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Ratio Analysis
Q 1. A very high current ratio will:
A)
B)
C)
D)
Ratio Analysis
Q 2. A very high current ratio may be due to:
A) Piling up of inventory;
B) Inefficiency in collection of debtors ;
C) High balances in cash and bank without proper
investment;
D) All of the above
E) None of the above
Ratio Analysis
Q 3. One of the following is not an absolute liquid
asset:
A)
B)
C)
D)
E)
Cash in hand;
Cash at bank ;
Bills Receivables;
Marketable securities
None of the above
Ratio Analysis
Q 4. Fixed interest bearing funds do not include one of
the following:
A)
B)
C)
D)
Debentures;
Preference Share Capital ;
Long Term Investments;
Public deposits
Ratio Analysis
Q 5. Following ratios have been extracted from the
audited records of a large sized industrial company:
Particulars
2008
2009
2010
2011
2012
Current Ratio
1.8
1.9
2.1
2.2
2.9
1.7
1.2
0.9
0.7
0.6
Ratio Analysis
Current Ratio has increased from 1.8 to 2.9 in a span of 5
years. The ideal ratio is 2:1. This improvement in CR means
improvement of short term solvency.
But when we analyze the Acid Test Ratios, it is fallen from
1.7 to 0.6 in 2009. This mean that most of the CA are
locked in Inventory. Ideal standard Acid test ratio is 1:1. It
means that company is not in a position to meet its
immediate current liabilities.
Ratio Analysis
Q 6. Which of the following firms would have the least
liquidity:
A)
B)
C)
D)
Ratio Analysis
Q 7. If the current ratio and Liquid Ratio of a firm are
2.2 and 0.8 respectively and its Current Liabilities is
R. 10 lacs. The value of stock held by the firm is
lacs :
A)
B)
C)
D)
12
14
16
None of the above
Ratio Analysis
Q 8. The current ratio of BM Limited is 2:1, while quick
ratio is 1.80 : 1. If the current liabilities are Rs.
40,000, the value of stock will be:
A)
B)
C)
D)
Rs. 6,400
Rs. 8,000
Rs. 10,000
Rs. 12,000
Ratio Analysis
Q 9. Warfield Company having net working capital of
Rs. 3 lacs has the current ratio of 1.8 and liquid ratio
of 1.6. Its value of stock is:
A)
B)
C)
D)
Rs. 55,000
Rs. 65,000
Rs. 75,000
Rs. 85,000
Ratio Analysis
Q 10. Consider the following information relating to
NMC Limited. Networth Rs. 250 lacs; Total Assets
Rs. 600 lacs; Long Term debt Rs. 200 lacs; Current
Liabilities Rs. 150 lacs. The debt equity ratio of
company is:
A)
B)
C)
D)
0.583
0.333
0.800
1.400
Ratio Analysis
Q Calculate the Net worth from the following balance
sheet
Particulars
Amount
Particulars
Amount
Equity Share
Cap
2,00,000
Fixed Assets
5,00,000
1,00,000
Current Assets
3,00,000
Reserve &
Surplus
1,00,000
Long Term
Liability
3,00,000
Current Liability
1,00,000
TOTAL
8,00,000
IMT Nagpur - 2012-14
8,00,000
Ratio Analysis
Net Worth = Fixed Assets + Current Assets (Long
Term Loan + Current liabilities )
= 500000+300000-(300000 +100000)
= 400000
Net Worth = Equity Share Capital + Pref Share Capital
+R&S
= 200000+100000 + 100000
= 400000
Ratio Analysis
Different
Kinds of
Ratios
Liquidity
Ratios
Leverage
Ratios
Asset
Management
Ratios
Operating
Ratios
Market
Based
Ratios
Ratio Analysis
Ratio Analysis
Asset Management Ratios
Ratio Analysis
Asset Management Ratios
Ratio Analysis
Asset Management Ratios
The important asset management ratios are :
1.
2.
3.
4.
5.
6.
7.
8.
9.
Ratio Analysis
Inventory Turnover Ratio
Sales
Average Inventory
Ratio Analysis
Inventory Turnover Ratio
Ratio Analysis
Inventory Turnover Ratio
Interpretation
If the inventory turnover ratio has decreased from past, it
means that either inventory is growing or sales are
dropping.
The higher the Inventory Turnover ratio, the better.
