Ratios

1. From the given details, prepare the Balance Sheet of the firm: Stock Turnover Capital Turnover Fixed Assets Turnover Gross Profit Ratio Average Collection Period Average Payment Period 6 2 4 20% 2 Months 73 days

Gross Profit is given to be 60,000. The closing stock is 5,000 greater than opening stock.

Gross Profit Ratio = Gross Profit/ sales 0.2 = 60,000 / Sales Sales = 3, 00,000 Gross Profit Ratio = Gross Profit/ sales 0.2 = 60,000 / Sales Sales = 3, 00,000

 Stock Turnover Ratio = Cost of Goods Sold / Average stock = Cost of Goods Sold / [(Opening + Closing Stock)/2] 6 = 2 ,40,000 / ( Opening + Closing Stock )/2 Closing Stock + Opening Stock = 80,000 Closing Stock - Opening Stock = 5,000 ( Given) Hence, Opening Stock = 37,500 Closing Stock = 42,500

 Capital Turnover = Cost of Sales/Capital 2 = 2 40,000/ Capital Capital = 1 20,000 Fixed Assets Turnover Ratio = Cost of Sales / Fixed Assets 4 = 2 40,000/ Fixed Assets Fixed Assets = 60,000 Debtors turnover ratio = 12 Months / Average Collection Period = 12 Months / 2 Months =6 Debtors = 50,000

Purchases = Cost of Goods sold + Closing Stock Opening Stock = 2 40,000 + 42,500 37,500 = 2 45,000 Creditors Turnover Ratio = 365 days / Average Payment Period (73 days) =5 Creditors Turnover Ratio = Credit Purchases / Average Creditors 5 = 2 45,000 / Average Creditors Creditors = 49,000.

Liabilities
Capital 1,20,000 Creditor 49,000

Assets
Fixed Assets Closing Stock Debtors Cash (B.F.) 60,000 42,500 50,000 16,500 1,69000

Total

1,69000 Total

 2. Prepare the Profit & loss A/C and Balance Sheet For X Co, Ltd given the following data: Net Profit Margin Ratio Current Ratio Return on Net Worth Total Debt to Asset Inventory Turnover Operating Expense Interest Taxation Rate Interest Rate Current Assets Cash Receivables 4% 1.25 15.23% 0.4 25 times Rs. 700 Cr Rs. 45 Cr 50% 15% Rs. 180 Cr Rs. 60 Cr

a) Accounts Payable: Current Ratio = Current Ratio/ Current Liabilities = 1.25 Current Liabilities = Current Assets/ 1.25 = 180/1.25 = 144 b) Long term debt: Interest/0.15= 45/ 0.15 =300 c) Total Assets: Total Debt/0.4= (144+ 300)/0.4 =1100 d) Net Worth: 1100- (444)= 656

 e) Fixed Assets: Fixed Assets = 1100-180 = 920 f) Profit after tax: (Net Worth) (Return on net worth) = (656) (0.1523) =99.9 g) Tax: As the tax rate is 50 per cent, the tax provision= Profit after tax, i.e. 99.9 h) Profit before tax: 99.9 + 99.9 = 199.8 i) EBIT: 198.8+45=244.8 j) Sales:

(Profit after tax)/ Net profit margin ratio = 99.9/0.04 = 2497.5

 k) Cost of goods sold: Sales- cost of goods sold- operating expenses= EBIT 2497.5 cost of goods sold 700 = 244.8

(l) Inventory: Sales/ Inventory turnover ratio = 2497.5/ 25 = 99.9 (m) Cash: Current Assets receivables inventory = 18060- 99.9 = 21.1

 Profit and Loss A/C Sales Less cost of goods sold Gross Profit Less Operating Expense 2497.5 (1552.7) 944.8 (700)

EBIT Less Interest

PBT Less Tax PAT

244.8 (45)
199.8

(99.9)
99.9

Liabilities

Assets
Fixed Assets 920 Current Assets 180 Cash 21.1 Inventory 99.9 Receivables 60 Total 1100

Share-Holders Equity 555.1 Long Term Debt 300 Profit 99.9 Current Liabilities 144
Total 1100