Ans.1.

Balance Sheet
PARTICULARS Rs. Rs.
I) SOURCES OF FUNDS
A) Shareholders Funds/ Proprietors Fund/Own Funds/ Net worth/ Equity
Share Capital:
Equity Share Capital (face value ₹ 10) 2,00,000
10% Preference Share Capital 1,00,000
Total Share Capital 3,00,000
Add: Reserves & Surplus
Reserves & Surplus 2,00,000
Less: Ficticious Assets
Underwriting Commission 10,000
Shareholders Funds/ Proprietors Fund/Own Funds/ Net worth/ Equity 4,90,000

B) Borrowed Funds/ Loan Funds/ Owed Funds

i) Secured Loans
12% Debentures 1,00,000
Borrowed Funds/ Loan Funds/ Owed Funds 1,00,000
Total Capital Employed 5,90,000
II) APPLICATION OF FUNDS
A) FIXED ASSETS
Land & Building 1,00,000
Plant and Machinery 1,20,000
Capital WIP 75,000
FIXED ASSETS 2,95,000
B) INVESTMENTS
Long term Investments 90,000
INVESTMENTS 90,000
C) WORKING CAPITAL
CURRENT ASSETS
Quick Assets
Book Debts (Debtors) 2,00,000
Marketable Investments 50,000
Cash and Bank 40,000
Bills Receivable 75,000
Total Quick Assets 3,65,000
Non Quick Assets
Inventories 2,00,000
Advance Tax -
Advance for Purchases (Pre-payments) 10,000
Total Non quick Assets 2,10,000
Total Current Assets (Quick Assets + Non-Quick Assets) 5,75,000
Less: CURRENT LIABILITIES:
Quick Liabilities
Accounts Payable (Creditors) 1,60,000
Acceptances Given (Bills Payable) 75,000
Provision for Tax (net of Advance Tax) (40,000 - 30,000) 10,000
Total Quick Liabilities 2,45,000
Non Quick Liabilities
Bank Overdraft 1,00,000
Income received in advance 25,000
Total Non-Quick Liabilities 1,25,000
Total Current Liabilities (QL + NQL) 3,70,000
Working Capital 2,05,000
Total Capital Utilised 5,90,000
Profit & Loss Account
Particulars Rs. Rs.
Gross Sales:
Cash Sales (10% of 20 Lakh) 2,00,000
Credit Sales (Balance) 18,00,000 20,00,000
Less : Returns (always from credit sales) 2,00,000
Net Sales 18,00,000
Less : Cost of Goods Sold
Opening Stock 1,50,000
Add : Purchases 10,50,000
12,00,000
Less : Closing Stock 2,00,000
10,00,000
Add: Factory Expenses: 4,50,000
COGS 14,50,000
Gross Profit 3,50,000
Add: Other Operating Income
Bad Debts Recovery 30,000
Dividend on Trade Investments 10,000
Royalty received 85,000
4,75,000
Less : Operating Expenses
A) Administrative Expenses:
Administrative 1,20,000
Depreciation 30,000
Rent 30,000 1,80,000
B) Selling & Distribution Expenses:
Selling Expenses 15,000
Bad debts 10,000 25,000
C) Finance Expenses: -
Total Operating Expenses 2,05,000
Net Operating Profit 2,70,000
Add : Non - Operating Income
Dividend / Interest received 25,000
2,95,000
Less : Non - Operating Expenses
Loss on sale of Fixed Assets 21,500
Net Profit Before Interes & Tax (NPBIT/ EBIT) 2,73,500
Less: Interest on debentures 12,000
Net Profit before tax (NPBT/ EBT) 2,61,500
Less : Tax 40,000
Net Profit After Tax (NPAT/ EAT) 2,21,500
Add : P & L balance b/f -
2,21,500
Less : Appropriations
Dividend on Preference Shares 10,000
Equity Dividend 50,000
Transfer to General Reserve 61,500 1,21,500
Profit & Loss balance c/d (Retained Earinings) 1,00,000
 COMPUTATION OF RATIOS

LIQUIDITY RATIOS

1.1 Current Ratio = Current Assets (CA) = Quick Assets + Non-Quick Assets
Current Liabilities (CL) Quick Liabilities + Non-Quick Liabilities
Current Ratio 1.55 :1
Current Assets 5,75,000
Current Liabilities 3,70,000

1.2 Liquid Ratio / Quick Ratio / = Quick Assets = Current Assets – Non-Quick Assets
Acid test Ratio Quick Liabilities Current Liabilities – Non-Quick Liabilities
(Use the above formula, if nothing is been specifically asked)
OR
= Quick Assets = Current Assets – Non-Quick Assets
Current Liabilities Current Liabilities

Quick Ratio 1.49 :1

Quick Assets 3,65,000
Quick Liabilities 2,45,000

1.3 Absolute Liquid Ratio = Cash + Cash equivalents = Cash + Bank + Marketable Securities
Current Liabilities Current Liabilities
Absolute Cash Ratio 0.24 :1
Cash & Cash Equivalent 90,000
Current Liabilities 3,70,000

1.4 Account Receivables to Working Capital Ratio = Account Receivables x 100

Working Capital
Accounts Receivables to Working Capital Ratio 134.15 %
Accounts Receivables 2,75,000
Working Capital 2,05,000

1.5 Inventory or Stock to Working Capital Ratio = Inventory (RM, WIP, FG) x 100
Working Capital
= Inventory (RM, WIP, FG) x 100
Current assets -Current Liabilities
Inventory To Working Capital 97.56 %
Inventory 2,00,000
Working Capital 2,05,000

ACTIVITY RATIOS

2.1 Stock Turnover Ratio / = COGS

Inventory Turnover Ratio Average Inventory
Stock Turnover Ratio 8.29 Times
COGS 14,50,000
Average Stock [(Opening Stock + Closing Stock) ÷ 2] 1,75,000

2.2 Stock Holding Period / = 1 X 365 days or 52 weeks or 12 months

FG Inventory Holding Period Stock Turnover Ratio

Stock Holding Period in number of days 44.05

Stock Holding Period in number of months 1.45
Stock Holding Period in number of weeks 6.28
2.3 Debtors Turnover Ratio / = Net Credit Sales
Receivables Turnover Ratio Average Receivables
Debtors Turnover Ratio 5.82 Times
Net Credit Sales 16,00,000
Average Receivables 2,75,000
Since opening balance is not given, Closing balance is taken instead of average.

