RBI GRADE B PHASE 2 MAINS 2017 EXAM STUDY MATERIAL ON FINANCE NUMERICALS TOPIC "RATIO ANALYSIS"


PROBLEMS AND SOLUTIONS 
Problem 1. From the data calculate :
(i) Gross Profit Ratio               (ii) Net Profit Ratio      (iii) Return on Total Assets
(iv) Inventory Turnover (v) Working Capital Turnover (vi) Net worth to Debt 
Sales                            25,20,000        Other Current Assets                           7,60,000
Cost of sale                  19,20,000        Fixed Assets                                        14, 40,000
Net profit                     3,60,000          Net worth                                            15,00,000
Inventory                     8,00,000          Debt.                                                   9,00,000
Current Liabilities       6,00,000
Solution:
1.   Gross Profit Ratio = (GP/ Sales) *  100 = 6
Sales – Cost of Sales Gross Profit
25,20,000 – 19,20,000 = 6,00,000
2.               Net Profit Ratio = (NP / Sales)* 100 = 3
3.               Inventory Turnover Ratio = Turnover / Total Assets) * 100= 1920000/800000= 2.4 times
Turnover Refers Cost of Sales
4.               Return on Total Assets = NP/ Total Assets  = (360000/3000000)*100 = 12%
FA+ CA +inventory [14,40,000 + 7,60,000 + 8,00,000] = 30,00,000
5.                           Net worth to Debt = Net worth/ Debt= (1500000/900000)* 100 = 1.66 times
6.                           Working Capital Turnover = Turnover/Working capital
Working Capital = Current Assets – Current Liabilities
= 8,00,000 + 7,60,000 – 6,00,000
15,60,000 – 6,00,000= 9,60,000
Working Capital Turnover Ratio = 19,20,000 = 2 times.
Problem 2. Perfect Ltd. gives the following Balance sheet. You are required to compute     the following ratios.
(a) Liquid Ratio
(b) Solvency Ratio
(c) Debt-Equity Ratio
(d) Stock of Working Capital Ratio 
Balance Sheet                                                  $                                                                      $
Equity share capital                            1500000          Fixed Assets                            1400000
Reserve fund                                        100000            Stock                                        500000
6% Debentures                                    300000            Debtors                                   200000
Overdraft                                             100000            Cash                                        100000
Creditors                                       200000                                                      2200000
Solution :
(a)                    Liquid Ratio= Liquid Assets / Liquid Liabilities
(or )
Liquid Assets / Current Liabilities 
LA Debtors = 2,00,000 i.e., 3,00,000 / 200000 = 1.5 
Cash = 1,00,000
         = 3,00,000 
Liquid Liabilities : Creditors = 2,00,000 
(b)                                Debt – Equity Ratio = External Equities /  Internal Equities 
External Equities: 
All outsiders loan Including current liabilities 
3,00,000 + 1,00,000 + 2,00,000 = 6,00,000 
Internal Equities : 
It Includes share holders fund + Reserves 
15,00,000 + 1,00,000 = 16,00,000 
Debt – Equity Ratio = 600000/ 1600000  = 0 · 375 
©                                 Solvency Ratio = Outside Liabilities / Total Assets 
Outside Liabilities = Debenture + Overdraft + Creditors 
= 3,00,000 + 1,00,000 + 2,00,000 = 6,00,000 
Solvency Ratio =( 600000 / 2200000) * 100
 = 27.27% 
(d)                                Stock of Working Capital Ratio = Stock / Working Capital
Working Capital = Current Assets – Current Liabilities
= 8,00,000 – 3,00,000 = 5,00,000
Stock of Working Capital Ratio =* 100 = 100% 
Problem 3. Calculate the following ratios from the balance sheet given below :
(i) Debt – Equity Ratio                        (ii) Liquidity Ratio
(iii) Fixed Assets to Current Assets    (iv) Fixed Assets Turnover
Balance Sheet
Liabilities                                $                                  Assets                                      $
Equity shares of $ 10 each      1,00,000                     Goodwill                                             60000
Reserves                                  20,000                         Fixed Assets                                       140000
P.L. A/c                                   30,000                         Stock                                                   30000
Secured loan                           80,000                         Sundry Debtors                                   30000
Sundry creditors                     50,000                         Advances                                            10000
Provision for taxation                         20,000                         Cash Balance                                      10000
3,00,000                                                                                  300000
The sales for the year were $ 5,60,000.
