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Particulars Amount
Share capital 450
Retained profits 240
Debentures 700
Trade creditors 620
Net fixed assets 875
Stock 310
Debtors 770
Bank balance 100
Sales 3100
Gross profit 1725
Expenses 805
Depreciation 250
Particulars 2017
Sales 4000000
Cost of goods sold 2800000
Interest 160000
PBT 1040000
Taxes 520000
PAT 520000
Profit distributed 220000
From the above, appraise the financial position of the company from
point of view of
a) Liquidity b) Profitability c) Activity
Solution: (Current ratio= 3.8, Acid test ratio= 1:1, Debt equity ratio= .57,
Interest coverage ratio= 7.5 times, gross profit ratio= 30%, net profit ratio=
13%, return on total assets=8.12%, return on capital employed= 13.6%, return
on equity funds= 18.5%, Debtors turn over= 11.1 times, stock turn over= 1.4
times, total assets turnover= .67 times
3) The data summarised in the table below show the performance of two firms A
and B, over three years.
Ratio 2014 2013 2012 Industry
average
GP ratio Firm A 34 35 36 34
Firm B 40 39 38 42
NP ratio Firm A 17 17 18 16
Firm B 19 18 17 21
ROCE Firm A 14 13 12 13
Firm B 9 10 10 11
Acid test Firm A 2.7 2.6 2.5 2.5
ratio Firm B 1.7 1.5 1.3 1.5
(a) Using the information in the table explain the comparative attractiveness of the
two firms to a potential investor.
Calculate current ratio, liquid ratio, inventory turnover ratio and average collection period
Solution: Current ratio= 2.42:1, liquid ratio= 1.13:1, Inventory turnover ratio= 3 times,
Average collection period= 41 days
5) The data summarised in the table below show the performance of ITC , over
three years.
Ratio 2014 2013 2012 Industry
average
Liquidity Current 1.17 1.15 1.1 1.5
ratios ratio
Quick .6 .7 .8 1
ratio
Profitability ROCE 46 41 40 40
ratios ROE 35 37 37 40
Turn over STR 8.7 8.7 7.2 9
ratios DTR 16 18 17 24
fTR 4.8 4.7 4.3 4.5
STR= stock turnover ratio, DTR= Debtors turnover ratio, FTR=Fixed Asset
Turnover ratio
using the information in the table explain the attractiveness of the firm to a
potential investor.
6)
1) The data summarised in the table below show the performance of D abur, over
three years.
Ratio 2014 2013 2012
EPS 3.9 3.3 2.8
Dividend 46 47 48
payout
Interest 46 41 53
coverage
Net profit 13 13 12
ratio
Dividend 6% 7% 8%
yield
Calculate:
Current Ratio
Acid Test Ratio
Debtors Turnover Ratio
Collection Period
Stock Turnover Ratio