2.4 Average Collection Period/ = 1 X 365 days or 52 weeks or 12 months

Debtors Collection Period/ Debtors Turnover Ratio
Receivables Collection Period
Average Collection Period in number of days. 62.73 Days
Average Collection Period in number of months. 2.06 Months
Average Collection Period in number of weeks. 8.94 Weeks

2.5 Creditors Turnover Ratio/ = Net Credit Purchases

Payables Turnover Ratio Average Payables
Creditors Turnover Ratio = 4.47 Times
Net Credit Purchases 10,50,000
Average Payables 2,35,000
Average Creditors 1,60,000
Average Bills Payables 75,000

2.6 Average Payment Period/ = 1 x 365 days or 52 weeks or 12 months

Creditors Payment Period/ Creditors Turnover Ratio
Payables Payment Period
Average Payment Period in number of days. 81.69 Days
Average Payment Period in number of months. 2.69 Months
Average Payment Period in number of weeks. 11.64 Weeks

2.7 Operating Cycle Duration (i.e. Net Operating Cycle) = Stock Holding Period (+) Debtors Collection
Period (-) Creditors Payment Period
Operating Cycle Duration in number of days. 25.10 Days
Operating Cycle Duration in number of months. 0.83 Months
Operating Cycle Duration in number of weeks. 3.58 Weeks

2.8 Total Asset Turnover Ratio = Total Net Sales

Total Assets
Total Asset Turnover Ratio = 1.875 Times
Total Net Sales = Cash Sales + Credit Sales - Sales Return 18,00,000
Total Assets = Fixed Assets + Investments + Current Assets 9,60,000
Note: Alternatively, COGS can be used if sales informotion is not available.
Note: If Opening Total Assets are given then average Total Assets should be taken.

2.9 Fixed Asset Turnover Ratio = Net Sales

Net Fixed Assets
Fixed Asset Turnover Ratio = 6.10 Times
Total Net Sales = Cash Sales + Credit Sales - Sales Return 18,00,000
Fixed Assets 2,95,000
Note: Alternatively, COGS can be used if sales informotion is not available.
Note: If Opening Fixed Assets are given then average Fixed Assets should be taken.
2.10 Capital Turnover Ratio = Net Sales
Capital Employed
Capital Turnover Ratio = 3.05 Times
Total Net Sales = Cash Sales + Credit Sales - Sales Return 18,00,000
Capital Employed 5,90,000
Note: Alternatively, COGS can be used if sales informotion is not available.
Note: If Opening Capital Employed is given then average Capital Employed should be taken.

2.11 Working Capital Turnover Ratio = Net Sales

Working Capital
Working Capital Turnover Ratio 8.78 Times
Total Net Sales = Cash Sales + Credit Sales - Sales Return 18,00,000
Working Capital 2,05,000

PROFITABILITY RATIOS

3.1 Gross Profit Margin/ = Gross Profit x 100

Gross Profit Ratio/ Net Sales
Gross Profit Ratio = 19.44 %
Gross Profit 3,50,000
Total Net Sales = Cash Sales + Credit Sales - Sales Return 18,00,000

3.2 Net Profit Margin/ = Net Profit after tax x 100

Net Profit Ratio Net Sales
(post tax)
Note: Always use post tax if nothing is been specifically asked.
Net Profit Ratio (post-tax) 12.31 %
Net Profit After Tax 2,21,500
Net Sales 18,00,000

3.2(a) Net Profit Margin / = Net Profit before tax x 100

Net Profit Ratio Net Sales
(pre tax)
Net Profit Ratio (pre-tax) 14.53 %
Net Profit Before Tax 2,61,500
Net Sales 18,00,000

3.3 Operating Profit Ratio = Operating Profit x 100

Net Sales
Operating Profit Ratio = 15 %
Operating Profit 2,70,000
Net Sales 18,00,000

If there is no other Operating Income

Operating Profit Ratio 8.06 %
Operating Profit (excluding other Operating Income) 1,45,000
Net Sales 18,00,000

3.4 Operating Expense Ratio = Operating Expenses x 100

Net Sales
Operating Expense Ratio = 11.39 %
Operating Expenses 2,05,000
Net Sales 18,00,000
3.4(a) Administative Expenses Ratio = Administrative Expenses x 100
Net Sales
Administative Expenses Ratio = 10 %
Administration Expenses 1,80,000
Net Sales 18,00,000

3.4(b) Selling Expenses Ratio = Selling & Distribution Expenses x 100

Net Sales
Selling Expenses Ratio = 1.39 %
Selling Expenses 25,000
Net Sales 18,00,000

3.4(c) Finance Expenses Ratio = Finance Expenses x 100 Nil

Net Sales

3.5 Operating Cost Ratio = Total Operating Cost x 100 91.94 %

Net Sales
(Total Operating Cost = COGS + Operating Expenses)
Operating Ratio =
Cost of Goods Sold 14,50,000
Operating Expenses 2,05,000
Total Operating Cost 16,55,000
Net Sales 18,00,000

If there is no other Operating Income (cross verification)

Op Profit Ratio
Operating Cost Ratio + (without Other = 100%
Op Income)
91.94% + 8.06% = 100%

Solvency / Capital Structure Ratios

4.1 Debt Equity Ratio = Borrowed Funds (LT)

Shareholders Funds
Debt Equity Ratio = 0.20 :1
Note: Always use this if nothing is been specifically asked.
Borrowed Funds (Long Term) 1,00,000
Shareholder's funds 4,90,000

4.1(a) Total Debt to Equity Ratio = LT Debt + ST Debt

Shareholders Funds
Total Debt to Equity Ratio = 0.41 :1
Long Term Borrowed Funds 1,00,000
Short Term Loans (Bank Overdraft) 1,00,000
Total Debt 2,00,000
Shareholder's Funds 4,90,000

4.1(b) Total Liabilities to Equity Ratio = Long Term Debt + Current Liabilities
Shareholders Funds
Total Liabilities to Equity Ratio = 0.96 :1
Long Term Borrowed Funds 1,00,000
Current Liabilities 3,70,000
Total Liabilities 4,70,000
Shareholder's Funds 4,90,000
 4.2 Debt to Total Assets = Borrowed Funds (Long Term)
Total Assets
Note: Always use above formula, if nothing is been specifically asked
Debt to Total Assets Ratio = 0.10 :1
Borrowed Funds (Long Term) 1,00,000 10.42%
Total assets 9,60,000

4.2(a) Total Debt to Total Assets = LT Debt + ST Debt

Total Assets
Total Debt to Total Assets Ratio = 0.21 :1
Long Term Borrowed Funds 1,00,000
Short Term Loans (Bank Overdraft) 1,00,000
Total Debt 2,00,000
Total Assets 9,60,000

4.3 Proprietory Ratio = Shareholder's Funds x 100

Total Assets
Proprietory Ratio = 51.04 %
Shareholder's Funds 4,90,000
Total Assets 9,60,000

4.4 Equity Multiplier = Total Assets

Shareholder's Funds
Equity Multiplier = 1.96 Times
Total Assets 9,60,000
Shareholder's Funds 4,90,000
Note: If Opening balances of Total assets and Shareholders funds are avaialble then Average Total Assets
and Average Shareholder's Funds should be taken.

