1
Pg - 2 CA SUNIL KESWANI RATIO ANALYSIS
Ratio Analysis
PAST YEAR QUESTIONS
MAY – 2022 – 5 Marks
Following information and ratios are given for W Limited for the year ended 31st March, 2022:
Equity share capital of `10 each `10 lakhs
Reserve & Surplus to shareholder’s fund 0.50
Sales / Shareholder’s 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) Shareholder’s fund
(ii) Stock
(iii) Debtors
(iv) Current liabilities
(v) Cash Balance
Solution
!"#"$%" & ()$*+)#
(i) = 0.5
(,-$",.+/"$ ! # 0)1/
!"#"$%" & ()$*+)#
23)456 (,-$" 7-*45-+8!"#"$%" & #)$*+)#
= 0.5
Reserve & Surplus = 0.5(10,00,000 + Reserve & Surplus)
Reserve & Surplus = 5,00,000 + (0.5)Reserve & Surplus
(0.5)Reserve & Surplus = 5,00,000
Reserve & Surplus = 10,00,000
Shareholder’s fund = 10,00,000 + 10,00,000 = `20,00,000
(ii) Sales = 1.5 ´ Shareholder’s fund = 1.5 ´ 20,00,000 = `30,00,000
Gross profit = Sales ´ GP Ratio = 30,00,000 ´ 20% = `6,00,000
Cost of goods sold (COGS) = Sales – Gross Profit = 30,00,000 – 6,00,000 = `24,00,000
Stock velocity = 2 month
9%"$-:" #5.;<
7=>(
× 12 = 2
?×?A,CC,CCC
Average stock = D?
= `4,00,000
(iii) Debtors Turnover Ratio = 6
(-+"#
9%"$-:" E"F5.$#
=6
GC,CC,CCC
9%"$-:" E"F5.$#
=6
CODE – CASUNIL CONTACT - 9953735388
Pg - 3 CA SUNIL KESWANI RATIO ANALYSIS
Average Debtors = `5,00,000
(iv) Net working capital turnover ratio = 2.5
(-+"#
H"5 I.$<41: ;-*45-+
= 2.5
GC,CC,CCC
H"5 I.$<41: ;-*45-+
= 2.5
Net working capital = 12,00,000
Current Assets – Current Liabilities = 12,00,000
Current Assets = 12,00,000 + Current Liabilities …………(1)
Current ratio = 2.5
7)$$"15 9##"5#
7)$$"15 J4-F4+454"#
= 2.5
Current Assets = (2.5)Current liabilities ………….(2)
Put value of current assets from equation (1) in equation (2)
12,00,000 + Current liabilities = (2.5)Current liabilities
(1.5)Current liabilities = 12,00,000
Current liabilities = 8,00,000
Thus, from equation (1), Current Assets = 12,00,000 + 8,00,000 = `20,00,000
(v) Total current assets = Debtors + Stock + Cash balance
20,00,000 = 5,00,000 + 4,00,000 + cash balance
Cash balance = `11,00,000
DECEMBER – 2021 – 10 Marks
Following are the data in respect of ABC Industries for the year ended 31st 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 : `64,00,000
Liabilities ` Assets `
Equity Share Capital 20,00,000 Fixed assets
Reserve & 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.
Solution
Balance Sheet of ABC Industries as on 31st March, 2021
Liabilities ` Assets `
Equity Share Capital 20,00,000 Fixed assets 30,32,222
CODE – CASUNIL CONTACT - 9953735388
Pg - 4 CA SUNIL KESWANI RATIO ANALYSIS
Reserve & surplus 10,00,000 Inventories 9,77,7778
Long-term debts 9,00,000 Accounts receivable 8,00,000
Accounts payable 11,00,000 Cash 1,90,000
Total 50,00,000 Total 50,00,000
Note:
Working Notes:
(1) Total liabilities = Total assets = `50,00,000
E"F5
K.5-+ 9##"5#
= 0.40
E"F5
LC,CC,CCC
= 0.40
Debt = `20,00,000
(2) Reserve & Surplus = Total liabilities – Equity capital – Debt
= 50,00,000 – 20,00,000 – 20,00,000 = `10,00,000
J.1: 5"$M /"F5
(3) 23)456 #,-$",.+/"$ 0)1/
= 30%
J.1: 5"$M /"F5
(?C,CC,CCC8DC,CC,CCC)
= 30%
Long term debt = `9,00,000
(4) Accounts payable = total debt - long term debt = 20,00,000 – 9,00,000 = `11,00,000
(5) COGS ratio = 100 – GP Ratio = 100 – 20% = 80% of sales
7.#5 .0 :../# #.+/ PA,CC,CCC
(6) Sales = 7=>( !-54.
