5. Ratio Analysis 2.
Proprietary Ratio:
(a) Liquidity Ratios: Shareholders Funds/ Equity
Current Assets Total Assets
1. Current Ratio:
Current Liabilities Total Assets = Non Current Assets + Current Assets
Current Assets = Current Investments + = Tangible Assets + Intangible Assets + Non Current
Inventories (excluding Loose Tools and Spare Investments + Long Term Loans and Advances
Parts) + Trade Receivables + Cash and Bank +
Balance + Short-term Loans and Advances + Current Investments + Inventories (including Loose
Other Current Assets Tools and Spare Parts) + Trade Receivables + Cash
and Bank Balance + Short-term Loans and Advances
Current Liabilities = Short term borrowings + + Other Current Assets
Trade payables + Other Current Liabilities + Debt
3. Debt to Total Assets Ratio:
Short term Provisions Total Assets
Quick Assets
2. Quick Ratio / Liquid Ratio: 4. Interest coverage ratio =
Current Liabilities Net profit before interest and taxes
OR
Interest
All Current Assets- Inventories(excluding Loose Tools and Spare Parts)- Prepaid Expenses
Interest includes interest on only long term
Current Liabilities borrowings.
OR
(c) Activity Ratios:
Liquid Assets
Current Liabilities 1. Debtors Turnover Ratio will be replaced by
Trade Receivable Turnover Ratio: =
(b) Solvency Ratios: Credit Revenue from Operation
1. Debt to Equity Ratio: Average Trade Receivable
Debt / Long Term Debt Credit Revenue from Operation = Revenue from
Equity / Shareholders' Funds Operation – Cash Revenue from Operation
Debt = Long Term Borrowings + Long Term Average Trade Receivables =
Provisions Opening Trade Receivable + Closing Trade Receivable
Equity / Shareholders’ Funds = Share Capital + 2
Reserves and Surplus
2. Creditors Turnover Ratio will be replaced by
Or
Trade Payable Turnover Ratio: =
Non Current Assets + (Current Assets – Current
Liabilities) - Non Current Liabilities Net Credit Purchases
= Non Current Assets + Working Capital- Non Average Trade Payable
Current Liabilities Average Trade Payables =
= (Tangible Assets + Intangible Assets + Non Opening Trade Payable + Closing Trade Payable
Current Investments + Long Term Loans and 2
Advances) + Working Capital – (Long Term
Borrowings + Long Term Provisions)
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3. Working Capital Turnover Ratio = Net Profit = Gross profit + Other Income –
Revenue from Operations Indirect Expenses – Tax
Working Capital
3. Operating Ratio:
4. Stock Turnover Ratio will be replaced by Cost of Revenue from Operations/Cost of Goods Sold + Operating Expenses
Inventory Turnover Ratio = × 100
Revenue from Operations
Cost of Goods Sold /
Cost of Revenue from Operation Operating Expenses = Employee Benefit Expenses +
Depreciation and Amortisation Expenses + Selling
Average Inventory and Distribution Expenses+ Office and
Cost of goods sold= Opening Stock + Net Administrative Expense.
Purchases + Direct Expenses – Closing Stock Operating Income = Sale of scrap, trading
Cost of Revenue from Operations = Revenue commission received, cash discount received, revenue
from Operations – Gross Profit from services.
Or 4. Operating Profit Ratio:
Cost of Material Consumed (including direct Net Operating Profit
expenses) + Change in inventories of WIP and × 100
Finished Goods Revenue from Operations
Or Net operating profit = Net Profit after
Tax+ Non-Operating Expenses – Non Operating
Opening Inventory + Net Purchases+ Direct Incomes
Expenses – Closing inventory Or
Average Inventory = Gross Profit – Operating Expenses + Operating
Opening Inventory + Closing Inventory Incomes
2 Non Operating Expenses = Finance Cost
(Interest on Borrowings) + Loss on sale of Non
(d) Profitability Ratios: Current Assets
1. Gross Profit Ratio: Non Operating Incomes = Interest and Dividend
Received on Investment + Profit on sale of Non
Gross Profit
× 100 Current Assets
Revenue from Operations
5. Earning per share:
Gross Profit = Revenue from Operations – Cost
of Revenue from Operations/ Cost of Goods Sold Net Profit after Tax and Preference Dividend
Cost of Revenue from Operations = Cost of No. of Equity Shares
Material Consumed (including direct expenses) +
Change in inventories of WIP and Finished
Goods. Price Earning Ratio
Or 6.
Market Value of an Equity share
Opening Inventory + Net Purchases + Direct
Expenses – Closing inventory
Earning per share
2. Net Profit Ratio: = 7. Return on Investment
Net Profit Net Pr ofit before Interest and Tax
× 100 = × 100
Revenue from Operations Capital Employed
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NOTE: (iii) Application of spreadsheets in generating the
1. Current Ratio includes Net Debtors (Gross following accounting information:
Debtors – Provision for doubtful debts) while 1. Payroll
Trade Receivables Turnover Ratio includes Gross Components of payroll – Basic, HRA, DA
Debtors. and TA, CCA, deduction for PF and
2. Capital employed = Shareholders’ Funds +
Non-current liabilities – non trade investments income tax.
OR 2. Data Presentation
Non-current assets (excluding Non-trade Graphs and charts- using wizards,
investments) + Working Capital various charts type, formatting grid lines
OR and legends, previewing & printing
Fixed Assets + Trade Investments + Working
charts
Capital
3. Investments to be taken as non-trade investments Database - creation, sorting, query and
unless specified as trade investments. filtering a database.
4. In Return on Investments Ratio- Net Profit before
interest and tax will not include interest on 7. Database Management System (DBMS)
non-trade investments.
(i) Concept and Features of DBMS.
SECTION C Types and features of DBMS.
A conceptual understanding of the basic
COMPUTERISED ACCOUNTING
features of Data Base Management System
6. Accounting Application of Electronic Spread (DBMS), i.e. data update and retrieval using
Sheet
basic functions and commands of SQL.
(i) Concept of Electronic Spreadsheet. Basic Commands: Select, Where, And, Or,
Meaning, utility, merits and demerits of Update, Delete and
Electronic spreadsheets. Basic Functions: Avg, Count, Max, Min, Sum.
(ii) Features offered by Electronic Spreadsheet.
An understanding of basic features of (ii) DBMS in Business Application.
electronic spreadsheets such as: Creating
worksheet, entering data into worksheet, Database design, tables, fields, relationships,
heading information, data, text, dates, forms reports and indexing.
alphanumeric values, saving & quitting The following examples of DBMS in business
worksheet. Opening and moving around in an application:
existing worksheet. Toolbars and Menus,
• Accounting Information
keyboard shortcuts. Working with single and
multiple workbooks - copying, renaming, • Debtors and Creditors
moving, adding and deleting, copying entries
• Bank Reconciliation Statement
and moving between workbooks. Formatting
of worksheet- Auto format, changing - • Asset Accounting
alignment, character styles, column width,
date format, borders and colours. Previewing
and Printing worksheet - Page setting,
Print titles, Adjusting margins, Page break,
headers and footers. Formulas – summation,
subtraction, division, multiplication, average
and percentage. Functions: date, if-then-
else, freezing panes.
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