4.5 Capital Gearing Ratio = Fixed Income Bearing Funds

Non-Fixed Income Bearing Funds
Capital Gearing Ratio = 0.51 :1
Borrowed Funds 1,00,000
Preference Shareholders 1,00,000
Fixed Income Bearing Funds 2,00,000
Non-fixed Income bearing Funds (Sh Funds - Pref. Share Cap) 3,90,000

4.7 Fixed Assets to Equity Ratio = Fixed Assets

Shareholder's Funds
Fixed Assets to Equity Ratio = 0.60 :1
Fixed Assets (WDV) 2,95,000
Shareholder's Funds 4,90,000

Coverage Ratio
5.1 Interest Coverage Ratio = Profit Before Interest and Taxes
Annual Interest
Interest Coverage Ratio = 22.79 Times
Earnings Before Interest and Taxes 2,73,500
Annual Interest 12,000

5.2 Preference Dividend Coverage Ratio = Net Profit After Taxes

Dividend on Preference Share Capital
Preference Dividend Coverage Ratio = 22.15 Times
Net Profit After Tax 2,21,500
Preference Dividend 10,000
5.3 Debt Service Coverage Ratio Not applicable.
Note: Since repayment obligation is not given in the question, Debt Service Coverage Ratio
cannot be computed.

INVESTMENT VALUATION RATIOS

Net Profit After Tax 2,21,500

Less: Preference Dividend 10,000
Earnings Available for Equity Shareholders 2,11,500
Equity Dividend (Distributed Profits) 50,000
Retained Amount 1,61,500

6.1 Earning Per Share = Earning Available for Equity Shareholders

(EPS) Number of Equity Shares
Earning Per Share = Rs. 10.575
Earning Available for Equity Shareholders 2,11,500
Number of Equity Shares = (Rs. 2 Lakh Eq Share Cap of Rs 10 each) 20,000

6.2 Dividend Per Share = Total Equity Dividend

(DPS) Number of Equity Shares
Dividend Per Share = Rs. 2.5
Total Equity Dividend 50,000
Number of Equity Shares 20,000

6.3 Dividend Payout Ratio = Dividend Per Share x 100

(DPR) Earning Per Share
Dividend Payout Ratio = 23.64 %
= Rs. 2.50 Per Share _ x 100
Rs. 10.575 Per share

6.4 Retained Earnings Ratio (Retention Ratio) = 100 - DPR 76.36 % OR

(RER or RR)
RER = (EPS - DPS) ÷ EPS 76.36 %
Retained Earnings per share = EPS - DPS = 10.575 - 2.50 = Rs. 8.075
Earning Per Share Rs. 10.575

6.5 Price Earning Ratio = Market Price Per Share = MPS

(PE Ratio or P/E Ratio) Earning Per Share EPS
Price Earning Ratio = 4.22 Times
Market Price Per Share (MPS) (Given) Rs. 44.6
Earning Per Share (EPS) Rs. 10.575

6.6 Price Earning to Growth Ratio = PE Ratio

(PEG) Projected Growth Rate
Price Earning to Growth Ratio = 0.35 Times
Price Earning Ratio = 4.22 Times
Growth Rate (%) (given in the question) 12.00 %

6.7 Dividend Yield Ratio = Dividend Per Share x 100

Market Price Per Share
Dividend Yield Ratio = 5.61 %
Dividend Per Share (DPS) = (Total Equity Div ÷ No. of Eq. Shares) 2.5 Rs.
Market Price Per Share (MPS) (given) 44.6 Rs.
6.8 Book Value Per Share = Total Shareholder's Fund - Preference Share Capital
Number of Equity Shares
Book Value Per Share = 19.50 Rs. per share
Shareholder's Fund 4,90,000
Preference Share Capital 1,00,000
Number of Equity Shares 20,000

RETURN ON INVESTMENT MEASURES

7.1 Return on Total Assets = Net Profit After Taxes x 100

(ROA) Average Total Assets
Return on Total Assets = 23.07 %
Net Profit After Tax 2,21,500
Total Assets 9,60,000
Note: Opening balance is not available, hence closing Total assets are taken.

7.2 Return on Equity = Net Profit After Taxes x 100

(ROE) Average Shareholder's Fund
Return on Equity = 45.20 %
Net Profit After Tax 2,21,500
Shareholder's Fund 4,90,000

7.3 Return on Capital Employed = Earnings Before Interest and Tax x 100
(ROCE) Average Capital Employed
Return on Capital Employed 46.36 %
Earnings Before Interest & Tax 2,73,500
Capital Employed = (Owner's Funds + Borrowed Funds) 5,90,000

7.4 Financial Leverage Index = Return on Equity

Return on Assets
Financial Leverage Index = 1.96 Times
Return on Equity 45.20
Return on Assets 23.07
Q.2. DuPont (3-way) Return on Equity = Net Profit After Taxes x 100
(ROE) Average Shareholder's Fund
2017-18 18.067%
2018-19 17.984%
2019-20 17.381%
Year Net Profit Margin (NPM) Tot Asset Turnover Ratio Equity Multiplier
NPAT x 100 Net Sales Average Total Assets
Net Sales Average Total Assets Average Shareholder's Funds
A B C D
2017-18 7.049% 1.326086957 1.932773109
(21.5 x 100 ÷ 305) Times Times
(305 ÷ 230) (230 ÷ 119)
Return on Equity = B x C x D = 18.067%
2018-19 6.371% 1.206896552 2.338709677
(22.3 x 100 ÷ 350) Times Times
(350 ÷ 290) (290 ÷ 124)
Return on Equity = B x C x D = 17.984%
2019-20 5.341% 1.171428571 2.777777778
(21.9 x 100 ÷ 410) Times Times
(410 ÷ 350) (350 ÷ 126)
Return on Equity = B x C x D = 17.381%
Decreasing Trend - Bad sign. Decreasing Trend - Bad sign. Increasing Trend - Higher Risk
Q.3. DuPont (5-way) X Ltd Y Ltd
1. Tax Burden NPAT 0.6667 0.6000
EBT 66.67% 60%
Tax 33.33% 40%
2. Interest Burden EBT 0.8571429 1.000
EBIT 86% 100%
Interest 14% Nil
3. EBIT Margin EBIT x 100 7.00% 11.11%
Net Sales
4. Total Asset Turnover Ratio Net Sales 2 3
Average Total Assets Times Times
(500 ÷ 250) (900 ÷ 300)
5. Equity Multiplier Average Total Assets 1.67 1.2
or Financial Leverage Index Average Shareholder's Funds Times Times
(250 ÷ 150) (300 ÷ 250)
ROE NPAT 13.33% 24.00%
Average Shareholder's Funds (0.667 x 0.85714 x 7% x 2 x 1.67) (0.60 x 1 x 11.11% x 3 x 1.2)
or = 1 x 2 x 3 x 4 x 5 13.33% 24.00%
 Ans.4.
COMPUTATION OF RATIOS
(i) Return on Capital Employed = Earnings Before Interest and Tax x 100
(ROCE) Average Capital Employed
Return on Capital Employed 26.43 %

