Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Commerce: Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

The document Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce is a part of the Commerce Course TS Grewal Solutions - Class 12 Accountancy.
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Question:101 

Calculate Working Capital Turnover Ratio from the following information:  

Revenue from Operations  30,00,000; Current Assets  12,50,000; Total Assets  20,00,000; Non-current Liabilities  10,00,000, Shareholders' Funds  5,00,000. 
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - CommerceQuestion:102 

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

Compute the 'Working Capital Turnover Ratio' of the company. 
Working Capital Turnover Ratio= Revenue from Operation/Working Capital 
Solution:

Gross Profit = 25% on Cost 

Let the Cost of Goods sold be  100. 

Gross Profit = 25 

Revenue from Operations = 100 + 25 = 125 

When Gross profit is  25, revenue from operations is = 125 

And, if Gross profit is  5,00,000 then revenue from operations will be = 5,00, 000 × 125/25 =  25,00,000 

Capital Employed = Shareholder’s Funds + Non-Current Liabilities 

 =  10,00,000 + 2,00,000 + 3,00,000 

=  15,00,000 

Also, Capital Employed = Non Current Assets + Working Capital 

Alternatively, Working Capital = Capital Employed – Non-current Assets =  15,00,000– 10,00,000 

=  5,00,000 

Hence, Working Capital Turnover Ratio= 25,00,000/5,00,000= 5 times 

Question:103 

Compute Gross Profit Ratio from the following information: 

Cost of Revenue from Operations Cost of Goods Sold 

 5,40,000; Revenue from Operations Net Sales 

 6,00,000. 

Solution: 

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

 = 6,00,000 – 5,40,000 

 = Rs 60,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:104 

From the following, calculate Gross Profit Ratio: 

Gross Profit:50,000; Revenue from Operations 5,00,000; Sales Return: 50,000. 

Solution: 

Net Sales = Rs 5, 00, 000Gross Profit = Rs 50, 000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Note: Here we will not deduct the amount of sales return because the amount of net sales has already been provided in the question.

Question:105 

Compute Gross Profit Ratio from the following information: 

Revenue from Operations, i.e., Net Sales = 4,00,000; Gross Profit 25% on Cost. 

Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:106 

Calculate Gross Profit Ratio from the following data: 

Cash Sales are 20% of Total Sales; Credit Sales are 5,00,000; Purchases are 4,00,000; Excess of Closing Inventory over Opening Inventory 25,000. 
Solution:
Credit Sales = 5,00,000 

Cash sales = 20% of Total Sales 

Let Total Sales be ‘x’ 

Therefore, Cash Sales = 20% of x 
Total Sales = Cash Sales + Credit Sales 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Cost of Goods Sold = Purchases – Excess of Closing Stock over Opening Stock 

 = Rs 4,00,000 – Rs 25,000 = Rs 3,75,000 

Gross Profit = Total Sales – Cost of Goods Sold 

 = Rs 6,25,000 – 3,75,000 = Rs 2,50,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:107 

From the following information, calculate Gross Profit Ratio: 

Credit Sales  5,00,000 
Decrease in Inventory 10,000 
Purchases 3,00,000 
Returns Outward 10,000 
Carriage Inwards 10,000 
Wages 50,000 
Rate of Credit Sale to Cash Sale 4:1 

Solution: 

Credit Sale = Rs 5,00,000 

Rate of Credit Sale to Cash Sale = 4:1
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Total Sales = Cash Sales + Credit Sales = Rs 1,25,000 + Rs 5,00,000 = Rs 6,25,000 

Cost of Goods Sold = Purchases – Return Outward + Carriage Inwards + Wages + Decrease in Inventory 

 = Rs 3,00,000 – Rs 10,000 + Rs 10,000 + Rs 50,000 + Rs 10,000 

 = Rs 3,60,000 

Gross Profit = Total Sales – Cost of Goods Sold 

 = Rs 6,25,000 – Rs 3,60,000 = Rs 2,65,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question: 108
Calculate Gross Profit Ratio from the following data: 

Average Inventory 3,20,000; Inventory Turnover Ratio 8 Times; Average Trade Receivables 4,00,000; Trade Receivables Turnover Ratio 6 Times; Cash Sales 25% of Net Sales. 
Solution: 

Inventory Turnover Ratio = 8 times 

Average Inventory = Rs 3,20,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Cost of Goods sold = 25,60,000 

Trade Receivables Turnover Ratio = 6 times 

Average Trade Receivables = Rs 4,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Net Credit Sales = 24,00,000 

Total Sales = Cash Sales + Credit Sales 

Total Sales = 25% of Total Sales + Credit Sales 

75% of Total Sales = 24,00,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Gross Profit = Total Sales – Cost of Goods Sold 

 = 32,00,000 – 25,60,000 = 6,40,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:109 

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

iii. Opening Inventory 1,00,000; Closing Inventory 60,000; Inventory Turnover Ratio 8 Times; Selling Price 25% above cost. Calculate Gross Profit Ratio. 
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:110 

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 50,000. 

ii. Purchases Return 15,000. 

iii. Cash Sale of Stock-in-Trade 40,000. 

iv. Stock-in-Trade costing 20,000 withdrawn for personal use. 

v. Stock-in-Trade costing 15,000 distributed as a free sample. 

Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - CommerceQuestion:111 

Cost of Revenue from Operations Cost of Goods Sold 

 3,00,000. Operating Expenses 1,20,000. Revenue from Operations: Cash Sales 5,20,000; Return 20,000. Calculate Operating Ratio. 
Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:112 

Operating Ratio 92%; Operating Expenses 94,000; Revenue from Operations 6,00,000; Sales Return 40,000. Calculate Cost of Revenue from Operations Cost of Goods Sold.
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Operating Cost = Cost of Goods Sold + Operating Expenses 

5,52,000 = Cost of Goods Sold + 94,000 

Cost of Goods Sold = Rs 4,58,000 

*Note: Sales Return will not be considered since net sales are given which means sales return have already been adjusted in the sales figure.

Question:113 

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 12,000; Office Expenses 8,000; Depreciation 6,000. Calculate Operating Ratio. 

ii. Revenue from Operations, Cash Sales 4,00,000; Credit Sales 1,00,000; Gross Profit 1,00,000; Office and Selling Expenses 50,000. Calculate Operating Ratio. 
Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Cost of Goods Sold = 2,20,000 

Operating Cost = Cost of Goods Sold + Operating Expenses 

Operating Cost = 2,20,000 + 26,000 = 2,46,000 

Sales = 3,20,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:114 

From the following information, calculate Operating Ratio: 

Cost of Revenue from Operations Cost of Goods Sold 52,000 
Revenue from Operation Gross Sales  88,000 

Operating Expenses 18,000 
Sales Return  8,000 

Solution: 

Net Sales = Gross Sales - Sales Return = 88, 000 - 8, 000 = Rs 80, 000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:115 

Calculate Cost of Revenue from Operations from the following information: 

Revenue from Operations  12,00,000; Operating Ratio 75%; Operating Expenses  1,00,000. 
Solution:
Revenue from Operations Net Sales = Rs 12, 00, 000
Operating Ratio = 75% 
Operating Expenses = Rs 1, 00, 000
Find out: Cost of Revenue from Operations 
Operating Ratio = Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:116 

Calculate Operating Ratio from the following information: 

Operating Cost  6,80,000; Gross Profit 25%; Operating Expenses  80,000.  

Solution: 

Given: Operating Cost = Rs 6, 80, 000
Operating Expenses = Rs 80, 000
Gross Profit Ratio = 25 % 
Find out: Operating Ratio
Operating Cost = Cost of Revenue from Operations + Operating Expenses
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:117 

Calculate Operating Profit Ratio from the following information: 

Opening Inventory 1,00,000 
Closing Inventory 1,50,000 

Purchases  10,00,000 
Loss by fire  20,000 

Revenue from Operations, i.e., Net Sales  14,70,000 
Dividend Received  30,000 

Administrative and Selling Expenses  1,70,000 

Solution: 

Cost of Goods Sold = Opening Inventory + Purchases – Closing Inventory 

 = 1,00,000 + 10,00,000 – 1,50,000 = 9,50,000 

Operating Expenses = Administrative and Selling Expenses = 1,70,000 

Operating Cost = Cost of Goods Sold + Operating Expenses 

 = 9,50,000 + 1,70,000 = 11,20,000 

Net Sales = 14,70,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Operating Profit Ratio = 100 – Operating Ratio = 100 – 76.19 = 23.81% 

Question:118 

Calculate Operating Profit Ratio from the Following: 

Revenue from Operations Net Sales 5,00,000 

Cost of Revenue from Operations Cost of Goods Sold 2,00,000 

Wages 1,00,000 

Office and Administrative Expenses 50,000 

Interest on Borrowings 5,000 

Solution: 

Cost of Goods Sold = 2,00,000 

Operating Expenses = Office and Administrative Expenses = 50,000 

Operating Cost = Cost of Goods Sold + Operating Expenses 

 = 2,00,000 + 50,000 = 2,50,000 

Net Sales = 5,00,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Operating Profit Ratio = 100 – Operating Ratio = 100 – 50 = 50% 

Question:119 

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

Solution: 

Operating Ratio = 82.59% 

Operating Ratio + Operating Profit Ratio = 100% 

Operating Profit Ratio = 100% − 82.59% = 17.41% 

Question:120 

Calculate Operating Profit Ratio,in each of the following alternative cases: 

Case 1: Revenue from Operations Net Sales 10,00,000; Operating Profit  1,50,000. 

