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Ratio Analysis - Notes | Study Cost Accounting - B Com

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Problem 1:
The following is the Balance Sheet of a company as on 31st March:
Ratio Analysis - Notes | Study Cost Accounting - B Com
Calculate :
(1) Current Ratio
(2) Quick Ratio
(3) Inventory to working Capital
(4) Debt to Equity Ratio
(5) Proprietary Ratio
(6) Capital Gearing Ratio
(7) Current Assets to Fixed Assets
Solution. 
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 2:
From the following particulars found in the Trading, Profit and Loss Account of A Company Ltd., work out the operation ratio of the business concern:
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 3:
The following is the summarised Profit and Loss Account of Taj Products Ltd. for the year ended 31st December:
Ratio Analysis - Notes | Study Cost Accounting - B Com
Work out the following ratios:
(1) Gross Profit Ratio
(2) Net Profit Ratio
(3) Operating Ratio
(4) Cost Ratios (to cost of Production)
(i) Materials Consumed Ratio
(ii) Labour Cost Ratio
(iii) Production Overhead Cost Ratio.
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 4:
From the following Balance Sheet and additional information, you are required to calculate:
(i) Return on Total Resources
(ii) Return on Capital Employed
(iii) Return on Shareholders’ Fund
Ratio Analysis - Notes | Study Cost Accounting - B Com
Net operating profit before tax is Rs. 2,80,000. Assume tax rate at 50%. Dividend declared amounts to Rs.1,20,000.
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 5:
A company has capital of Rs. 10, 00,000; its turnover is 3 times the capital and the margin on sales is 6%. What is the return on investment.
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 6:
Ram & Company supplies you the following information regarding the year ended 31st December:
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Average InventoryRatio Analysis - Notes | Study Cost Accounting - B Com
Inventory Turnover Ratio Analysis - Notes | Study Cost Accounting - B Com


Problem 7: 
The following is the Profit and Loss Account of Burn Ltd.
Ratio Analysis - Notes | Study Cost Accounting - B Com
You are required to calculate the following :
(i) Stock Turnover
(ii) Raw Materials Turnover
(iii) Average Material Holding
Solution.
Ratio Analysis - Notes | Study Cost Accounting - B Com
Workings :
(1) Cost of Sales 

= Total Cost + Opening Stock of Finished Goods - Closing Stock of Finished Goods
= Rs. 11,90,000 + Its. 80,000 - Its. 1,00,000 = Rs. 11,70,000
Ratio Analysis - Notes | Study Cost Accounting - B Com
= Rs. 60,000 + Rs. 6, 00,000
= Rs. 5, 90,000

Problem 8:
Calculate Debtors Velocity from the following details:
Opening Balance of Debtors Rs. 10,000
Credit Sales during the year Rs. 20,000
Sales Returns Rs. 1,000
Discount on Sales Rs. 50
Cash collected from Debtors during the year Rs, 5,000
Bad Debts Rs. 500
Bad Debt Provision at 10%
Solution.
The following components are needed to find Debtors Velocity :
1. Net Sales = Gross Sales - (Sales Returns + Discount on Sales)
= Rs. 20,000 - (Rs. 1,000 + Rs. 50)
= Rs. 18.950
2. Net Debtors on Closing = Opening Debtors
Add : Credit Sales
Less : Cash Collection
Less : Sales Returns
Less : Sales Discount
Rs. 10,000 + Rs. 20,000 - (Rs. 5,000 + Rs. 1,000 + Rs. 50) = Rs. 23,950
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 9: 
The Capital of a Company is as follows:
Ratio Analysis - Notes | Study Cost Accounting - B Com
The Accountant has ascertained the following information :
Profit (after tax at 60%)   Rs. 2,70,000.
Depreciation                      Rs. 60,000
Equity Dividend Paid 20%
Market Price of equity share Rs. 40.
You are required to state the following, showing the necessary workings :
(a) Dividend yield on the equity shares.
(b) Cover for the preference and equity dividends.
(c) Earnings for equity shares.
(d) Price-earnings ratio
Solution. 
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com

Problem 10:
Assume that a firm has owners’ equity of Rs. 1, 00,000. The ratios for the firm are:
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
Ratio Analysis - Notes | Study Cost Accounting - B Com
7. Cash = Current Assets — Inventory
= Rs. 1,00,000 — Rs. 40,000 = Rs. 60,000
8. Current Debt = 0.40 x Total Debt = 0.40 x Rs. 60,000 = Rs. 24,000
9. Long-Term Debt = Total Debt — Current Debt = Rs. 60,000 — Rs. 24,000 = Rs. 36,000 

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