Earnings Before Tax 140.00

Add back: Interest (300 x 15%) 45.00
Earnings Before Interest & Tax 185

Share Capital 200

General Reserve 150
Investment Allowance Reserve 50
15% Long term loan 300
Capital Employed = (Owner's Funds + Borrowed Funds) 700

(ii) Return on Equity = Net Profit After Taxes x 100

(ROE) Average Shareholder's Fund
Return on Equity = 14.00 %

Net Profit Before Tax 140.00

Less: Provision for tax 84.00
Net Profit After Tax 56

Share Capital 200

General Reserve 150
Investment Allowance Reserve 50
Shareholder's Fund 400

(iii) Book Value Per Share = Total Shareholder's Fund - Preference Share Capital
Number of Equity Shares
Book Value Per Share = 20.00 Rs. per share

Equity Share Capital 200

General Reserve 150
Investment Allowance Reserve 50
Shareholder's Fund 400

Number of Equity Shares 20 lakhs

 Ans.5.
Working note
Particulars A Ltd. B Ltd.
Earnings before Interest & Tax 60 80
Less: Interest 3 9
Net Profit Before Tax 57 71
Less: Tax 17 21
Net Profit After Tax 40 50
Less: Preference Dividend 8 10
Earnings Available for Equity Shareholders 32 40
Equity Dividend (Distributed Profits) 20 25
Retained Amount 12 15

(i) Earning Per Share = Earning Available for Equity Shareholders

(EPS) Number of Equity Shares
Earning Per Share = Rs. 1.6 1.6
Earning Available for Equity Shareholders 32 40
Number of Equity Shares 20 25

(ii) Price Earning Ratio = Market Price Per Share = MPS

(PE Ratio or P/E Ratio) Earning Per Share EPS
Price Earning Ratio (No. of times) = 31.25 37.50
Market Price Per Share (MPS) (Given) Rs. 50 60
Earning Per Share (EPS) Rs. 1.6 1.6

(iii) Dividend Payout Ratio = Dividend Per Share x 100

(DPR) Earning Per Share
Dividend Payout Ratio (%) = 62.50 62.50
Dividend Per Share = Rs. 1.00 1.00
Earning Per Share = Rs. 1.60 1.60

(iv) Dividend Yield Ratio = Dividend Per Share x 100

Market Price Per Share
Dividend Yield Ratio (%) = 2.00 1.67
Dividend Per Share (DPS) = (Total Equity Div ÷ No. of Eq. Shares) 1.00 1.00
Market Price Per Share (MPS) (given) Rs. 50 60

(v) Price Earning to Growth Ratio = PE Ratio 31.25 37.50

(PEG) Projected Growth Rate 5 7
= No. of times. 6.25 5.3571

Interpretation: Since PEG ratio is based on both trailing earnings and

future earnings growth, PEG is often viewed as more informative than
the P/E ratio. Although earnings growth rates can vary among different
sectors, a stock with a PEG of less than one is typically considered
undervalued because its price is low relative to its expected earnings
growth. A PEG greater than one might be considered overvalued
because it suggests the stock price is too high relative to the company’s
expected earnings growth.
Q.6.
Debt Service Coverage Ratio
DSCR = Cash Earnings available for debt service ÷ Annual Installment including interest (OR)
DSCR = NPAT + Interest + Non-cash Expenses (Depreciation + Expenses W/Off etc.) ÷ (Interest + Principal)
Repayment Schedule ÷ Loan Amortisation Schedule
Q.6. Rs In Lakh
Years Loan at beginning Installment Interest Principal Loan at the end
(iv) = (ii) x
(i) (ii) (iii) (v) = (iii) - (iv) (vi) = (ii) - (v)
12%
1 300 136 36 100 200
2 200 124 24 100 100
3 100 112 12 100 0
Interest = 36 lakh 12 Interest (1st yr) = Loan at beginning x 12%
? 100 Hence Loan amount = Interest amount / Interest Rate = 36 ÷ 12%
Equal Principal method = loan at beginning / Number of installments

Particulars Year 1 Year 2 Year 3 Total

Earnings Before Interest, Tax, Depreciation & Amortisation 220.00 230.00 240.00 690.00
Less: Depreciation (Given) -150.00 -150.00 -150.00 -450.00
Less: Pre-operative Expenses written off -20.00 -20.00 -20.00 -60.00
Earnings Before Interest & Tax 50.00 60.00 70.00 180.00
Less: Interest on term loan -36.00 -24.00 -12.00 -72.00
Net Profit Before Tax 14.00 36.00 58.00 108.00
Less: Provision for tax 4.90 12.60 20.30 37.80
Net Profit After Tax 9.10 23.40 37.70 70.20
Add: Depreciation 150.00 150.00 150.00 450.00
Add: Pre-operative expenses w/off 20.00 20.00 20.00 60.00
Add: Interest on Term Loan 36.00 24.00 12.00 72.00
(a) Cash (Earnings) available for repayment of Debt 215.10 217.40 219.70 652.20
(b) Annual Installment including interest 136.00 124.00 112.00 372.00
(c) DSCR (in times) (a) ÷ (b) 1.58 1.75 1.96 1.75
(d) ICR = (EBIT / Interest) (in times) 1.39 2.50 5.83 2.50
Alternatively,
Cash (Earnings) available for repayment of Debt = EBITDA -
Prov for Tax 215.10 217.40 219.70
Q.7. PVAF 2.40183 12%
Years Loan at beginning Installment Interest Principal Loan at the end

