,000
+ 2 = 5,00,000 -
4 9 3 3

9 +4 212ÿ 15,00,00025,00,000
=
36 3

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.22

ÿ
= 10,00,000/3
36

X = 1,20,00,000

11. Now, from above calculations, we get,

ÿ 1,20,00,000
Fixed Asset = = = 30,00,000
4 4

ÿ 1,20,00,000
Stock = = = 20,00,000
6 6

ÿ 1,20,00,000
Debtor = 6 = 6
= 20,00,000

Net worth = x/4 = 30,00,000

Now, Capital to Reserve is 1 : 2

Capital = ¹ 10,00,000
and, Reserve = ¹ 20,00,000

Long Term Loan = X\4 = 30,00,000

Outstanding Interest = 30,00,000×10% = 3,00,000

Creditors = x/12 = 1,20,00,000 /12 = 10,00,000

Current Liabilities = Creditors + Other STCL + Outstanding Interest

X/9 X 5,00,000/3= 10,00,000+ Other STCL + 3,00,000

1,20,00,000 5,00,000
+ = 13,00,000+ Other STCL
6 3

15,00,000 = Other STCL + 13,00,000

Other STCL = 2,00,000

Question 13
DISCUSS the limitations of financial ratios. (MTP 4 Marks April 22, Old & New SM)
Answer 13
The limitations of financial ratios are listed below:
(i) Diversified product lines: Many businesses operate a large number of divisions in quite different
industries. In such cases ratios calculated on the basis of aggregate data cannot be used for
inter-firm comparisons.
(ii) Financial data are badly distorted by inflation: Historical cost values may be substantially
different from true values. Such distortions of financial data are also carried in the financial
ratios.
(iii) Seasonal factors may also influence financial data.
(iv) To give a good shape to the popularly used financial ratios (like current ratio, debt- equity ratios,
etc.): The business may make some year-end adjustments. Such window dressing can change
the character of financial ratios which would be different had there been no such change.
(v) Differences in accounting policies and accounting period: It can make the accounting data of
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.23

two firms non-comparable as also the accounting ratios.

(vi) There is no standard set of ratios against which a firm9s ratios can be compared: Sometimes a
firm9s ratios are compared with the industry average. But if a firm desires to be above the
average, then industry average becomes a low standard. On the other hand, for a below average
firm, industry averages become too high a standard to achieve.
(vii) Financial ratios are inter-related, not independent: Viewed in isolation one ratio may highlight
efficiency. But when considered as a set of ratios they may speak differently. Such
interdependence among the ratios can be taken care of through multivariate analysis.

Question 14
PI Limited has the following Balance Sheet as on March 31, 2020 and March 31, 2021:
Balance Sheet
Particulars March 31, 2020 March 31, 2021
Sources of Funds:
Shareholders9 Funds 87,500 87,500
Loan Funds 1,22,500 1,05,000
2,10,000 1,92,500
Applications of Funds:
Fixed Assets 87,500 1,05,000
Cash and bank 15,750 14,000
Receivables 49,000 38,500
Inventories 87,500 70,000
Other Current Assets 35,000 35,000
Less: Current Liabilities (64,750) (70,000)
2,10,000 1,92,500
The Income Statement of the PI Ltd. for the year ended is as follows:
Particulars March 31, 2020 March 31, 2021
Sales 7,87,500 8,33,000
Less: Cost of Goods sold (7,30,100) (7,38,500)
Gross Profit 57,400 94,500
Less: Selling, General and Administrative expenses (38,500) (61,250)
Earnings before Interest and Tax (EBIT) 18,900 33,250
Less: Interest Expense (12,250) (10,500)
Earnings before Tax (EBT) 6,650 22,750
Less: Tax (1,995) (6,825)
Profits after Tax (PAT) 4,655 15,925
You are required to CALCULATE for the year 2020-21:
(i) Inventory turnover ratio
(ii) Financial Leverage
(iii) Return on Capital Employed (after tax) (MTP Sep922 5 Marks)
Answer 14

Ratios for the year 2020-21

(i) Inventory turnover ratio
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.24

COGS ¹ 7,38,500
= = ¹(,ÿÿ+ÿ,ÿÿ) = .
Average Inventory

(ii) Financial leverage

þý
.33,250
=
þ
= = 1.46

.22,750

(iii) ROCE

þý(12) ¹ 33,250 (120.3) ¹ 23,275
= = 2,10,000+1,92,500 = × 100= 11.56 %
ý ÿ ÿÿÿÿþ
ÿþ
 ¹( ) ¹201,250
2

Question 15
From the following information and ratios, PREPARE the Balance sheet as at 31st March 2022 and lncome
statement for the year ended on that date for M/s Ganguly & Co -
Average Stock ¹10 lakh
Current Ratio 3:1
Acid Test Ratio 1:1
PBIT to PBT 2.2:1
Average Collection period (Assume 360 days in a year) 30 days
Stock Turnover Ratio (Use sales as turnover) 5 times
Fixed assets turnover ratio 0.8 times
Working Capital ¹10 lakh
Net profit Ratio 10%
Gross profit Ratio 40%
Operating expenses (excluding interest) ¹ 9 lakh
Long term loan interest 12%
Tax Nil
(MTP 10 Marks Oct922, 10 Marks, New SM)
Answer 15
1. Current Ratio = 3:1
Current Assets (CA)/Current Liability (CL) = 3:1 CA = 3CL

WC = 10,00,000
CA 3 CL = 10,00,000 3CL 3 CL = 10,00,000
2CL = 10,00,000

ÿ,ÿÿ,ÿÿÿ
CL =

CL = ¹5,00,000 CA = 3 x 5,00,000 CA = ¹15,00,000
2. Acid Test Ratio = CA 3 Stock / CL = 1:1
= 15,00,000 2 Stock
=1
,ÿÿ,ÿÿÿ

15,00,000 3 stock = 5,00,000

Stock = ¹10,00,000
3. Stock Turnover ratio (on sales) = 5
Sales
= =
Avg stock
Sales
Prakshal Shah | 877979464610,00,000 = Sales = ¹50,00,000
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.25

4. Gross Profit = 50,00,000 x 40% = ¹20,00,000

Net profit (PBT)
= 50,00,000 x 10% = ¹5,00,000
5. PBIT/PBT = 2.2
PBIT = 2.2 x 5,00,000
PBIT= 11,00,000
Interest = 11,00,000 3 5,00,000 = ¹6,00,000
,ÿÿ,ÿÿÿ
Long term loan= ÿ.