=QC%
= `80,00,000
7.#5 .0 :../# #.+/ PA,CC,CCC
(7) Closing inventory = S1"15.$6 /-6#
× 360 = LL
× 360 = `9,77,778
7$"/45 #-+"# QC,CC,CCC
(8) Account receivables = 9;;.)15 $";"4%-F+" *"$4./ × 360 = GP
× 360 = `8,00,000
T)4;< -##"5#
(9) Quick ratio = 7)$$"15 +4-F4+45"#
7-#,8E"F5.$#
0.90 = DD,CC,CCC
Cash + 8,00,000 = 9,90,000
Cash = `1,90,000
(10) Fixed assets = Total assets – current assets
= 50,00,000 – (9,77,778 + 8,00,000 + 1,90,000) = `30,32,222
JULY – 2021 – 10 Marks
Masco Limited has furnished the following ratios and information relating to the year ended 31st
March 2021:
Sales ` 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 ` 22,50,000
Interest on debentures ` 75,000
Receivables (includes debtors ` 1,25,000) ` 2,00,000
CODE – CASUNIL CONTACT - 9953735388
Pg - 5 CA SUNIL KESWANI RATIO ANALYSIS
Payables ` 2,50,000
Bank Overdraft ` 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 ` Assets `
Share Capital Fixed Assets
Reserves and Surplus Current Assets
15% Debentures Stock
Payables Receivables
Bank Overdraft Cash
Solution
(a) Calculation of operating expenses for the year ended 31st March, 2021
Particulars (` )
Net Profit (6.5% ´ 75,00,000) 4,87,500
Add: Income Tax @ 50% 4,87,500
Profit before tax 9,75,000
Add: Debenture interest 75,000
Profit before interest and tax (A) 10,50,000
Sales 75,00,000
Less: COGS 22,50,000
Gross Profit (B) 52,50,000
Operating expenses (B – A) 42,00,000
st
(b) Balance Sheet as on 31 March, 2021
Liabilities ` Assets `
Share Capital 11,70,000 Fixed Assets 18,50,000
Reserve & 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 1,50,000 Cash 6,12,500
28,50,000 28,50,000
Working Notes:
(1) Net worth = PAT ´ 25% = 4,87,500 ´ 25% = `19,50,000
(2) Ratio of Share capital to reserve is 6:4
P
Thus, Share capital = 19,50,000 ´ DC = `11,70,000
A
Reserves = 19,50,000 ´ DC = `7,80,000
S15"$"#5 9M.)15 UL,CCC
(3) Value of Debentures = S15"$"#5 $-5"
= DL%
= `5,00,000
(4) Total current liabilities = Bank overdraft + Payables = 1,50,000 + 2,50,000 = `4,00,000
Given, current ratio = 2.5
Thus, current assets = 2.5 ´ current liabilities = 2.5 ´ 4,00,000 = `10,00,000
(5) Total liabilities = Net worth + Debentures + Current liabilities
CODE – CASUNIL CONTACT - 9953735388
Pg - 6 CA SUNIL KESWANI RATIO ANALYSIS
= 19,50,000 + 5,00,000 + 4,00,000 = `28,50,000
Total assets = Total liabilities = `28,50,000
Fixed assets = Total assets – Current assets = 28,50,000 – 10,00,000 = `18,50,000
7.#5 .0 :../# #.+/ ??,LC,CCC
(6) Closing stock = S1%"15.$6 5)$1.%"$ $-54. = D?
= `1,87,500
(7) Cash = Current assets – Stock – Receivables = 10,00,000 – 1,87,500 – 2,00,000 = `6,12,500
JAN – 2021 – 5 Marks
From the following information, complete the Balance sheet given below:
(i) Equity `2,00,000
(ii) Total debt to owner’s equity 0.75
(iii) Total assets turnover 2 times
(iv) Inventory turnover 8 times
(v) Fixed assets to owner’s equity 0.60
(vi) Current debt to total debt 0.40
Solution
Equity = 2,00,000
Total Debt = Equity ´ 0.75 = 2,00,000 ´ 0.75 = `1,50,000
Current Debt = total Debt ´ 0.40 = 1,50,000 ´ 0.40 = `60,000
Long term debt = 1,50,000 – 60,000 = `90,000
Fixed Assets = Equity ´ 0.60 = 2,00,000 ´ 0.60 = `1,20,000
Total Assets = Total Liabilities = Equity + Total Debt = 2,00,000 + 1,50,000 = `3,50,000
Current Assets = Total Assets – Fixed Assets = 3,50,000 – 1,20,000 = `2,30,000
Sales = 2 ´ Total Assets = 2 ´ 3,50,000 = `7,00,000
(-+"# U,CC,CCC
Inventory = SK!