(i) (ii) (iii) (iv) = (ii) x 12% (v) = (iii) - (iv) (vi) = (ii) - (v)
1 300.00 124.90 36.00 88.90 211.10
2 211.10 124.90 25.33 99.57 111.52
3 111.52 124.90 13.38 111.52 -0.00
Total 300.00
Equated Installment = Loan at beginning ÷ PVAF
Particulars Year 1 Year 2 Year 3 Total
Earnings Before Interest, Tax, Depreciation & Amortisation 200.00 210.00 220.00 630.00
Less: Depreciation -150.00 -150.00 -150.00 -450.00
Earnings Before Interest & Tax 50.00 60.00 70.00 180.00
Less: Interest on term loan -36.00 -25.33 -13.38 -74.71
Net Profit Before Tax 14.00 34.67 56.62 105.29
Less: Provision for tax -4.90 -12.13 -19.82 -36.85
Net Profit After Tax 9.10 22.53 36.80 68.44
Add: Depreciation 150.00 150.00 150.00 450.00
Add: Interest on Term Loan 36.00 25.33 13.38 74.71
(a) Cash (Earnings) available for repayment of Debt 195.10 197.87 200.18 593.15
(b) Annual Installment including interest 124.90 124.90 124.90 374.71
(c) DSCR (in times) (a) ÷ (b) 1.56 1.58 1.60 1.58
(d) ICR = (EBIT ÷ Interest) (in times) 1.39 2.37 5.23 2.41
Alternatively Cash (Earnings) available for repayment of Debt =
EBITDA - Prov for Tax 204.90 222.13 239.82

PV @12% 1
1–
0 1 PVAF = (1 + r)^n
1 0.892857143 1/(1+r)^n r
2 0.797193878
3 0.711780248 1
1–
Total 2.401831268 PVAF PVAF = (1 + .12)^3
0.12
PVAF = 2.40183

EMI = P x ROI x (1 + R) N
(1 + R) N - 1
Q.8.
I Current Ratio:
Total Current Assets ÷ Total Current Liabilities Cash 21,000 Provision for Tax 50,000
Current Assets 5,56,800 Debtors 3,00,425 Commission received in Advance 10,875
Current Liabilities 3,10,000 Prepaid Insurance 15,375 Bills Payable 49,125
Current Ratio 1.80 Stock 2,00,700 Bank Overdraft 10,740
Market Investments 19,300 Sundry Creditors 1,89,260
II Liquidity Ratio: 5,56,800 3,10,000
Quick Assets ÷ Quick Liabilities
Quick Assets 3,40,725 Cash 21,000 Provision for Tax 50,000
Quick Liabilities 2,88,385 Debtors 3,00,425 Bills Payable 49,125
Quick Ratio 1.18 Market Investments 19,300 Sundry Creditors 1,89,260
3,40,725 2,88,385
III Debt Equity Ratio:
Debt ÷ Equity (or) Borrowed Funds ÷ Owners Funds
Debt or Borrowed Funds 2,00,000 15% debentures 1,60,000 Capital Reserve 1,26,000
Equity or Owners Funds 14,41,800 12% Bank Loan 40,000 General Reserve 1,20,000
Debt Equity Ratio 0.14 2,00,000 6% Preference Share Capital 2,00,000
Equity Share Capital 10,00,000
Profit and Loss Account 9,000
Share Premium 15,000
Preliminary Expenses -18,625
Calls in Arrears -9,575
14,41,800
IV Capital Gearing Ratio:
Fixed Cost Bearing Funds ÷ Variable Cost Bearing Funds
Fixed Cost Bearing Funds 4,00,000 15% debentures 1,60,000 Shareholder Fund 14,41,800
Variable Cost Bearing Funds 12,41,800 12% Bank Loan 40,000 Less: 6% Pref Share Capital -2,00,000
Capital Gearing Ratio 0.32 6% Pref Share Capital 2,00,000 12,41,800
4,00,000
V Propietary Ratio:
Proprietors Funds ÷ Total Assets x 100 Shareholder Fund 14,41,800 Copyright 1,00,000
Proprietors Funds 14,41,800 14,41,800 Cash 21,000
Total Assets 19,51,800 Plant and Machinery 4,20,000
Propietary Ratio (%) 73.87 Debtors 3,00,425
Prepaid Insurance 15,375
Land and Building 5,00,000
Fixtures 25,000
Furniture 75,000
Goodwill 1,00,000
Investments (Long Term) 1,75,000
Stock 2,00,700
Market Investments 19,300
19,51,800
 Ans.9.
2018 2019 Particulars 31.12.2018 31.12.2019
a) Net Profit Ratio 2.60% 5.33% Net profit after Depreciation 1,21,600 1,60,800
Net Profit After Taxes 26,000 64,000 Less:
Sales (Given) 10,00,000 12,00,000 Directors Remuneration 60,000 20,000
Interest on Mortgage Loan 9,600 8,800
Provision for Taxation 26,000 68,000
Net Profit After Taxes 26,000 64,000
Particulars 31.12.2018 31.12.2019
b) Current Ratio 1.03 1.35 Stock in Trade 1,20,000 60,000
Current Assets 2,84,000 2,00,000 Debtors 1,60,000 80,000
Current Liabilities 2,76,000 1,48,000 Cash & Bank 4,000 60,000
2,84,000 2,00,000
Bank Overdraft 40,000 -
Creditors 1,80,000 60,000
Provision for Taxation 26,000 68,000
Dividend Declared 30,000 20,000
2,76,000 1,48,000
c) Liquidity Ratio 0.69 0.95 Particulars 31.12.2018 31.12.2019
Quick Assets 1,64,000 1,40,000 Debtors 1,60,000 80,000
Quick Liabilities 2,36,000 1,48,000 Cash & Bank 4,000 60,000
1,64,000 1,40,000
Creditors 1,80,000 60,000
Provision for Taxation 26,000 68,000
Dividend Declared 30,000 20,000
2,36,000 1,48,000
d) Debt ÷ Equity Ratio 0.66 0.89 Particulars 31.12.2018 31.12.2019
Debt 1,60,000 2,20,000 Mortgage Loan 1,60,000 2,20,000
Equity 2,44,000 2,48,000 1,60,000 2,20,000
Equity Share of Rs. 10 each 2,00,000 2,00,000
General Reserve 40,000 20,000
Profit & Loss A/c 4,000 28,000
2,44,000 2,48,000
e) Interest Coverage Ratio Particulars 31.12.2018 31.12.2019
EBIT ÷ Interest 6.42 16 Net profit after Depreciation 1,21,600 1,60,800
EBIT 61,600 1,40,800 Less: Directors Remuneration 60,000 20,000
Interest 9,600 8,800 61,600 1,40,800
Interest on Mortgage Loan 9,600 8,800
9,600 8,800
f) Net Operating Profit Ratio 6.16 11.73 Particulars 31.12.2018 31.12.2019
Operating Profit 61,600 1,40,800 Net profit after Depreciation 1,21,600 1,60,800
Sales (Given) 10,00,000 12,00,000 Less: Directors Remuneration 60,000 20,000
Operating Profit 61,600 1,40,800
 Ans.10. Working:
(i) Current Ratio 2.5:1 Debtors 4,50,000 Creditors 3,00,000
Current Assets 10,00,000 Advances to Suppliers 50,000 Bank Overdraft 1,00,000
Current Liabilities 4,00,000 Stock 4,00,000 Current Liabilities 4,00,000
Bank Balance 1,00,000
Current Assets 10,00,000