× ÿ, ÿÿ, ÿÿÿ

6. Average collection period = 30 days

ÿ
Receivables = × ÿ, ÿÿ, ÿÿÿ= 4,16,667
ÿ

7. Fixed Assets Turnover Ratio = 0.8

50,00,000/ Fixed Assets = 0.8

Fixed Assets = ¹62,50,000

Income Statement
Amount (¹)
Sales 50,00,000
Less: Cost of Goods Sold 30,00,000
Gross Profit 20,00,000
Less: Operating Expenses 9,00,000
Less: Interest. 6,00,000
Net Profit 5,00,000
Balance sheet
Liabilities Amount (¹) Assets Amount (¹)
Equity share capital 22,50,000 Fixed asset 62,50,000
Long term debt 50,00,000 Current assets:
Current liability 5,00,000 Stock 10,00,000
Receivables 4,16,667
Other 83,333 15,00,000
77,50,000 77,50,000

Question 16
Using the following information, PREPARE the balance sheet:
Long-term debt to net worth 0.25
Total asset turnover 3
Average collection period 9 days
Inventory turnover 13
Gross profit margin 20%
Acid-test ratio 1.5

*Assume a 360-day
Prakshal Shah | 8779794646 year and all sales on credit.
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.26

Liabilities ¹ Assets ¹
Notes and payables 2,50,000 Cash ?
Long-term debt ? Accounts receivable ?
Common stock 8,00,000 Inventory ?
Retained earnings 16,00,000 Plant and equipment ?
Total liabilities and equity ? Total assets ?
(MTP 5 Marks April 923, Old & New SM)
Answer 16
Working Notes:
(i) Long term Debt
Long Term Debt/ Net worth = 0.25
Long Term Debt/ (8,00,000+16,00,000) = 0.25
Long term debt = 6,00,000
(ii) Total assets
Total liabilities and Equity = Notes and payables + Long-term debt + Common stock + Retained
earnings

= 2,50,000+6,00,000+8,00,000+16,00,000

Total assets = Total liabilities and Equity = 32,50,000

(iii) Sales and Cost of Goods sold

Total asset turnover = 3 = Sales/ Total Assets = Sales/32,50,000 Sales
= 97,50,000
Cost of goods sold = (100% - Gross Profit margin) x Sales
= (100% - 20%) x 97,50,000 =78,00,000.
(iv) Current Assets
Inventory turnover = 13 = COGS/ Inventory = 78,00,000/Inventory
Inventory = ¹ 6,00,000
Average collection period = 9 = Receivables/Sales x 360 = Receivables/ 97,50,000 x 360
Accounts receivables = 2,43,750
Acid-test ratio = 1.5 = (Cash+ Accounts Receivables) /Notes and Payables
= (Cash +2,43,750)/2,50,000 = 1.5
Cash = 1,31,250

(v) Plant and equipment

= Total Assets - Current Assets
= 32,50,000 - (1,31,250+2,43,750+6,00,000) = 22,75,000
Balance Sheet
Liabilities ¹ Assets ¹
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.27

Notes and payables 2,50,000 Cash 1,31,250

Long-term debt 6,00,000 Accounts receivable 2,43,750
Common stock 8,00,000 Inventory 6,00,000
Retained earnings 16,00,000 Plant and equipment 22,75,000
Total liabilities and equity 32,50,000 Total assets 32,50,000

Question 17
Assuming the current ratio of a Company is 2, STATE in each of the following cases whether the ratio
will improve or decline or will have no change:
(i) Payment of current liability
(ii) Purchase of fixed assets by cash
(iii) Cash collected from Customers
(iv) Bills receivable dishonored
(v) Issue of new shares (RTP Nov 918)
Answer 17
ÿ
 ý(ÿý)
Current Ratio = = 2 i.e. 2:1
ÿ
 ÿÿÿ
ÿþÿÿ(ÿÿ)
S. Situation Improve/ Reason
No. Decline/ No
Change
(i) Payment of Current Ratio will Let us assume CA is ¹ 2 lakhs & CL is ¹ 1 lakh.
Current liability improve If payment of Current Liability
= ¹10,000 then, CA = 1, 90,000 CL
= 90,000.
Current Ratio = 1,90,000 / 90,000
= 2.11 : 1. When Current Ratio is 2:1 Payment
of Current liability will reduce the same
amount in the numerator and denominator.
Hence, the ratio will improve.
(ii) Purchase of Fixed Current Ratio will Since the cash being a current asset
Assets by cash decline converted into fixed asset, current assets
reduced, thus current ratio will fall.
(iii) Cash collected Current Ratio will Cash will increase and Debtors will reduce.
from Customers not change Hence No Change in Current Asset.
(iv) Bills Receivable Current Ratio will Bills Receivable will come down and debtors
dishonored not change will increase. Hence no change in Current
Assets.
(v) Issue of New Current Ratio will As Cash will increase, Current Assets will
Shares improve increase and current ratio will increase.

Question 18
From the following table of financial ratios of Prabhu Chemicals Limited, comment on various ratios
given at the end:
Ratios 2021 2022 Average of
Chemical Industry
Liquidity Ratios
Current ratio 2.1 2.3 2.4
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.28

Quick ratio 1.4 1.8 1.4

Receivable turnover ratio 8 9 8
Inventory turnover 8 9 5
Receivables collection period 46 41 46 days
days days
Operating profitability
Operating income 3ROI 24% 21% 18%
Operating profit margin 18% 18% 12%
Financing decisions
Debt ratio 45% 44% 60%
Return
Return on equity 26% 28% 18%
COMMENT on the following aspect of Prabhu Chemicals Limited
(i) Liquidity
(ii) Operating profits
(iii) Financing
(iv) Return to the shareholders (RTP Nov 923 & May 819)
Answer 18
Ratios Comment
Liquidity Current ratio has improved from last year and matching the
industry average.
Quick ratio also improved than last year and above the
industry average.
The reduced inventory levels (evidenced by higher inventory
turnover ratio) have led to better quick ratio in FY 2022
compared to FY 2021.
Further the decrease in current liabilities is greater than the
collective decrease in inventory and debtors as the current
ratio have increase from FY2021 to FY 2022.
Operating Profits Operating Income-ROI reduced from last year, but Operating
Profit Margin has been maintained. This may happen due to
decrease in operating cost. However, both the ratios are still
higher than the industry average.

Financing The company has reduced its debt capital by 1% and saved
earnings for equity shareholders. It also signifies that
dependency on debt compared to other industry players
(60%) is low.

Return to the Prabhu9s ROE is 26 per cent in 2021 and 28 per cent in 2022
shareholders compared to an industry average of 18 per cent. The ROE is
stable and improved over the last year.

Question 19
The following is the Profit and loss account and Balance sheet of KLM LLP.
Prakshal Shah | 8779794646 Trading and Profit & Loss Account
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.29

Particulars Amount (¹) Particulars Amount (¹)

To Opening stock 12,46,000 By Sales 1,96,56,000
To Purchases 1,56,20,000 By Closing stock 14,28,000
To Gross profit c/d 42,18,000
2,10,84,000 2,10,84,000
By Gross profit b/d 42,18,000
To Administrative expenses 18,40,000 By Interest on investment 24,600
To Selling & distribution 7,56,000 By Dividend received 22,000
expenses
To Interest on loan 2,60,000
To Net profit 14,08,600
42,64,600 42,64,600
Balance Sheet as on&&&.
Capital & Liabilities Amount (¹) Assets Amount (¹)
Capital 20,00,000 Plant & machinery 24,00,000
Retained earnings 42,00,000 Building 42,00,000
General reserve 12,00,000 Furniture 12,00,000
Term loan from bank 26,00,000 Sundry receivables 13,50,000
Sundry Payables 7,20,000 Inventory 14,28,000
Other liabilities 2,80,000 Cash & Bank balance 4,22,000
1,10,00,000 1,10,00,000
You are required to COMPUTE:
(i) Gross profit ratio (ii) Net profit ratio (iii) Operating cost ratio
(iv) Operating profit ratio (v) Inventory turnover ratio (vi) Current ratio
(vii) Quick ratio (viii) Interest coverage ratio (ix) Return on capital employed