= Q
= `87,500
Other CA = Current Assets – Inventory = 2,30,000 – 87,500 = `1,42,500
Balance Sheet
Equity 2,00,000 Fixed Assets 1,20,000
Long Term Debt 90,000 Inventory 87,500
Current Debts 60,000 Other CA 1,42,500
3,50,000 3,50,000
NOV – 2020 – 5 Marks
Following information relates to RM Co. Ltd.
(`)
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.
Tas rate is 30%
You are required to calculate:
(i) Net profit margin
CODE – CASUNIL CONTACT - 9953735388
Pg - 7 CA SUNIL KESWANI RATIO ANALYSIS
(ii) Return on Assets
(iii) Asset turnover
(iv) Return on owners’ equity
Solution
H"5 V$.045 D,CD,LCC
(i) Net profit margin = (-+"#
× 100 = Q,?L,CCC × 100 = 12.30%
2WSK D,QL,CCC
(ii) Return on Assets = K.5-+ 9##"5# × 100 = DC,CC,CCC × 100 = 18.50%
(-+"# Q,?L,CCC
(iii) Assets Turnover = K.5-+ 9##"5# = DC,CC,CCC = 0.825 times
H"5 V$.045 905"$ K-X D,CD,LCC
(iv) Return on owner’s equity = =I1"$ ! # 23)456
× 100 = DC,CC,CCC×LC% × 100 = 20.30%
Working Notes:
1) Sales = Direct cost × 150% = 5,50,000 × 150% = `8,25,000
2) EBIT = Sales – Direct cost – Operating cost
= 8,25,000 – 5,50,000 – 90,000 = `1,85,000
3) Net Profit before tax = EBIT – Interest
= 1,85,000 – (10,00,000 × 50% × 8%) = `1,45,000
4) Net Profit after tax = 1,45,000 × (1 – 0.30) = `1,01,500
NOV – 2019 – 5 Marks
Following information has been gathered from the books of Tram Ltd. the equity share of which
is trading in the stock market at `14.
Particulars Amount (`)
Equity Share Capital (face value `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:
(a) Return on Capital Employed
(b) Earnings per share
(c) PE Ratio
Solution
(a) Capital employed = Equity shareholder’s fund + Debenture + Pref. shares
= 10,00,000 + 8,00,000 + 6,00,000 + 2,00,000 = `26,00,000
2WSK A,CC,CCC
Return on capital employed (pre tax) = 7-*45-+ 2M*+.6"/ × 100 = ?P,CC,CCC × 100 = 15.38%
29K ?,AC,CCC
Return on capital employed (post tax) = 7-*45-+ 2M*+.6"/ × 100 = ?P,CC,CCC × 100 = 9.23%
2-$141: -%-4+-F+" 0.$ "3)456 ,.+/"$# ?,AC,CCCZ?C,CCC
(b) Earning per share = H...0 "3)456 #,-$"#
= D,CC,CCC
= `2.20
[V( DA
(c) PE Ratio = 2V(
= ?.?C = 6.364
CODE – CASUNIL CONTACT - 9953735388
Pg - 8 CA SUNIL KESWANI RATIO ANALYSIS
MAY – 2019 – 5 Marks
Following figures and ratios are related to a company of Q Ltd.:
Sales for the year (all credit) `30,00,000
Gross profit ratio 25%
Fixed assets turnover ratio (based on cost of goods sold) 1.5
Stock turnover ratio (based on cost of goods sold) 6
Liquid ratio 1:1
Current Ratio 1.5
Receivables (Debtors) collection period 2 months
Reserves & surplus to share capital 0.60:1
Capital gearing ratio 0.5
Fixed assets to net worth 1.20:1
You are required to calculate:
Closing stock, Fixed Assets, Current Assets, Debtors and Net Worth.