(ii) Liquidity Ratio 1.83:1 Debtors 4,50,000 Creditors 3,00,000

Quick Assets 5,50,000 Bank Balance 1,00,000 3,00,000
Quick Liabilities 3,00,000 5,50,000

(iii) Operating Ratio 90% Net Sales (given) 90,00,000 (given)

Operating Cost (COGS + Op. Exp.) 81,00,000 Less: COGS (given) 70,00,000 (given)
Sales (given) 90,00,000 Gross Profit 20,00,000 Calculated
100 - Op. Ratio = Op. Profit Ratio Less: Operating Exp 11,00,000 Calculated
Operating Profit Ratio 10% Operating Profit 9,00,000 Calculated
(100 - 90%) = 10% Less: Non-Operating Exp - (given)
Operating Profit 9,00,000 Add: Non-Operating incomes - (given)
Sales 90,00,000 EBIT (given) 9,00,000 (given)
Interest - There is no loan.
Profit Before Tax (given) 9,00,000 (given)
Tax @ 50% 4,50,000 Tax rate is given.
Profit After Tax 4,50,000 Calculated

(iv) Net Profit Ratio (%) 5% Net Profit before tax 9,00,000
NPAT 4,50,000 Less: Tax @ 50% 4,50,000
Sales (given) 90,00,000 Net Profit after tax 4,50,000

(v) Stock Turnover Ratio 20 Times Opening Stock 3,00,000

COGS (given) 70,00,000 Closing Stock 4,00,000
Average Stock 3,50,000 Total = Opening + Closing 7,00,000
Average Stock 3,50,000
(vi) Stock / Working Capital Ratio 0.67 Debtors 4,50,000 Creditors 3,00,000
Stock 4,00,000 Advances to Suppliers 50,000 Bank Overdraft 1,00,000
Working Capital (CA - CL) 6,00,000 Stock 4,00,000 Current Liabilities 4,00,000
Bank Balance 1,00,000 Working Capital (CA - CL) 6,00,000
Current Assets 10,00,000

(vii) Debtors Turnover Ratio 24 Times Closing Debtors including advances 5,00,000
Net Credit Sales (90% of sales) 81,00,000 Less: Advances 50,000
Average Debtors 3,37,500 Closing Debtors excluding advances 4,50,000
Opening Debtors 2,25,000
(vii) Debtors Collection Period Total = Opening + Closing 6,75,000
In number of days 15.21 Average Debtors 3,37,500
(365 days ÷ 24 times)
In number of months 0.5
(12 months ÷ 24 times)
 Solution to Question 11 Sources of Funds
Share Capital (20000 Equity Shares of Rs. Share Capital (20,000 Equity Shares of Rs.
1,00,000 1,00,000
10 each of Rs. 5 called up) 10 each of Rs. 5 called up)
a) Debt / Equity Ratio 0.63 Land and Building 1,25,000 Reserves and Surplus:
Machinery 50,000 General Reserve 50,000
b) Proprietary Ratio (%) 56% Stock 50,000 Profit and Loss Account 15,000
Proprietors Funds 1,60,000 Reserves and Surplus: Less: Preliminary Expenses 5,000
Total Assets 2,85,000 General Reserve 50,000 Shareholder's Fund 1,60,000
Profit and Loss Account 15,000 Borrowed Funds
c) Current Ratio 3.40 5% Debentures 1,00,000 5% Debentures 1,00,000
Current Assets 85,000 Bills Payable 7,000 Borrowed Funds 1,00,000
Current Liabilities 25,000 Bills Receivable 5,000 Total Capital Employed 2,60,000
Furniture 25,000
d) Liquid Ratio 1.40 Debtors (less than 6 months) 11,000 Application of Funds
Quick Assets 35,000 Preliminary Expenses 5,000 Fixed Assets
Quick Liabilities 25,000 Creditors 18,000 Land and Building 1,25,000
Cash on Hand 2,000 Machinery 50,000
e) Stock to Working Capital Ratio 0.83 Bank Balance (Dr.) 18,000 Working Capital
Stock 50,000 Provision for Doubtful Debts 1,000 Current Assets
Working Capital 60,000 Quick Assets
[BR + (Debtors - Prov DD) + Cash + Bank] 35,000
Non Quick Assets 50,000
Total Current Assets 85,000

Current Liabilities
Quick Liabilities 25,000
Non Quick Liabilities -
Total Current Liabilities 25,000
WC = (CA-CL) 60,000
Ans.12.
1) Profitability: Declining profitability is evident from:
(a) Decreasing gross profit margin and increasing cost of goods sold ÷ sales ratio.
(b) Decreasing net profit margin and increasing operating expense ÷ sales ratio.
(c) Over the period of 3 years, gross profit margin has declined by 3% from 30% to 27% due to
increase in COGS. Net profit margin has declined from 7% to 2% due to increase in COGS by 3% and
operating expense by 3%.
2) Operating efficiency (Activity ratios):
(a) Decreasing Debtors Turnover Ratio and increasing Average Collection Period with falling
Profitability indicates poor Debtors management If there is rise in bad-debts.
(b) Higher Average Collection Period also results in loss of opportunity cost due to additional funds
block in receivables.
3) Lower Stock Turnover Ratio and higher Stock holding period:
(a) Consistent increase in current ratio with consistent decrease in Quick Ratio shows that the levels
of inventory has been rising. This is also evident from rising stock to working after ratio. The reasons
for increasing inventory needs to be enquired into. If the product has become slow moving or
outdated then it might further affect the Profitability and liquidity negatively.
(b) Increase in Debtors and Inventory indicates excessive investment in current assets which seems
to be affecting rate of return.
4) Liquidity:
(a) Short term liquidity has improved which is evident from increasing current ratio.
(b) Immediate liquidity has been declining due to increase in inventory. However, at present it is at
comfortable level (Quick ration = 0.99:1) and the company is unlikely to encounter any serious
difficulty in paying short term obligation as and when they become due for payment.
(c) However, to avoid any liquidity crisis the company needs to maintain the ratio of current levels
and prevent any further decline.
5) Capex or Diversification plans: Investment in fixed assets seems to be higher relative to net
worth. This needs me further investigated to determine the capex plans. If there is any capital WIP
which might generate additional revenue and Profitability in future or the company is investing in
modern technology to achieve economies of scale and reduce COGS.
6) Dividend policy: The company seems to follow stable dividend policy which will have positive
impact on its market price. Even though the company has low EPS of Rs. 2.5 per share, it has paid
dividend of Rs 3 per share out of its past accumulated profits.
Conclusion: The firm’s financial position has not become so bad that it cannot be cured what is
required is thorough probe into the over investment in working capital and fixed assets.
Q.13.
(1)
There is no Bank overdraft.
Pre-paid expenses and Incomes received in advance is assumed to be Nil.
Current Ratio = Current Assets (CA) = 4.5
Current Liabilities (CL) 1