Case 2: Revenue from Operations Net Sales 6,00,000; Operating Cost  5,10,000. 

Case 3: Revenue from Operations Net Sales 3,60,000; Gross Profit 20% on Sales; Operating Expenses  18,000 

Case 4: Revenue from Operations Net Sales  4,50,000; Cost of Revenue from Operations  3,60,000; Operating Expenses  22,500. 

Case 5: Cost of Goods Sold, i.e., Cost of Revenue from Operations  8,00,000; Gross Profit 20% on Sales; Operating Expenses  50,000. 
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:121 

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

Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:122 

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

Solution: 

Cost of Revenue from Operations = Operating Cost - Operating Expenses  = 3,40,000 - 20,000 = Rs 3,20,000 3,20,000 × 20 

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Revenue from Operations = Cost of Revenue from Operations + Gross Profit 

 =3,20,000+80,000 = Rs 4,00,000 

Operating Profit = Revenue from Operations - Operating Cost 

 = 4, 00, 000 − 3, 40, 000 = Rs 60,000 

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:123 

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

Solution: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:124 

Revenue from Operations, i.e., Net Sales  6,00,000. Calculate Net Profit Ratio. 

Solution:
Net Sales = 6,00,000 

Net profit = 60,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:125 

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

Solution: 

Net Sales = Rs 8, 20, 000 

Gross Profit = Net Sales - Cost of Goods Sold 
= 8, 20, 000 - 5, 20, 000 
= Rs 3, 00, 000 

Net Profit = Gross Profit - Operating Expenses - Interest on Debentures + Profit on Sale of Fixed Asset 
= 3, 00, 000 - 2, 09, 000 - 40, 500 + 81, 000 
= Rs 1, 31, 500 

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:126
Revenue from Operations 4,00,000; Gross Profit Ratio 25%; Operating Ratio 90%. Non-operating Expenses 2,000; Non-operating Income 22,000. Calculate Net Profit Ratio.
Solution:
Net Profit = Operating Profit + Non Operating Incomes - Non Operating Expenses 

 = 40,000+22,000- 2,000 = Rs 60,000 

Operating Profit Ratio = 100 − Operating Ratio =100-90 =10% 

Operating Profit = 4, 00, 000 × 10% = Rs 40,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:127 

Calculate Return on Investment ROI 

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

Solution: 

Net Fixed Assets = Fixed Assets at cost 

− Accumulated Depreciation 

= 22,50,000 − 2,50,000 = 20,00,000 

Capital Employed = Net Fixed Assets + Current Assets − Current Liabilities 

= 20,00,000 + 12,00,000 − 4,00,000 

= 28,00,000 

Interest on 10% Debentures = 10% of 10,00,000 = 1,00,000 

Let Profit before Tax be = x 

Profit after Tax = Profit Before Tax − Tax 

Tax Rate = 50% 

∴ Tax = 0.5 x 

x − 0.5 x = 6,50,000 

x = 13,00,000 

Net Profit before Tax = x = 13,00,000 

Profit before Interest and Tax = Profit before Tax + Interest on Long-term Debt 

= 13,00,000 + 1,00,000 

= 14,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:128 

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

Net Profit before Interest and Tax = 2,50,000 

Capital Employed = 10,00,000 

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:129 

Net Profit before Interest and Tax 6,00,000; Net Fixed Assets 20,00,000; Net Working Capital 10,00,000; Current Assets 11,00,000. Calculate Return on Investment. 
Solution: 

Net Profit before Interest and Tax = 6,00,000 

Capital Employed = Net Fixed Assets + Net Working Capital 

= 20,00,000 + 10,00,000 = 30,00,000 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:130 

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

Solution: 

Net Profit before Interest and Tax = 4,00,000 

Capital Employed = 15% long-term Debt + Shareholders’ Funds 

= 8,00,000 + 4,00,000 = 12,00,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:131 

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

Solution: 

Return on Investment = Net Profit before Interest, Tax and Dividend/Capital Employed × 100 

Let Profit before tax be Rs 100 

Tax = Rs 20 

Profit after tax = 100 – 20 = 80 

If Profit after tax is Rs 80 then profit before tax is = Rs 100 

If Profit after tax is Rs 1,00,000 then profit before tax is = Rs 1, 00, 000 × 100/80 = 1,25,000 

Interest on long-term borrowings = Rs 4, 00, 000 × 10/100 = Rs 40,000 

Profit after interest and Tax = Rs 1,25,000 + 40,000 = Rs 1,65,000 

Capital Employed = Fixed Assets + Current Assets – Current Liabilities 

=  6,00,000 + 4,00,000 – 2,00,000 

= 8,00,000 

Return on Investment = 1,65,000/8,00,000 × 100 = 20.625% or 20.63% 

approx. 