(x) Debt to assets ratio. (RTP Nov 919)

Answer 19

 ÿ
ÿ
.42,18,000
i. Gross Profit ratio = × 100 = × 100 = 21.46%
ÿþ
.1,96,56,000

ý ÿ
ÿ
.14,08,600

ii. Net Profit ratio = × 100 = × 100 = 7.17%
ÿþ
.1,96,56,000

þÿÿ
 ÿ

iii. Operating ratio = × 100
ÿþ
Operating cost = Cost of goods sold + Operating expenses
Cost of goods sold = Sales 3 Gross profit
= 1,96,56,000 - 42,18,000 = 1,54,38,000
Operating expenses = Administrative expenses + Selling & distribution expenses
= 18,40,000 + 7,56,000 = 25,96,000
1,54,38,000+25,96,000
Therefore, Operating ratio = 1,96,56,000
× 100

1,80,34,000
= 1,96,56,000 × 100 = 91.75%

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.30

iv. Operating profit ratio = 100 3 Operating cost ratio

= 100 3 91.75% = 8.25%
ÿ

 

 
þ
v. Inventory turnover ratio =
ý ÿ 

ý
1,54,38,000 1,54,38.000
= = = 11.55 times
(14,28,000+12,46,000)/2 13,37,000
ÿ
 ÿ
vi. Current Ratio =
ÿ
 ÿÿÿ
þÿÿ

Current assets = Sundry receivables + Inventory + Cash & Bank balance

= 13,50,000 + 14,28,000 + 4,22,000 = 32,00,000
Current liabilities = Sundry Payables + Other liabilities

= 7,20,000 + 2,80,000 = 10,00,000

32,00,000
Current ratio = 10,00,000 = 3.2 times

ÿ
 ÿ2ý


ÿ

vii. Quick Ratio =
ÿ
 ÿÿÿ
ÿþÿÿ
32,00,000214,28,000
= = 1.77 times
10,00,000

þý
 ý ÿ
ÿ+ý


viii. Interest Coverage ratio = =
ý
 ý

14,08,600+2,60,000
= = 6.42 times
2,60,000

þý
ix. Return on Capital employed (ROCE) = ÿÿÿÿþ
ÿþ

× 100

Capital employed = Capital + Retained earnings + General reserve + Term loan

= 20,00,000 + 42,00,000 + 12,00,000 + 26,00,000
= 1,00,00,000
16,68,600
Therefore, ROCE = ×100 = 16.69%
1,00,00,000


 26,00,000
x. Debt to assets ratio = 
ÿþ ÿ × 100 = × 100 = 23.64%
1,10,00,000

Question 20
MT Limited has the following Balance Sheet as on March 31, 2019 and March 31, 2020: Balance
Sheet
¹ in lakhs
March 31, 2019 March 31, 2020
Sources of Funds:
Shareholders9 Funds 2,500 2,500
Loan Funds 3,500 3,000
6,000 5,500
Applications of Funds:
Fixed Assets 3,500 3,000
Cash and bank 450 400
Receivables 1,400 1,100
Inventories 2,500 2,000
Other Current Assets 1,500 1,000
Less: Current Liabilities
Prakshal Shah | 8779794646
(1,850) (2,000)
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.31

6,000 5,500
The Income Statement of the MT Ltd. for the year ended is as follows:
¹ in lakhs
March 31, 2019 March 31, 2020
Sales 22,500 23,800
Less: Cost of Goods sold (20,860) (21,100)
Gross Profit 1,640 2,700
Less: Selling, General and Administrative (1,100) (1,750)
expenses
Earnings before Interest and Tax (EBIT) 540 950
Less: Interest Expense (350) (300)
Earnings before Tax (EBT) 190 650
Less: Tax (57) (195)
Profits after Tax (PAT) 133 455
Required:
CALCULATE for the year 2019-20-
(a) Financial Leverage
(b) Return on Capital Employed (ROCE)
(c) Return on Equity (ROE)
(d) Average Collection period. [Take 1 year = 365 days] (RTP May 920)
Answer 20
Ratios for the year 2019-2020
(a) Inventory turnover ratio
ÿþ
=
ý ÿ ý




.21,100
= ýý.(2,500+2,000) = 9.4
2

(b) Financial leverage

þý
.950
= = = 1.46

þ
.650
(c) ROCE

þý(12)
.950(120.3)
.665
= = 6,000+5,500 = × 100 = 11.56%
ý ÿ ÿÿÿÿþ
ÿþ

.( )
.5,750
2

[Here Return on Capital Employed (ROCE) is calculated after Tax]

(d) ROE
Profits after tax
.455
= =
.2,500 × 100 = 18.2%
Average Shareholders2funds
(e) Average Collection Period

.23,800
Average Sales per day = = Rs. 65.20 Lakhs
365
ý ÿ

ÿ ÿ
þ
Average Collection Period =
ý ÿ ÿþ  ÿ

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.32

ýý.(1,400+1,100)
2
.1,250
= = = 19.17 days

.65.2
.65.2

Question 21
Following information has been provided from the books of M/s Laxmi & Co. for the year ending on
31st March, 2020:
Net Working ¹ 4,80,000
Capital ¹ 80,000
Bank overdraft 0.75
Fixed Assets to Proprietary ratio
Reserves and Surplus ¹ 3,20,000
Current ratio 2.5
Liquid ratio (Quick Ratio) 1.5
You are required to PREPARE a summarized Balance Sheet as at 31st March, 2020. (RTP Nov 920, Old &
New SM) (Same concept different figures MTP 5 Marks Aug918 & Sep 823)
Answer 21
Working notes:
(i) Current Assets and Current Liabilities computation:
ÿ

þÿ ÿ

þ

.
ÿ

þÿ ÿÿÿ
ÿýÿÿþ

=

Or Current assets = 2.5 Current liabilities
Now, Working capital = Current assets - Current liabilities Or ¹
4,80,000 = 2.5 Current liability - Current liability Or 1.5
Current liability = ¹ 4,80,000
6 Current Liabilities = ¹ 3,20,000
So, Current Assets = ¹ 3,20,000 X 2.5 = ¹ 8,00,000
(ii) Computation of stock
ÿÿÿÿý ÿ

þ

Liquid ratio = ÿ

þÿ ÿÿÿ
ÿýÿÿþ

ÿ

þÿ ÿ

þ
2ýÿþÿ

ÿþ

Or 1.5 = ý
.,
ÿ,ÿÿÿ

Or 1.5 X ¹ 3, 20,000 = ¹ 8,00,000 - Inventories

Or Inventories = ¹ 8,00,000 3 ¹ 4, 80,000
Or Stock = ¹ 3,20,000
(iii) Computation of Proprietary fund; Fixed assets; Capital and Sundry creditors
ÿ  ÿ
Fixed Asset to Proprietary ratio = = 0.75
ÿ
ÿÿ 