Current Assets = 4.5 x Current Liabilities

Quick Ratio = Quick Assets = 3

Current Liabilities 1

Quick Assets = 3 x Quick Liabilities

Quick Assets = Current Assets (-) Inventory
3CL = 4.5CL - Inventory (Rs. 6,00,000)
3CL = 4.5CL - Rs. 6,00,000
1.5CL = Rs. 6,00,000
CL = Rs. 4,00,000

(2)
There is no Bank overdraft.
Incomes received in advance is assumed to be Nil.
Quick Ratio = Quick Assets = 3
Current Liabilities 1
Current Liabilities = Rs. 10,00,000 (given)
Quick Assets = Rs. 30,00,000
Current Assets = Quick Assets + Inventory + Prepaid expenses
Current Assets = Rs. 30,00,000 + Rs. 5,00,000 + Nil
Current Assets = Rs. 35,00,000
Current Ratio = Current Assets (CA) = 35,00,000
Current Liabilities (CL) 10,00,000
Current Ratio = 3.5:1

(3)
There is no Bank overdraft.
Incomes received in advance is assumed to be Nil.
Quick Ratio = Quick Assets = 2
Current Liabilities 1
Rs. 24,00,000 = 2 x Current Liabilities
Current Liabilities = Rs. 12,00,000
Current Assets (CA) = Quick Assets + Non-Quick Assets
Current Assets (CA) = Rs. 30,00,000

Current Ratio = Current Assets (CA)

Current Liabilities (CL)

= Current Assets (CA) = Rs. 30,00,000

Current Liabilities (CL) Rs. 12,00,000
Current Ratio = 2.5:1
 (4)
Working Capital = Current Assets (-) Current Liabilities
Rs. 6,00,000 = Curretn Assets (-) Current Liabilities
= Current Assets (CA) = 2.5
Current Liabilities (CL) '1

Current Assets = 2.5 x Current Liabilities

2.5 x Current Liabilities (-) CL = Rs. 6,00,000
1.5 Current Liabilities = Rs. 6,00,000
Current Liabilities = Rs. 4,00,000
Working Capital = Current Assets (-) Current Liabilities
Rs. 6,00,000 = Current Assets (-) Rs. 4,00,000
Current Assets = Rs. 10,00,000

= Current Assets (CA) = Rs. 10,00,000

Current Liabilities (CL) Rs. 4,00,000

Current Ratio = 2.5:1

Quick Ratio = 1.5:1

Quick Ratio = Quick Assets = 1.5
Current Liabilities 1

Quick Assets = 1.5 x Current Liabilities

Quick Assets = 1.5 x Rs. 4,00,000
Quick Assets = Rs. 6,00,000
Current Assets = Rs. 10,00,000
Current Assets (-) Quick Assets = Stock + Prepaid expenses
Rs. 10,00,000 (-) Rs. 6,00,000 = Stock + Nil
Stock = Rs. 4,00,000

(5)
COGS = Rs. 8,00,000
GP Ratio = 20%
Sales = COGS + Gross Profit
Gross Profit = Rs. 2,00,000
Sales = Rs. 10,00,000

Debtors Velocity (Debtors collection period)

Average Collection Period / = 1 X 365 days or 52 weeks or 12 months
Debtors Collection Period / Debtors Turnover Ratio

4 months = 1 X 12 months
Debtors Turnover Ratio
Debtors Turnover Ratio = 3 = Sales
Debtors
Net credit Sales = Sales
Average Debtors = ?
3 = 10,00,000
Debtors
Debtors = Rs. 3,33,333
 (6)
Fixed Assets = 0.75:1
Shareholder's Funds
Shareholder's Funds = Rs. 15,00,000 X

Fixed Assets = Rs. 15,00,000 0.75X

Working Capital = Rs. 5,00,000

0.75X + 5,00,000 = X
5,00,000 = 0.25X
X = 20,00,000

(7)
Shareholder's Funds = 20,00,000
Reserves & Surplus 0.25X
Share Capital X

0.25X + X = 20,00,000
1.25X = 20,00,000
X = 16,00,000
Share Capital = 16,00,000
Reserves & Surplus = 4,00,000
(0.25 of 16,00,000)

(8)
10% Debentures = Rs. 10,000
Return on Net worth (Return on equity) = 5%
Net Profit after Tax = 20,000
ROE = NPAT
Shareholders Fund

0.05 = Rs. 20,000

Shareholders Fund

Shareholders Fund = Rs. 20,000

0.05
Shareholders Fund = Rs. 4,00,000
Debentures = Rs. 1,00,000
10% = Rs. 10,000, 100% = Rs. 1,00,000
Capital Employed = Rs. 5,00,000
Q.14.
(1)
Current Ratio = 2.5:1
Current Assets = 2.5Current Liabilities
Working Capital = 2.5CL (-) CL
Rs. 6,00,000 = 1.5CL
CL = Rs. 4,00,000
Current Assets = 2.5 x Rs. 4,00,000
Current Assets = Rs. 10,00,000

(2)
Quick Ratio = 1.5 = Current Assets (-) Inventory
Current Liabilities

Quick Ratio = 1.5 = Rs. 10,00,000 (-) Inventory

Rs. 4,00,000
Inventory = Rs. 10,00,000 (-) Rs. 6,00,000

(3)
Stock Turnover Ratio = COGS
Inventory
5 times = COGS
Rs. 4,00,000

COGS = Rs. 20,00,000

(4)
Gross Profit Ratio = Gross Profit x 100
Net Sales
= 20%
If Sales = X, Gross Profit = 0.2X
COGS = 0.8X
0.8X = Rs. 20,00,000
X = Rs. 25,00,000
Sales = Rs. 25,00,000

(5)
2 times = COGS
Fixed Assets
Rs. 20,00,000 = 2 X Fixed Assets
Fixed Assets = Rs. 10,00,000

