Project Illustratio: The company UK Gel Ltd. is’ in the business of manufacturing writing instruments. It being concerned about its profitability and liquidity position has engaged you to analyse its financial data and give assessment thereon. The company has provided its Financial Statements, i.e, Balance Sheets and Statement of Profit and Loss for the financial years ended 31st March, 2017, 2018 and 2019. These Financial Statements are also available on its website www.ukgel.com. Project Solution Subject Matter of the Project The Project is to analyse the financial data and give assessment on the profitability and liquidity of UK Gel Ltd. for the last three years on the basis of the following accounting ratios: (@ Gross Profit Ratio; (ii) Net Profit Ratio; (iff) Inventory Turnover Ratio; (iv) Current Ratio; (®) Liquid Ratio; and (vi) Debt Collection Period. Information and Data for the Project The Statement of Profit and Loss for the years ended 31st March, 2017, 31st March, 2018 and 31st March, 2019, the Balance Sheets as at dates and Notes to Accounts have been provided. The data so provided has been utilised for computing the ratios. The computation of the ratios is given at the end of the conclusion as Working Notes. The computed ratios of the three years have been shown with the help of graphs for easy understanding. On the basis of the computed ratios, views have been formed and expressed. The data provided by the company is produced below: STATEMENT OF PROFIT AND LOSS for the years ended 31st March, 2017, 2018 and 2019 S.No. | Particulars Note No.| 31stMarch | 31stMarch | 31stMarch t 2017) 2018.) 2019 @) 1 | income (a) Revenue from Operations (Net Sales) 800,000 | 12,6000 | 17,40,000 (6) Other Income 10,000 40,000 85,000 Total 8,10,000 | 13,00,000 | 18,25,000 UW | Expenditure (a) Purchases of Stock-in-Trade 600,000 | 800,000 | 9,50,000 (6) Change in Inventories of Stock-in-Trade 1 (30,000) | (50,000) | (75,000) () Employees Benefit Expenses 1,10,000 | 2,00,000 | —2,80,000 (d) Finance Costs _ - 70,000 (e) Depreciation and Amortisation Expenses 8,000 9,000 10,000 (f) Other Expenses 80,000 | 1,00,000 | _1,20,000 Total 7,68,000 | 10,59,000 | 13,55,000 I. | Profit before Tax (1-1) 42,000 | 241,000 | 470,000 WW. | Less: Tax 21,000 | 1,00,000 | — 1,80,000 V. | Net Profit after Tax (ill- IV) 21,000 | 1,41,000 | 2,90,000BALANCE SHEETS as at 31st March, 2017, 2018 and 2019 Particulars NoteNo, | 31stMarch, | 31stMarch, | 31stMarch, 2017) | 2018) 2019 ®) 1. EQUITY AND LIABILITIES | 1, Shareholders’ Funds | (@) Share Capital 2,00,000 | 2,00,000 | 2,00,000 (b) Reserves and Surplus 33,000 89,500 1,50,000 2. Non-Current Liabilities (@) Long-term Borrowings (Debentures) rie = 2,00,000 (6) Other Long-term Liabilities 60,000 40,000 | 20,000 (9 Long-term Provisions 10,000 | 15,000 | 15,000 3. Current Liabilities | j | (q) Short-term Borrowings 20000 | 15,000 | 20,000 (6) Trade Payables | 112,000 | 2,24,000 | 3,32,000 (0. Other Current Liabilities 20.000 | 20000 | 20,000 (@. Short-term Provisions (Provision for Tax) 5,000 40,000 | 65,000 Total 460,000 | 643,500 | 10,22,000 Ml. ASSETS | | 1, Non-Current Assets | | (a) Fixed Assets: | | () Tangible Assets 78,000 | 97,000 | _1,40,000 (ii) Intangible Assets 30,000 | 38,000 | 42,000 (ii) Capital Work-in-Progress 50,000 40,000 | 5 (iv) Intangible Assets under Progress 20,000 11,000 = (6) Non-current investments | 60,000 | 66,500 30,000 (0 Long-term Loans and Advances 30,000 | 32,000 35,000 2. Current Assets | (q) Current Investments | 2000 | 7,000 43,000 (6) Inventories | 70000 | — 1,20,000 1,95,000 (0) Trade Receivables | 80000 | 1,90,.000 | 4,80,000 (@) Cash and Cash Equivalents | 15,000 10,000 20,000 (@) Short-term Loans and Advances | 10,000 20,000 24,000 (f) Other Current Assets 15,000 12,000 13,000 Total | 460000 | 643500 | 10,22,000 Note to Accounts Particulars 31stMarch, | 31stMarch, | 31st March, 2017 @) 2018), 2019), 1. Change in Inventories of Stock-in-Trade Opening Inventories 40,000 70,000 | 1,20,000 Less:Closing Inventories 70,000 | _1,20,000 | _ 195,000 (0,000) _| (50,000) | (75,000) Analytical Tools Used Analytical tool used for the analysis of financial data is accounting ratios. Planning and Execution Considering the requirements of the company following, ratios have been computed: (i) Gross Profit Ratio; (ii) Net Profit Ratio; (iii) Inventory Turnover Ratio; (iv) Current Ratio; (2) Liquid Ratio; and (vi) Debt Collection Period. Calculation of above accounting ratios is given in the project itself.