6 Fixed Assets = 0.75 Proprietary fund (PF)[FA+NWC = PF] or

NWC = PF- FA [(i.e. .75 PF)]
and Net Working Capital (NWC) = 0.25 Proprietary fund Or ¹
4,80,000/0.25 = Proprietary fund
Or Proprietary fund = ¹ 19,20,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.33

and Fixed Assets = 0.75 proprietary fund

= 0.75 X ¹ 19,20,000 = ¹ 14,40,000
Capital = Proprietary fund - Reserves & Surplus
= ¹ 19,20,000 - ¹ 3,20,000 = ¹ 16,00,000
Sundry Creditors = (Current liabilities - Bank overdraft) (¹
= 3,20,000 - ¹ 80,000) = ¹ 2,40,000
Balance Sheet as at 31st March, 2020
Liabilities ¹ Assets ¹
Capital 16,00,000 Fixed Assets 14,40,000
Reserves & Surplus 3,20,000 Stock 3,20,000
Bank overdraft 80,000 Other Current Assets 4,80,000
Sundry creditors 2,40,000
22,40,000 22,40,000

Question 22
Given below are the estimations for the next year by Niti Ltd.:

Particulars (¹ in crores)
Fixed Assets 5.20
Current Liabilities 4.68
Current Assets 7.80
Sales 23.00
EBIT 2.30
The company will issue equity funds of ¹ 5 crores in the next year. It is also considering the debt
alternatives of ¹ 3.32 crores for financing the assets. The company wants to adopt one of the policies
given below: (¹ in crores)
Financing Policy Short term debt @ 12% Long term debt @ 16% Total
Conservative 1.08 2.24 3.32
Moderate 2.00 1.32 3.32
Aggressive 3.00 0.32 3.32
Assuming corporate tax rate at 30%, CALCULATE the following for each of the financing policy:
(i) Return on total assets
(ii) Return on owner's equity
(iii) Net Working capital
(iv) Current Ratio
Also advise which Financing policy should be adopted if the company wants high returns. (RTP May 921)
Answer 22
(i) Return on total assets
ýþýÿ(
2ÿ)
Return on total assets =
ÿ
ÿý ÿ

þ
(þý+ÿý)

.2.30 ÿ
(120.3)
.1.61 ÿ

= = = 0.1238 or 12.38%

.5.20 ÿ
+
.7.80 ÿ

.13 ÿ

Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.34

(ii) Return on owner's equity

(Amount in ¹)
Financing policy (¹)
Conservative Moderate Aggressive
Expected EBIT 2,30,00,000 2,30,00,000 2,30,00,000
Less: Interest
Short term Debt @ 12% Long 12,96,000 24,00,000 36,00,000
term Debt @ 16% 35,84,000 21,12,000 5,12,000
Earnings before tax (EBT) 1,81,20,000 1,84,88,000 1,88,88,000
Less: Tax @ 30% 54,36,000 55,46,400 56,66,400
Earnings after Tax (EAT) 1,26,84,000 1,29,41,600 1,32,21,600
Owner's Equity 5,00,00,000 5,00,00,000 5,00,00,000
1,29,41,600 1,
,

,00
Return on owner's equity
,
,,ÿÿÿ = 5,00,00,000
= =
=
Net Profit after taxes (EAT) ,ÿÿ,ÿÿ,ÿÿÿ 5,00,00,000
Owners 8equity = 0.2644 or
= 0.2537 or 25.37% = 0.2588 or 25.88%
26.44%
(iii) Net Working capital
(¹ in crores)
Financing policy
Conservative Moderate Aggressive
Current Liabilities (Excluding 4.68 4.68 4.68
Short Term Debt)
Short term Debt 1.08 2.00 3.00
Total Current Liabilities 5.76 6.68 7.68
Current Assets 7.80 7.80 7.80
Net Working capital 7.80 - 5.76 7.80 - 6.68 7.80 - 7.68
= Current Assets - Current Liabilities = 2.04 = 1.12 = 0.12

(iv) Current ratio

(¹ in crores)
Financing policy
Conservative Moderate Aggressive
Current Ratio = 7.80/5.76 = 7.80/6.68 = 7.80/7.68
= 1.35 = 1.17 = 1.02
ÿ
 ý
=
ÿ
 ÿÿÿ
ÿþÿÿ

Advise: It is advisable to adopt aggressive financial policy, if the company wants high return as the
return on owner's equity is maximum in this policy i.e. 26.44%.

Question 23
From the following information, find out missing figures and REWRITE the balance sheet of Mukesh
Enterprise.
Current Ratio = 2:1

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.35

Acid Test ratio = 3:2

Reserves and surplus = 20% of equity share capital
Long term debt = 45% of net worth
Stock turnover velocity = 1.5 months Receivables turnover velocity = 2 months
You may assume closing Receivables as average Receivables. Gross profit ratio = 20%
Sales is ¹ 21,00,000 (25% sales are on cash basis and balance on credit basis) Closing stock is ¹ 40,000
more than opening stock.
Accumulated depreciation is 1/6 of original cost of fixed assets. Balance sheet of the company is as
follows:
Liabilities (¹) Assets (¹)
Equity Share Capital ? Fixed Assets (Cost) ?
Reserves & Surplus ? Less: Accumulated. ?
Depreciation
Long Term Loans 6,75,000 Fixed Assets (WDV) ?
Bank Overdraft 60,000 Stock ?
Creditors ? Debtors ?
Cash ?
Total ? Total ?
(RTP May 23)
Answer 23
Liabilities (¹) Assets (¹)
Equity Share Capital 12,50,000 Fixed Assets (cost) 20,58,000
Reserves & Surplus 2,50,000 Less: Acc. Depreciation (3,43,000)
Long Term Loans 6,75,000 Fixed Assets (WDV) 17,15,000
Bank Overdraft 60,000 Stock 2,30,000
Payables 4,00,000 Receivables 2,62,500
Cash 4,27,500
Total 26,35,000 Total 26,35,000
Working Notes:
(i) Sales ¹ 21,00,000
Less: Gross Profit (20%) ¹ 4,20,000
Cost of Goods Sold (COGS) ¹ 16,80,000

ý ÿ

ÿ ÿ
þ

(ii) Receivables Turnover Velocity = X 12
ÿÿ ÿþ

ý ÿ

ÿ ÿ
þ

2= X 12

.21,00,000 ÿ 75%

.21,00,000 ÿ 75% X 2
Average Receivables =
ÿÿ ÿþ

Average Receivables = ¹ 2,62,500 Closing

Receivables = ¹ 2,62,500
ý ÿ 

ý
(iii) Stock Turnover Velocity = X 12
ÿþ
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.36

ý ÿ 

ý
Or 1.5 = X 12

.16,80,000
Or Average Stock = Rs. 2,10,000
þ
ÿ
 

ý+ÿþ
ÿ
 

ý
2
= Rs. 2,10,000
Opening Stock + Closing Stock = ¹ 4,20,000 ................................ (1)
Also, Closing Stock-Opening Stock = ¹ 40,000 ............................ (2)
Solving (1) and (2), we get closing stock = ¹ 2,30,000
ÿ
 ý 