Question:132 

From the following Balance Sheet of Global Ltd., you are required to calculate Return on Investment for the year 2018-19: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
Return on Investment = (Net Profit before Interest, Tax and Dividend/ Capital Employed × 100)

Interest on borrowings = ₹ (16,00,000 × 15/100)= ₹ 2,40,000

Net Profit before Tax = ₹ 9,72,000

Net Profit before Interest and Tax = ₹ (9,72,000 + 2,40,000) = ₹ 12,12,000

Net Profit before Interest and Tax (excluding interest on Non-trade investments) = ₹ (12,12,000 – 12,000) = ₹ 12,00,000

Capital Employed = Shareholder’s Funds + Non-Current Liabilities – Non-Trade Investment

                        = ₹ (5,00,000 + 4,20,000 + 16,00,000 – 1,20,000) = ₹ 24,00,000

Return on Investment = (12,00,000/24,00,000 × 100) = 50%

Question:133 

Following is the Balance Sheet of the Bharati Ltd. as at 31st March, 2019: 
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
You are required to calculate Return on Investment for the year 2018-19 with reference to Opening Capital Employed. 

Solution:
Return on Investment = (Net Profit before Interest, Tax and Dividend/ Capital Employed × 100)

Interest on borrowings = ₹ (24,00,000 × 15/100) = ₹3,60,000

Net Profit before Interest and Tax = Net Profit after tax + Interest on borrowings – Interest received on Non-trade Investments

                                                = ₹ (14,58,000 + 3,60,000 – 18,000) = ₹ 18,00,000

Opening Capital Employed = Shareholder’s Funds (Opening) + Non-Current Liabilities (Opening) – Non-Trade Investment

                                         = ₹(7,50,000 + 6,30,000 + 24,00,000 – 1,80,000) = ₹36,00,000

Return on Investment = (18,00,000/36,00,000 × 100) = 50%

Question:134
State with reason whether the following transactions will increase, decrease or not change the 'Return on Investment' Ratio:

(i) Purchase of machinery worth ₹10,00,000 by issue of equity shares.

(ii) Charging depreciation of ₹25,000 on machinery.

(iii) Redemption of debentures by cheque ₹2,00,000.

(iv) Conversion of 9% Debentures of ₹1,00,000 into equity shares.
Solution:

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:135
Opening Inventory ₹80,000; Purchases ₹4,30,900; Direct Expenses ₹4,000; Closing Inventory ₹1,60,000; Administrative Expenses ₹21,100; Selling and Distribution Expenses ₹40,000; Revenue from Operations, i.e., Net Sales ₹10,00,000. Calculate Inventory Turnover Ratio; Gross Profit Ratio; and Opening Ratio.
Solution:
(i) Opening Inventory = 80,000

Closing Inventory = 1,60,000

Cost of Goods Sold = Opening Inventory + Purchases + Direct Expenses − Closing Inventory

= 80,000 + 4,30,900 + 4,000 − 1,60,000

= 3,54,900

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Sales = 10,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 10,00,000 − 3,54,900 = 6,45,100
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Operating Expenses = Administration Expenses + Selling and Distribution Expenses

= 21,100 + 40,000 = 61,100

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:136

Following information is given about a company:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
From the above information, calculate following ratios:

(i) Gross Profit Ratio,

(ii) Inventory Turnover Ratio, and 

(iii) Trade Receivables Turnover Ratio.
Solution:
(i) Sales = 1,50,000

Gross Profit = 30,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Opening Inventory = 29,000

Closing Inventory = 31,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii)Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:137
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) ₹ 1,00,000; cost of Revenue from Operations (Cost of Goods Sold) was 80% of sales; Equity Share Capital ₹ 7,00,000; General Reserve ₹ 3,00,000; Operating Expenses ₹ 10,000; Quick Assets ₹ 6,00,000; 9% Debentures ₹ 5,00,000; Closing Inventory ₹ 50,000; Prepaid Expenses ₹ 10,000 and Current Liabilities ₹ 4,00,000. 
Solution: 
(i) Current Assets = Quick Assets + Closing Stock + Prepaid Expenses