Ratio Analysis
Q. The summarized balance sheet of R.K. Limited as on
31.03.2012 is given below with other relevant details:
LIABILITIES
AMOUNT
ASSETS
AMOUNT
40,00,000
6,00,000
14,00,000
28,00,000
2,40,000
18,60,000
11,00,000
60,00,000
60,00,000
Other Information:
Sales
Less: Cost of Goods Sole
Less: Selling and Distribution Expenses
Net Profit
52,00,000
36,00,000
16,00,000
12,50,000
3,50,000
Ratio Analysis
Inventory Turnover Ratio
Inventory Turnover Ratio =
Sales
Average Inventory
= 52,00,000/11,00,000 = 4.73
Ratio Analysis
Debtors Turnover Ratio
Credit Sales
Average Debtors
Ratio Analysis
Debtor Turnover Ratio
Ratio Analysis
Debtors Turnover Ratio
Debtors Turnover Ratio =
Credit S a l e s
Average Debtors
= 52,00,000/18,60,000 = 2.80
Ratio Analysis
Debtors Collection Period
Ratio Analysis
Debtor Collection Period
Ratio Analysis
Q. The summarized balance sheet of R.K. Limited as on
31.03.2012 is given below with other relevant details:
LIABILITIES
AMOUNT
ASSETS
AMOUNT
40,00,000
6,00,000
14,00,000
28,00,000
2,40,000
18,60,000
11,00,000
60,00,000
60,00,000
Other Information:
Sales
Less: Cost of Goods Sold
Less: Selling and Distribution Expenses
Net Profit
52,00,000
36,00,000
16,00,000
12,50,000
3,50,000
Ratio Analysis
Debtors Collection Period
Debtors Collection Period =
Average Debtors * 365
Credit Sales
= 11,00,000* 365
52, 00,000
= 77.21 = 77 days
Ratio Analysis
Bad debts to Sales
Ratio Analysis
Bad debts to Sales Ratio
Ratio Analysis
Creditors Turnover Ratio
Credit Purchases
Average Creditors
Ratio Analysis
Creditors Payment Period
Ratio Analysis
Creditors Payment Period
This ratio shows the average time taken to pay for goods
and services purchased by the company.
Ratio Analysis
Q. The summarized balance sheet of R.K. Limited as on
31.03.2012 is given below with other relevant details:
LIABILITIES
AMOUNT
ASSETS
AMOUNT
40,00,000
6,00,000
14,00,000
28,00,000
2,40,000
18,60,000
11,00,000
60,00,000
60,00,000
Other Information:
Sales
Less: Cost of Goods Sold (Total Purchase Rs. 28,00,000)
Less: Selling and Distribution Expenses
Net Profit
52,00,000
36,00,000
16,00,000
12,50,000
3,50,000
Ratio Analysis
Creditors Payment Period
Creditors Payment Period =
Average Creditors * 365
Credit Purchases
= 14,00,000* 365
28, 00,000
Ratio Analysis
Fixed Assets Turnover Ratio
Ratio Analysis
Fixed Assets Turnover Ratios
Ratio Analysis
Ratio Analysis
NET SALES = Total Sales Sales Returns
= Rs. 8,50,000 Rs. 50,000
= Rs. 8,00,000
Net Fixed Asset = Gross Fixed Assets Accumulated
Depreciation
= Rs. 3,00,000 Rs. 1,00,000
= Rs. 2,00,000
Fixed Assets Turnover Ratio = Sales / Net Fixed Assets
= Rs. 8,00,000 - Rs. 2,00,000
= 4 Times
Ratio Analysis
Total Assets Turnover Ratio
Ratio Analysis
Total Assets Turnover Ratios
This ratio indicates the number of times total assets are being
tuned over in a year.
Ratio Analysis
Sales to Capital Employed
Ratio Analysis
Sales to Capital Employed
Sh Cap + R&S
Ratio Analysis
Sales to Capital Employed
Ratio Analysis
Q. From the following Balance sheet of S Ltd. For the year
ended 31st December, 2011, calculate Sales to Capital
Employed Ratio:
LIABILITIES
AMOUNT ASSETS
AMOUNT
75,000
47,000
25,000
76,000
40,000
90,000
86,000
7,000
Fixed Assets
Stock
Debtors
Cash
2,23,000
2,23,000
Ratio Analysis
THANK YOU