ý+

ÿ
þ+ÿÿ/
(iv) Current Ratio = =
ÿ
 ÿÿÿ
ÿþÿþÿÿ þÿ
ý þ ÿ+ÿÿ


.2,30,000+
.2,62,500+ÿÿ/
Or 2 =
.60,000+ÿÿ


Or ¹ 1,20,000 + 2 Payables = ¹ 4,92,500 + Cash Or

2 Payables 3 Cash.= ¹ 3,72,500
Or Cash = 2 Payables 3 ¹ 3,72,500 ................................... (3)

ÿ
 ÿ2

ý


+ÿÿ/

Acid Test Ratio = =
ÿ
 ÿÿÿ
ÿþÿþÿÿ ÿ
 ÿÿÿ
ÿþÿþÿÿ

3
.2,62,500+ÿÿ/
Or =
2 60,000+ÿÿ


Or ¹ 1,80,000 + 3 Payables = ¹ 5,25,000 + 2 Cash

Or 3 Payables 3 2 Cash = ¹ 3,45,000 ......................... (4)

Substitute (3) in (4)

Or 3 Payables 3 2(2 Payables 3 ¹ 3,72,500) = ¹ 3,45,000
Or 3 Payables 3 4 Payables + ¹ 7,45,000= ¹ 3,45,000
(Payables) = ¹ 3,45,000 - ¹ 7,45,000
Payables = ¹ 4,00,000

So, Cash = 2 x ¹ 4,00,000 3 ¹ 3,72,5000

Cash = ¹ 4,27,500

(ii) Long term Debt = 45% of Net Worth Or ¹

6,75,000 = 45% of Net Worth Net Worth = ¹
15,00,000
(iii) Equity Share Capital (ESC) + Reserves = ¹ 15,00,000
Or ESC + 0.2ESC = ¹ 15,00,000 Or 1.2 ESC = ¹ 15,00,000
Equity Share Capital (ESC) = ¹ 12,50,000

(iv) Reserves = 0.2 x ¹ 12,50,000

Reserves = ¹ 2,50,000

(v) Total of Liabilities=Total of Assets

Prakshal Shah | 8779794646

Or ¹ 12,50,000 + ¹ 2,50,000 + ¹ 6,75,000 +¹ 60,000 + ¹ 4,00,000 + Fixes Assets(FA)
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.37

(WDV) + ¹ 2,30,000 + ¹ 2,62,000 +¹ 4,27,500

Or ¹ 26,35,000 = ¹ 9,20,000 + FA(WDV)

FA (WDV) =¹ 17,15,000

Now FA(Cost) 3 Depreciation = FA(WDV)

Or FA(Cost) 3 FA(Cost)/6 = ¹ 17,15,000
Or 5 FA(Cost)/6 = ¹ 17,15,000

Or FA(Cost) = ¹ 17,15,000x 6/5

So, FA(Cost) = ¹ 20,58,000
Depreciation = ¹ 20,58,000/6 = ¹ 3,43,000

Question 24
Masco Limited has furnished the following ratios and information relating to the year ended
31st March 2021
Sales Rs.75,00,000
Return on net worth 25%
Rate of income tax 50%
Share capital to reserves 6:4
Current ratio 2.5
Net profit to sales (After Income Tax) 6.50%
Inventory turnover (based on cost of goods sold) 12
Cost of goods sold Rs.22,50,000
Interest on debentures Rs.75,000
Receivables (includes debtors Rs.1,25,000) Rs.2,00,000
Payables Rs.2,50,000
Bank Overdraft Rs.1,50,000

You are required to:

a. Calculate the operating expenses for the year ended 31st March, 2021.
b. Prepare a balance sheet as on 31st March in the following format:
Liabilities Rs Assets Rs.
Share Capital Fixed Assets
Reserves and Current Assets
Surplus
15% Debentures Stock
Payables Receivables
Bank Term Loan Cash
(PYP 10 Marks, July921, Old & New SM)
Answer 24
(a) Calculation of Operating Expenses for the year ended 31st March, 2021
Particulars (Rs.)
Net Profit [@ 6.5% of Sales] 4,87,500
Add: Income Tax (@ 50%) 4,87,500
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.38

Profit Before Tax (PBT) 9,75,000

Add: Debenture Interest 75,000
Profit before interest and tax (PBIT) 10,50,000
Sales 75,00,000
Less: Cost of goods sold 22,50,000
PBIT 10,50,000 33,00,000
Operating Expenses 42,00,000
(b) Balance Sheet as on 31st March, 2021
Liabilities Rs. Assets Rs.
Share Capital 11,70,000 Fixed Assets 18,50,000
Reserve and Surplus 7,80,000 Current Assets
15% Debentures 5,00,000 Stock 1,87,500
Payables 2,50,000 Receivables 2,00,000
Bank Overdraft(or 1,50,000 Cash 6,12,500
Bank Term Loan)
28,50,000 28,50,000
Working Notes:
(i) Calculation of Share Capital and Reserves
The return on net worth is 25%. Therefore, the profit after tax of
Rs.4,87,500 should be equivalent to 25% of the net worth.
25
Net worth× 100 = 4,87,500

4,87,500×100
6 Net worth = 19,50,000
25

The ratio of share capital to reserves is 6:4

Share Capital = 19,50,000 x 6/10 = Rs.11,70,000 Reserves = 19,50,000 x 4/10 = Rs.7,80,000
(ii) Calculation of Debentures
Interest on Debentures @ 15% (as given in the balance sheet format) = Rs. 75,000
75,000×100
6 Debentures= 15
= Rs500,000

(iii) Calculation of Current Assets

Current Ratio = 2.5 Payables = Rs.2,50,000 Bank overdraft = Rs.1,50,000
Total Current Liabilities = Rs.2,50,000 + Rs.1,50,000 = Rs.4,00,000
6 Current Assets = 2.5 x Current Liabilities = 2.5 × 4,00,000 = Rs.10,00,000
(iv) Calculation of Fixed Assets
Particulars ¹
Share capital 11,70,000
Reserves 7,80,000
Debentures 5,00,000
Payables 2,50,000
Bank Overdraft 1,50,000
Total Liabilities 28,50,000
Less: Current Assets 10,00,000
Fixed Assets 18,50,000
(v) Calculation of Composition of Current Assets
Inventory Turnover = 12
Cost of goods sold
= Closing stok
= 12
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.39

22,50,000
Closing stock = =Closing Stok Rs.1,87,500
12

Particulars ¹
Stock 1,87,500
Receivables 2,00,000
Cash (balancing figure) 6,12,500
Total Current Assets 10,00,000

Question 25
Following information relates to RM Co. Ltd.
(Rs.)
Total Assets employed 10,00,000
Direct Cost 5,50,000
Other Operating Cost 90,000
Goods are sold to the customers at 150% of direct costs.
50% of the assets being financed by borrowed capital at an interest cost of 8% per annum. Tax
rate is 30%.
You are required to calculate:
Net profit margin
Return on Assets
Asset turnover
Return on owners' equity. (PYP 5 Marks, Nov920)
Answer25
Computation of net profit:
Particulars (¹)
Sales (150% of Rs.5,50,000) 8,25,000
Direct Costs 5,50,000
Gross profit 2,75,000
Other Operating Costs 90,000
Operating profit (EBIT) 1,85,000
Interest changes (8% of Rs.5,00,000) 40,000
Profit before taxes (EBT) 1,45,000
Taxes (@ 30%) 43,500
Net profit after taxes (EAT) 1,01,500