= 6,00,000 + 50,000 + 10,000 = 6,60,000

Current Liabilities = 4,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Long-term Debts = 9% Debentures = 5,00,000

Shareholder’s Funds = Equity Share Capital + General Reserve

= 7,00,000 + 3,00,000 = 10,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Sales = 1,00,000

Cost of Goods Sold = 80% of Sales = 80,000

Operating Expenses = 10,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

Question:138
From the following information, calculate Inventory Turnover Ratio; Operating Ratio and Working Capital Turnover Ratio:

Opening Inventory ₹ 28,000; Closing Inventory ₹ 22,000; Purchases ₹ 46,000; Revenue from Operations,  i.e., Net Sales ₹ 80,000; Return ₹10,000; Carriage Inwards ₹ 4,000; Office Expenses ₹ 4,000; Selling and Distribution Expenses ₹ 2,000; Working Capital ₹ 40,000.
Solution:
(i) Opening Inventory = 28,000

Closing Inventory = 22,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Cost of Goods Sold = Opening Inventory + Purchases + Carriage Inwards − Closing Inventory

= 28,000 + 46,000 + 4,000 − 22,000 = 56,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Operating Expenses = Office Expenses + Selling and Distribution Expenses

= 4,000 + 2,000 = 6,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Working Capital = 40,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
*Note: Sales return will not be considered as the amount of net sales is provided in the question.

Question:139
From the following calculate:

(a) Current Ratio; and 
(b) Working Capital Turnover Ratio.Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:140
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.
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:141
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.
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
(i) Current Assets = 70,000

Current Liabilities = 35,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Liquid Assets = Current Assets − Inventory

= 70,000 − 30,000 = 40,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Net Sales = 1,20,000

Operating Cost = Cost of Goods Sold + Operating Expenses

= 60,000 + 40,000 = 1,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iv) Gross Profit = Net Sales − Cost of Goods Sold

= 1,20,000 − 60,000 = 60,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:142
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.
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
(i) Net Sales = 5,00,000

Cost of Goods Sold = 3,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 5,00,000 − 3,00,000 = 2,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Current Assets = 2,00,000

Current Liabilities = 1,40,000

Working Capital = Current Assets − Current Liabilities

= 2,00,000 − 1,40,000 = 60,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Long-term Debts = 13% Debentures = 1,00,000

Equity = Paid-up Share Capital = 2,50,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iv) Total Assets = Total Liabilities

= Current Liabilities + Paid-up Share Capital + 13% Debentures

= 1,40,000 + 2,50,000 + 1,00,000

= 4,90,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:143
On the basis of the following information calculate: 

(i) Debt to Equity Ratio; and 

(ii) Working Capital Turnover Ratio.
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
(i) Long-term Debts = 6% Debentures + 9% Loan from Bank

= 3,00,000 + 7,00,000 = 10,00,000

Equity = Paid-up Share Capital + Debenture Redemption Reserve

= 17,00,000 + 3,00,000 = 20,00,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Current Assets = Other Current Assets + Inventory

= 8,00,000 + 1,00,000

= 9,00,000

Working Capital = Current Assets − Current Liabilities

= 9,00,000 − 4,00,000

= 5,00,000

Net Sales = Cash Sales + Credit sales

= 40,00,000 + 20,00,000

= 60,00,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce


Question:144
From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:145

From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio:

Information: Fixed Assets ₹ 75,00,000; Current Assets ₹ 40,00,000; Current Liabilities ₹ 27,00,000; 12% Debentures ₹ 80,00,000 and Net Profit before Interest, Tax and Dividend ₹ 14,50,000.
Solution:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:146
Calculate Current Ratio, Quick Ratio and Debt to Equity Ratio from the figures given below:
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
(i) Current Assets = Inventory + Prepaid Expenses + Other Current Assets

= 30,000 + 2,000 + 50,000 = 82,000

Current Liabilities = 40,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(ii) Liquid Assets = Current Assets − Inventory − Prepaid Expenses

= 82,000 − 30,000 − 2,000 = 50,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
(iii) Long-term Debts = 12% Debentures = 30,000

Equity = Accumulated Profits + Equity Share Capital

= 10,000 + 1,00,000 = 1,10,000
Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Question:147
From the following informations, calculate Return on Investment (or Return on Capital Employed):

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce
Solution:
Net Profit before tax = 6,00,000

Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings

= 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000

Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
= 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000

Accounting Ratios (Part - 5) Notes | Study TS Grewal Solutions - Class 12 Accountancy - Commerce

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