Solution
Calculation of Closing Stock:
Sales for the year = `30,00,000
GP Ratio = 25%
Gross Profit = 30,00,000 × 25% = `7,50,000
Cost of Goods Sold = Sales – Gross Profit = 30,00,000 – 7,50,000 = `22,50,000
7=>( ??,LC,CCC
Closing Stock = (5.;< K)$1.%"$ = P
= `3,75,000
Calculation of Fixed Assets:
7.#5 .0 >../# (.+/
Fixed Assets Turnover Ratio = \4X"/ 9##"5#
??,LC,CCC
1.5 = \4X"/ 9##"5#
??,LC,CCC
Fixed Assets = D.L
= `15,00,000
Calculation of Current Assets:
Current Ratio = 1.5
7)$$"15 9##"5#
7)$$"15 J4-F4+454"#
= 1.5
Current Assets = Current Liabilities × 1.5
Also, Liquid Ratio = 1
J43)4/ 9##"5#
7)$$"15 J4-F4+454"#
=1
Liquid Assets = Current Liabilities
Current Assets – Stock = Current Liabilities
(1.5 × Current Liabilities) – 3,75,000 = Current Liabilities
0.5 × Current Liabilities = 3,75,000
Current Liabilities = 7,50,000
Current Assets = 7,50,000 × 1.5 = `11,25,000
Calculation of Debtors:
CODE – CASUNIL CONTACT - 9953735388
Pg - 9 CA SUNIL KESWANI RATIO ANALYSIS
(-+"# × E"F5.$# 7.++";54.1 V"$4./ GC,CC,CCC×?
Debtors = D?
= D?
= `5,00,000
Calculation of Net Worth:
\4X"/ 9##"5#
1.20 =
H"5 ].$5,
\4X"/ 9##"5# DL,CC,CCC
Net Worth = D.?C
= D.?C
= `12,50,000
NOV – 2018 – 5 Marks
The following is the information of XML Ltd. relate to the year ended 31-03-2018:
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
st
Non-current assets as on 31 March, 2017 `50,00,000
Assume that:
(a) No change in Non-current assets during the year 2017-18
(b) No depreciation changed on Non-Current Assets during the year
(c) 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.
Solution
Non-current assets to sale = 1:4
Sales = Non-current assets × 4
= 50,00,000 × 4 = `2,00,00,000
Net Profit = 10% × Sales = 10% × 2,00,00,000 = `20,00,000
Cost of Goods Sold = Sales – Gross Profit
= 2,00,00,000 – (20% × 2,00,00,000)
= `1,60,00,000
Inventory = COGS × (3/12)
= 1,60,00,000 × (3/12) = `40,00,000
Receivables = Sales × (3/12)
= 2,00,00,000 × (3/12) = `50,00,000
Non-Current Assets to current assets = 1:2
Current Assets = Non-current assets × 2
= 50,00,000 × 2 = `1,00,00,000
Cash = Current Assets – Inventory – Receivables
= 1,00,00,000 – 40,00,000 – 50,00,000
= `10,00,000
CODE – CASUNIL CONTACT - 9953735388
Pg - 10 CA SUNIL KESWANI RATIO ANALYSIS
MAY – 2018 – 5 Marks
The accountant of Moon Ltd. has reported the following data:
Gross Profit `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.
Liabilities ` Assets `
Net Worth Fixed Assets
Current Liabilities Stock
Debtors
Cash
Total Liabilities Total Assets
Solution
Balance Sheet of Moon Ltd.
Liabilities ` Assets `
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
Working Notes:
Sales = Gross profit ÷ Gross Profit Margin
= 60,000 ÷ 20% = `3,00,000
Total Assets = Sales ÷ Total Assets Turnover
= 3,00,000 ÷ 0.30 = `10,00,000
Net Worth = 0.90 × Total Assets
= 0.90 × 10,00,000 = `9,00,000
Current Liability = Total Assets – Net Worth
= 10,00,000 – 9,00,000 = `1,00,000
Current Assets = 1.5 × Current Liabilities
= 1.5 × 1,00,000 = `1,50,000
Liquid Assets = Current Liabilities × 1
= 1,00,000 × 1 = `1,00,000
Stock = Current Assets – Liquid Assets
= 1,50,000 – 1,00,000 = `50,000
Debtors = Credit sales × (Average collection period ÷ 12)
= 3,00,000 × 0.80 × (60/360) = `40,000
Cash = Current Assets – Stock – Debtors
CODE – CASUNIL CONTACT - 9953735388
Pg - 11 CA SUNIL KESWANI RATIO ANALYSIS
= 1,50,000 – 50,000 - 40,000 = `60,000
Fixed assets = Total Assets – Current Assets
= 10,00,000 – 1,50,000 = `8,50,000
CODE – CASUNIL CONTACT - 9953735388