Profit after taxes Rs.1,01,500

i. Net profit margin (After tax)= = =0.12303 or12.303%
Sales Rs8,25,000

Profit before taxes Rs.1,45,00,00

Net profit margin (Before tax)= = = 0.17576 or17.576%
Sales Rs.8,25,000

EBIT(12T) Rs.1,85,0000(120.3)
ii. Return on assets= = = 0.1295 or12.95%
Total Assets Rs.10,00,0000

Sales Rs.8,25,000
iii. Asset turnover= = =0.825times
Prakshal Shah | 8779794646 Assets Rs.10,00,000
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.40

Profit before taxes Rs.1,01,500

iv. Return on owner's equity= = = 0.203or 20.3%
Owners equity 50%×Rs.10,00,000

Question 26
Following information has been gathered from the books of Tram Ltd. the equity shares of which is
trading in the stock market at Rs.14.
Particulars Amount (¹)
Equity Share Capital (face value Rs.10) 10,00,000
10% Preference Shares 2,00,000
Reserves 8,00,000
10% Debentures 6,00,000
Profit before Interest and Tax for the year 4,00,000
Interest 60,000
Profit after Tax for the year 2,40,000
Calculate the following:
i. Return on Capital Employed
ii. Earnings per share
iii. PE ratio. (PYP 5 Marks, Nov919) (Same concept different figures RTP Nov921)
Answer 26
i. Calculation of Return on capital employed (ROCE)
Capital employed = Equity Shareholders9 funds + Debenture + Preference shares
= ¹ (10,00,000 + 8,00,000 + 6,00,000 + 2,00,000)
= Rs.26,00,000

PBIT
Return on capital employed [ROCE-(Pre-tax)]= × 100
Capital Employed
Rs.4,00,000
= × 100== 15.38% (approx.)
Rs.26,00,000

Profit After tex

Return on capital employed [ROCE-(Post-tax)]= Capital Employed × 100

Rs.240,000
ii. × 100 == 9.23% (approx.)
Rs.26,00,000

iii. Calculation of Earnings per share

= Earnings availableto equity shareholders

Earnings per share= No of equity shares

Profit after tax2preference Dividend

=
No of equity shares

Rs(.2,40,000 2 20,000)
= == Rs.2.20
Rs.1,00,000

iv. Calculation of PE ratio

= Market Price per Share (MPS)
PE=
Earning per Shares (EPS)
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.41

Rs14
= Rs 2.20== 6.364 (approx.)

Question 27
Following figures and ratios are related to a company Q Ltd.:
Sales for the year (all credit) Rs.30,00,000
i. Gross Profit ratio 25 per cent
ii. Fixed assets turnover (based on cost of goods sold) 1.5
iii. Stock turnover (based on cost of goods sold) 6
iv. Liquid ratio 1:1
v. Current ratio 1. 5 : 1
vi. Receivables (Debtors) collection period 2 months
vii. Reserves and surplus to share capital 0.6 : 1
viii. Capital gearing ratio 0.5
ix. Fixed assets to net worth 1.20 : 1
You are required to calculate:
Closing stock, Fixed Assets, Current Assets, Debtors and Net worth.
(PYP 5 MarksMay919)
Answer 27
(i) Calculation of Closing Stock:
Cost of Goods Sold = Sales 3 Gross Profit (25% of Sales)
= Rs.30,00,000 3 Rs.7,50,000
= Rs.22,50,000
Closing Stock = Cost of Goods Sold / Stock Turnover
= Rs.22,50,000/6 = Rs.3,75,000

(ii) Calculation of Fixed Assets:

Fixed Assets = Cost of Goods Sold / Fixed Assets Turnover
= Rs.22,50,000/1.5
= Rs.15,00,000

(iii) Calculation of Current Assets:

Current Ratio = 1.5 and Liquid Ratio = 1
Stock = 1.5 3 1 = 0.5
Current Assets = Amount of Stock × 1.5/0.5
= Rs.3,75,000 × 1.5/0.5 = Rs.11,25,000

(iv) Calculation of Debtors:

Debtors = Sales × Debtors Collection period /12
= Rs.30,00,000 × 2 /12
= Rs.5,00,000

(v) Calculation of Net Worth:

Net worth = Fixed Assets /1.2
= Rs.15,00,000/1.2 = Rs.12,50,000

Question 28
The following is the information of XML Ltd. relate to the year ended 31-03-2018:
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.42

Gross Profit 20% of Sales

Net Profit 10% of Sales
Inventory Holding period 3 months
Receivable collection period 3 months
Non-Current Assets to Sales 1:4
Non-Current Assets to Current Assets 1:2
Current Ratio 2:1
Non-Current Liabilities to Current Liabilities 1:1
Share Capital to Reserve and Surplus 4:1
Non-current Assets as on 31st March, 2017 Rs.50,00,000
Assume that:
(i) No change in Non-Current Assets during the year 2017-18
(ii) No depreciation charged on Non-Current Assets during the year 2017-18.
(iii) Ignoring Tax
You are required to Calculate cost of goods sold, Net profit, Inventory, Receivables and Cash for
the year ended on 31st March, 2018(PYP 5 Marks, Nov918)

Answer 28
Workings
ý
ÿ ÿÿÿÿÿ
ý

ÿ



=
ÿÿÿÿ
ý

ÿ

50,00,000 1
Or Curent Assets= 2
So, Current Assets = Rs.1,00,00,000 Now further,
Non CurrentAssets 1
=
Sales 4

50,00,000 1
ÿÿ =
Curent Assets 4
So, Sales = Rs.2,00,00,000
Calculation of Cost of Goods sold, Net profit, Inventory, Receivables and Cash:
Cost of Goods Sold (COGS):
Cost of Goods Sold = Sales- Gross Profit
= Rs.2,00,00,000 3 20% of Rs.2,00,00,000
= Rs.1,60,00,000
Net Profit = 10% of Sales = 10% of Rs.2,00,00,000
= Rs.20,00,000
Inventory:
12 ÿ

/
Inventory Holding Period=InventoryTurnover Ratio
ÿþÿ
4=
verageInventory
1,60,00,000
4=AverageInventory
Average or Closing Inventory =Rs.40,00,000
Receivables:
12 ÿ

/
Receivable Collection Period=ReceivablesTurnover Ratio
ÿÿ ÿþ
Or Receivables Turnover Ratio = 12/ 3 = 4 =
Average AccountsReceivable

,ÿÿ,ÿÿ,ÿÿÿ
Or 4 =
Average Accounts Receivable
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.43

So, Average Accounts Receivable/Receivables =Rs.50,00,000/-

Cash:
Cash* = Current Assets* 3 Inventory- Receivables Cash = Rs.1,00,00,000 - Rs.40,00,000 -
Rs.50,00,000
= Rs.10,00,000
(it is assumed that no other current assets are included in the Current Asset)