(6)
Average Collection Period = 12 months
Debtors Turnover Ratio
2.4 Months = 12
Debtors Turnover Ratio

Debtors Turnover Ratio = 5 Times

Debtors Turnover Ratio = Net Credit Sales
Debtors
Debtors = Net Credit Sales
Debtors Turnover Ratio
Debtors = Rs. 25,00,000
5
Debtors = Rs. 5,00,000
 (7)
0.8 = Fixed Assets
Net worth

Networth = Rs. 10,00,000

0.8
Networth = Rs. 12,50,000
Shareholder's Fund = Rs. 12,50,000

(8)
Long Term Debt = 7
Shareholder's Fund = 25

Long Term Debt = 7

Rs. 12,50,000 = 25
Long Term Debt = Rs. 3,50,000

Vertical Balancesheet
Sources of Funds
Shareholder's Fund 12,50,000
Long Term Debt 3,50,000
Total 16,00,000
Application of Funds
Fixed Assets 10,00,000
Working Capital 6,00,000
Current Assets = 10,00,000
Current Liabilities = 4,00,000
Total 16,00,000
Q.15.
(1)
There is no cash sales.
Gross Profit Ratio = 25%
= Gross Profit = 0.25
Net Sales
Gross Profit = 0.25 x Rs. 6,00,000
Gross Profit = Rs. 1,50,000
Sales (-) Gross Profit = COGS
COGS = Rs. 4,50,000

(2)
Average Collection Period = 12 months
Debtors Turnover Ratio
1.5 Months = 12
Debtors Turnover Ratio
Debtors Turnover Ratio = 8 Times
8 Times = Net Credit Sales
Debtors
8 Times = Rs. 6,00,000
Debtors
Debtors = Rs. 75,000

(3)
Stock Turnover Ratio = 9 Times
Stock Turnover Ratio = COGS
Closing Stock
Rs. 4,50,000 = 9 x Closing Stock

Closing Stock = Rs. 4,50,000

9
Closing Stock = Rs. 50,000

(4)
1.2 = COGS
Fixed Assets
1.2 = Rs. 4,50,000
Fixed Assets
Fixed Assets = Rs. 4,50,000
1.2
Fixed Assets = Rs. 3,75,000

(5)
Fixed Assets = 1.25 = Rs. 3,75,000
Shareholders Fund 1 1
Shareholders Fund = Rs. 3,00,000
Reserves & Surplus = 0.20
Share Capital 1
0.20X + X = Rs. 3,00,000
1.20X = Rs. 3,00,000
X = Rs. 2,50,000
Share Capital = Rs. 2,50,000
Reserves & Surplus = 0.2 x Rs. 2,50,000
Reserves & Surplus = Rs. 50,000
Capital Gearing Ratio = 0.6 Times
0.6 = Borrowed Funds
Share Capital
0.6 = Borrowed Funds
Rs. 2,50,000
Borrowed Funds = Rs. 1,50,000

(6)
Current Ratio = 1.75:1
Current Ratio = Current Assets
Current Liabilities
Current Assets = 1.75 Current Liabilities
Quick Ratio = 1.25:1
Quick Ratio = Quick Assets
Current Liabilities

1.25 = 1.75 Current Liabilities (-) Rs. 50,000

Current Liabilities
1.25 = 1.75 Current Liabilities (-) Rs. 50,000
0.5 Current Liabilities = Rs. 50,000
Current Liabilities = Rs. 1,00,000
Current Assets = 1.75 Current Liabilities
Current Assets = 1.75 X Rs. 1,00,000
Current Assets = Rs. 1,75,000

Vertical Balancesheet
Sources of Funds
Shareholder's Fund 3,00,000
Share Capital = 2,50,000
Reserves & Surplus = 50,000
Borrowed Fund 1,50,000
Total 4,50,000
Application of Funds
Fixed Assets 3,75,000
Working Capital 75,000
Current Assets = 1,75,000
Current Liabilities = 1,00,000
Total 4,50,000
Q.16.
(1)
Working Capital = Rs. 33,000
Working Capital Ratio = Current Ratio = Current Assets = 1.75 times
Current Liabilities
Working Capital = Current Assets (-) Current Liabilities
Current Assets = 1.75 Current Liabilities
Working Capital = Current Assets (-) Current Liabilities
Rs. 33,000 = 1.75 Current Liabilities (-) Current Liabilities
Current Liabilities = Rs. 44,000
Current Assets = 1.75 x Rs. 44,000
Current Assets = Rs. 77,000

(2)
Earnings Per Share = Net Profit after Tax
No. of Equity Shares
0.50 = Net Profit after Tax
26,000 shares
Net Profit after Tax = Rs. 13,000

Net Profit after Tax = 25% of Share Capital

Rs. 13,000 = 25% x Share Capital
Share Capital = Rs. 13,000
0.25
Share Capital = Rs. 52,000

(3)
0.625 = Fixed Assets Sources of Funds
(given) Shareholders Fund (X) Shareholders Fund X
Borrowed Funds Nil
Fixed Assets = 0.625X Total X
Shareholders Fund = Fixed Assets + Working Capital Application of Funds
X = 0.625X + Rs. 33,000 Fixed Assets ?
X = Rs. 88,000 Investments Nil
Shareholders Fund = Rs. 88,000 Working Capital 33,000
Shareholders Fund = Share Capital + Reserves & Surplus Total X
Rs. 88,000 = Rs. 52,000 + Reserves & Surplus
Reserves & Surplus = Rs. 36,000

(4)
Average Collection Period = 365 Days
Debtors Turnover Ratio
73 Days = 365 Days
Debtors Turnover Ratio
Debtors Turnover Ratio = 5 Times

Debtors Turnover Ratio = Net Credit Sales

Debtors
5 Times = Rs. 1,40,800
Debtors
Debtors = Rs. 28,160

(5)
Quick Ratio = 1.27 = Current Assets (-) Inventory
 Current Liabilities
Quick Ratio = 1.27 = Rs. 77,000 (-) Inventory
Rs. 44,000
55,880 = Rs. 77,000 (-) Inventory
Inventory = Rs. 21,120

(6)
Stock Turnover Ratio = 4 Times
Stock Turnover Ratio = COGS
Closing Stock
4 Times = COGS
Rs. 21,120
COGS = 4 x Rs. 21,120
COGS = Rs. 84,480

(7)
Sales (-) COGS = Gross Profit Sales 1,40,800
Gross Profit Ratio = 40% COGS 84,480
If Sales = X, Gross Profit = 0.4X Gross Profit 56,320
X (-) 84,480 = 0.4X (-) Operating exp. & Tax 43,320
X = 1,40,800 NPAT 13,000
Sales = Rs. 1,40,800