Question 29
The accountant of Moon Ltd. has reported the following data:
Gross profit Rs.60,000
Gross Profit Margin 20 per cent
Total Assets Turnover 0.30:1
Net Worth to Total Assets 0.90:1
Current Ratio 1.5:1
Liquid Assets to Current Liability 1:1
Credit Sales to Total Sales 0.80:1
Average Collection Period 60 days
Assume 360 days in a year You are required to complete the following:
Balance Sheet of Moon Ltd. (PYP 5 Marks, May918)
Liabilities ¹ Assets ¹
Net Worth Fixed Assets
Current Liabilities Stock
Debtors
Cash
Total Liabilities Total Assets
Answer 29
Preparation of Balance Sheet Working Notes:
Sales = Gross Profit / Gross Profit Margin
= 60,000 / 0.2 = Rs.3,00,000
Total Assets = Sales / Total Asset Turnover
= 3,00,000 / 0.3 = Rs.10,00,000
Net Worth = 0.9 X Total Assets
= 0.9 X Rs.10,00,000 = Rs.9,00,000
Current Liability = Total Assets 3 Net Worth
= Rs.10,00,000 3 Rs.9,00,000
= Rs.1,00,000
Current Assets = 1.5 x Current Liability
= 1.5 x Rs.1,00,000 = Rs.1,50,000
Stock = Current Assets 3 Liquid Assets
= Current Assets 3 (Liquid Assets / Current Liabilities =1)
= 1,50,000 3 (LA / 1,00,000 = 1) = Rs. 50,000
Debtors = Average Collection Period X Credit Sales / 360
= 60 x 0.8 x 3,00,000 / 360 = Rs. 40,000
Cash = Current Assets 3 Debtors 3 Stock
= Rs.1,50,000 3 Rs. 40,000 3 Rs. 50,000
=Rs. 60,000
Fixed Assets = Total Assets 3 Current Assets
= Rs.10,00,000 3 Rs.1,50,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.44

= ¹ 8,50,000
Balance Sheet
Liabilities ¹ Assets ¹
Net Worth 9,00,000 Fixed Assets 8,50,000
Current Liabilities 1,00,000 Stock 50,000
Debtors 40,000
Cash 60,000
Total liabilities 10,00,000 Total Assets 10,00,000

Question 30
Following are the data in respect of ABC Industries for the year ended 31 st March, 2021:

Debt to Total assets ratio : 0.40

Long-term debts to equity ratio : 30%
Gross profit margin on sales : 20%
Accounts receivables period : 36 days
Quick ratio : 0.9
Inventory holding period : 55 days
Cost of goods sold : ¹ 64,00,000

Liabilities ¹ Assets ¹
Equity Share Capital 20,00,000 Fixed assets
Reserves & surplus Inventories
Long-term debts Accounts receivable
Accounts payable Cash
Total 50,00,000 Total
Required:
Complete the Balance Sheet of ABC Industries as on 31st March, 2021. All calculations should be
in nearest Rupee. Assume 360 days in a year. (PYP 10 Marks Dec 821)
Answer 30

(1) Total liability = Total Assets =

850,00,000 Debt to Total Asset Ratio
= 0.40



= 0.40

ÿþ ý



Or, 50,00,000
=0.40

So, Debt = 20,00,000

(2) Total Liabilities = ¹ 50,00,000
Equity share Capital + Reserves + Debt = ¹
50,00,000 So, Reserves =¹ 50,00,000 - ¹ 20,00,000
- ¹ 20,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.45

So, Reserves & Surplus = ¹ 10,00,000

ÿ

 ÿ



(3) = 30%*

ÿ /ÿ/
þ2


ÿ

 ÿ



= (20,00,000+10,00,000) = 30%

Long Term Debt = ¹ 9,00,000

(4) So, Accounts Payable = ¹ 20,00,000 3 ¹ 9,00,000
Accounts Payable = ¹ 11,00,000
(5) Gross Profit to sales = 20%
Cost of Goods Sold = 80% of Sales = ¹ 64,00,000
Sales = 100/80 X 64,00,000 = 80,00,000
360
(6) Inventory Turnover =
55
ÿþ 360
=
ÿþ
ÿ
 ý


 55

64,00,000 360
=
ÿþ
ÿ
 ÿ


 55

Closing inventory = 9,77,778

(7) Accounts Receivable period = 36 days

ý





ÿ ÿ
þ
×360 = 36
ÿÿ ÿþ
Accounts Receivable = 36/360 × credit sales
= 36 / 360 × 80,00,000 (assumed all sales are on credit)

Accounts Receivable = ¹ 8,00,000

(8) Quick Ratio = 0.9

ÿ
ý ý
= 0.9
ÿ
 þÿÿ
þÿÿ

ÿÿ/+



= 0.9
11,00,000
Cash + 8,00,000 = ¹ 9,90,000
Cash = ¹ 1,90,000
(9) Fixed Assets = Total Assets- Current Assets = 50,00,000 3 (9,77,778+8,00,000+1,90,000)

= 30,32,222
Balance Sheet of ABC Industries as on 31st March 2021

Liabilities (¹) Assets (¹)

Share Capital 20,00,000 Fixed Assets 30,32,222
Reserved surplus 10,00,000 Current Assets:
Long Term Debt 9,00,000 Inventory 9,77,778
Accounts Payable 11,00,000 Accounts Receivables 8,00,000
Cash 1,90,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.46

Total 50,00,000 Total 50,00,000

(*Note: Equity shareholders9 fund represent equity in 8Long term debts to equity ratio9. The
question can be solved assuming only share capital as 8equity9)

Question 31
Following information and ratios are given for W Limited for the year ended 31st March, 2022:

Equity Share Capital of ¹ 10 each ¹ 10 lakhs

Reserves & Surplus to Shareholders9 Fund 0.50
Sales / Shareholders9 Fund 1.50
Current Ratio 2.50
Debtors Turnover Ratio 6.00
Stock Velocity 2 Months
Gross Profit Ratio 20%
Net Working Capital Turnover Ratio 2.50
You are required to calculate:
(i) Shareholders' Fund
(ii) Stock
(iii) Debtors
(iv) Current liabilities
(v) Cash Balance. (PYP 5 Marks May922)

Answer 31
(i) Calculation of Shareholders9 Fund:
Reserve & Surplus
Shareholders2Funds
= 0.5

Reserve & Surplus

= 0.5
Equity Share Capital + Reserve & Surplus

Reserve & Surplus

= 0.5
10,00,000 + Reserve & Surplus

Reserve & Surplus = 5,00,000 + 0.5 Reserve & Surplus

0.5 Reserve & Surplus = 5,00,000 Reserve & Surplus = 10,00,000
Shareholders9 funds = 10,00,000 +10,00,000
Shareholders9 funds = ¹ 20,00,000
(ii) Calculation of Value of Stock:
Sales
Shareholders2 Funds
=
Sales = 1.5 × 20,00,000
Sales = 30,00,000
Gross Profit = 30,00,000 × 20% = 6,00,000
Cost of Goods Sold = 30,00,000 3 6,00,000
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.47

= ¹ 24,00,000
Stock velocity = 2 months
Average Stock
=Cost of Goods Sold × 12 = 2
Average Stock
= × 12 = 2
24,00,000
2
Average Stock = 24,00,000× 12

Average stock = ¹ 4,00,000

(iii) Calculation of Debtors: Debtors Turnover Ratio = 6
Sales
6 =
Average Debtors
ÿ,ÿÿÿ
6 =6
Average Debtors

Average Debtors = ¹ 5,00,000

(iv) Calculation of Current Liabilities:
Net Working Capital Turnover ratio = 2.5

Sales
= 2.5
Current Assets2 ÿÿÿÿÿ
Liabilites

ÿ,ÿÿÿ
= 2.5
Current Assets2 Current Liabilites
Current Assets 3 Current Liabilities = 12,00,000 ......................... (1)
Current Ratio = 2.5

Current Assets
= 2.5
Current Liabilites

Current Assets = 2.5 Current Liabilities ......................................... (2)

From (1) & (2),
2.5 Current Liabilities 3 Current Liabilities = 12,00,000
1.5 Current Liabilities = 12,00,000
Current Liabilities = ¹ 8,00,000
(v) Calculation of Cash Balance:
Current Assets = 2.5 Current Liabilities
Current Assets = 2.5 (8,00,000) = 20,00,000
(-) Debtors (5,00,000)
(-) Stock (4,00,000)
Cash Balance ¹ 11,00,000

Question 32
The following figures are related to the trading activities of M Ltd.

Total assets ¹ 10,00,000

Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.48

Debt to total assets 50%

Interest cost 10% per year

Direct Cost 10 times of the interest cost

Operating Exp. ¹ 1,00,000

The goods are sold to customers at a margin of 50% on the direct cost
Tax Rate is 30%

You are required to calculate

(i) Net profit margin

(ii) Net operating profit margin
(iii) Return on assets

(iv) Return on owner9s equity (PYP 5 Marks Nov 822)

Answer 32
(i) Computation of Net Profit Margin
Debt = (10,00,000 x 50%) = ¹5,00,000
10
Interest cost = 5,00,000 × (100) = 50,000
Direct cost = 50,000 x 10 = ¹5,00,000
Sales = 5,00,000 x 150% = ¹7,50,000
(¹)
Gross profit = 7,50,000 3 5,00,000 = 2,50,000
Less: Operating expenses = 1,00,000
6 EBIT = 1,50,000
Less: Interest = 50,000

INTERMEDIATE EXAMINATION: NOVEMBER 2022

6 EBT = 1,00,000
Less: Tax @ 30% = 30,000
6 PAT = 70,000
70,000
Net profit margin =( ) × 100 = 9.33 %
7,50,000

(ii) Net Operating Profit margin

þý
Net operating profit margin = (ÿþ) × 100

1,50,000
= (7,50,000) × 100 = 20 %

(iii) Return on Assets

ÿý+ý

Return on Assets = [( 
ÿþ ý )] × 100

1,20,000
= [(10,00,000)] × 100 = 12 %
Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.49

(OR)

þý
Return on Assets = X 100
ý
1,50,000
= (10,00,000) × 100 = 15 %
(OR)
70,000
= 10,00,000 X 100 = 7%
(OR)
1,50,000(120.3)
=[ ] X 100 = 10.5%
10,00,000

(iv) Return on owner9s equity

ÿý 70,000
Return = X100 = X 100 = 14%
þ
 2  ÿ 5,00,000

Question 33
Following information and ratios are given in respect of AQUA Ltd. for the year ended 31st March,
2023:
Current ratio 4.0
Acid test ratio 2.5
Inventory turnover ratio (based on sales) 6
Average collection period (days) 70
Earnings per share ¹ 3.5
Current liabilities ¹ 3,10,000
Total assets turnover ratio (based on sales) 0.96
Cash ratio 0.43
Proprietary ratio 0.48
Total equity dividend ¹ 1,75,000
Equity dividend coverage ratio 1.60
Assume 360 days in a year.
You are required to complete Balance Sheet as on 31stMarch, 2023.
Balance Sheet as on 31stMarch, 2023.
Liabilities ¹ Assets ¹
Equity share capital (¹10 per share) XXX Fixed assets XXX
Reserves & surplus XXX Inventory XXX
Long-term debt XXX Debtors XXX
Current liabilities 3,10,000 Loans & advances XXX
Cash & bank XXX
Total XXX Total XXX
(PYP 10 Marks May 823)
Answer 33
(i) Current Ratio = 4


 ý
=4
ÿ
 ÿÿÿ
ÿþÿÿ

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.50


 ý
6 3,10,000
=4

6 Current Assets = 12,40,000

(ii) Acid Test Ratio = 2.5


 ý2ý



= 2.5
ÿ
 ÿÿÿ
ÿþÿÿ

12,40,0002ý



6 = 2.5
3,10,000

6 12,40,000 3 Inventory = ¹ 7,75,000

Inventory = ¹ 4,65,000

(iii) Inventory Turnover Ratio (on Sales) = 6

ÿþ
ý



=6
ÿþ
4,65,000
=6

6 Sales = ¹ 27,90,000
(iv) Debtors Collection Period = 70 days
6 (Debtors / sales) x 360 = 70
6 (Debtors / 27,90,000) x 360 = 70
Debtors = ¹ 5,42,500
(v) Total Assets Turnover Ratio (on Sales) = 0.96
ÿþ
6 = 0.96

ÿþ ý

27,90,000
6 = 0.96

ÿþ ý

Total Assets = ¹ 29,06,250

(vi) Fixed Assets (FA) = Total Assets 3 Current Assets

= 29,06,250 3 12,40,000
Fixed Assets = ¹ 16,66,250
ÿÿ/
(vii) Cash Ratio = = 0.43
ÿ
 ÿÿÿ
ÿþÿÿ
ÿÿ/
6 = 0.43
3,10,000

6 Cash = ¹ 1,33,300
ÿ
ÿÿ 

(viii) Proprietary Ratio = = 0.48

ÿþ ý

ÿ
ÿÿ 

6 = 0.48
29,06,250

6 Proprietary Fund = ¹ 13,95,000

Prakshal Shah | 8779794646
Chapter 3 Financial Analysis & Planning- Ratio Analysis
 3.51

(ix) Equity Dividend Coverage Ratio = 1.6

ÿ 3.5
Or =

ÿ
ÿ

6 DPS = 2.1875

ÿþ
ÿ ÿ

DPS =
ýÿ


ÿ /ÿ

1,75,000
6 2.1875 =
ýÿ


ÿ /ÿ

6 Number of Equity Shares = 80,000

6 Equity Share Capital = 80,000 x 10 = ¹ 8,00,000

6 Reserves &Surplus = 13,95,000 - 8,00,000 = ¹ 5,95,000
(x) Loans and Advances = Current Assets - (Inventory + Receivables + Cash & Bank)
= ¹ 12,40,000 - (¹ 4,65,000 + 5,42,500 + 1,33,300) = ¹ 99,200
Balance Sheet as on 31st March 2023
Liabilities ¹ Assets ¹
Equity Share Capital (¹ 10 per share) 8,00,000 Fixed Assets 16,66,250
Reserves & Surplus 5,95,000 Inventory 4,65,000
Long-term debt *(B/F) 12,01,250 Receivables 5,42,500
Current Liabilities 3,10,000 Loans & Advances 99,200
Cash & Bank 1,33,300
Total 29,06,250 Total 29,06,250

Prakshal Shah | 8779794646

Chapter 3 Financial Analysis & Planning- Ratio Analysis