Solution:        
Debt – Equity = Long – Term Debt / Shareholders Fund
Ratio = Secured loan $. 80,000
Shareholder’s Fund= Equity Share Capital + Reserves + P.L.A/c
= 1,00,000 + 20,000 + 30,000       = 1,50,000
Debt-Equity Ratio = 80,000 / 1,50,000=.53
Liquidity Ratio = Liquid Assets / Liquid Liabilities
Liquid Assets = Sundry Debtors + Advances + Cash Balance
30,000 + 10,000 + 30,000 = 70,000
Liquid Liabilities = Provision for Taxation + sundry creditors
= 20,000 + 50,000 = 70,000
Liquid Ratio = 70,000 / 70,000= 1
Fixed Assets to Current Assets
= Fixed Assets / Current Assets= 1,40,000/ 100000
= 1.4
Fixed Assets Turnover =Turnover / Fixed Assets= 5,60,000/1,40,000
= 4 
Problem 4. The Balance sheet of Naronath & Co. as on 31.12.2000 shows as follows:
Liabilities                                $                      Assets                                                  $
Equity capital                          1,00,000          Fixed Assets                           1,80,000
15% Preference shares            50,000             Stores                                      25,000
12% Debentures                      50,000             Debtors                                   55,000
Retained Earnings                   20,000             Bills Receivable                      3,000
Creditors                                 45,000             Bank                                        2,000
2,65,000                                                          2,65,000
Comment on the financial position of the Company i. e., Debt – Equity Ratio, Fixed Assets Ratio, Current Ratio, and Liquidity.
Solution:
Debt – Equity Ratio =  Debt – Equity Ratio / Long – Term Debt
Long-term Debt = Debentures
= 50,000
Shareholder’s Fund = Equity + Preference + Retained Earnings
= 1,00,000 + 50,000 + 20,000
= 50,000
= 1,70,000
= ·29
Fixed Assets Ratio= Fixed Assets / Proprietor’s Fund= -1,80,000
Proprietor’s Fund=Equity Share Capital + Preference Share Capital+ Retained Earnings
=1,00,000 + 50,000 + 20,000 = 1,70,000
Fixed Assets Ratio = 1,80,000 / 1,70,000= 1.05
Current Ratio = Current Assets / Current Liabilities
Current Assets = Stores + Debtors + BR + Bank= 25,000 + 55,000 + 3,000 + 2,000 = 85,000
Liquid Ratio=45,000 / 85,000= 1.88
Liquid Assets = 45,000
Liquid Liabilities = Debtors + Bill Receivable + Cash=55,000 + 3,000 + 2,000 = 60,000
Liquid Ratio = 60,000 / 45,000   = 1.33
Problem 5: From the following particulars pertaining to Assets and Liabilities of a company calculate :
(a) Current Ratio                     (b) Liquidity Ratio                  (c) Proprietary Ratio
(d) Debt-equity Ratio                         (e) Capital Gearing Ratio
Liabilities                                $                                  Assets                                      $
5000 equity shares $ 10
each                                                     500000                        Land & Building                     500000
8% 2000 pre shares $ 100                                                       Plant & Machinery                  600000
Each                                                    200000                        Debtors                                   200000
9% 4000 Debentures of                                                          Stock                                       240000
$ 100 each                                           400000                        Cash and Bank                        55000
Reserves                                              300000                        Prepaid expenses                     5000
Creditors                                             150000
Bank overdraft                                    50000
1600000                                                               1600000 
Solution :
Current Ratio = Current Assets / Current Liabilities
Current Assets = Stock + Cash + Prepaid Expenses + Debtors
= 2,40,000 + 55,000 + 5,000 + 2,00,000 = 5,00,000
Current Liabilities = Creditors + Bank Overdraft
=1,50,000 + 50,000 = 2,00,000
=5,00,000 / 2,00,000
= 2.5 : 1
Liquid Ratio = Liquid Assets / Liquid Liabilities
Liquid Assets = Cash and Bank + Debtors
=55,000 + 2,00,000 = 2,55,000
Liquid Liabilities : Creditors   = 1,50,000
Liquid Ratio = 2,55,000 / 1,50,000
= 1.7 : 1
Proprietor’s Ratio = Proprietor’s Fund / Total Tangible Assets
Proprietor’s Fund  = Equity Share Capital + Preference
Share Capital + Reserves and Surplus
=5,00,000 + 2,00,000 + 3,00,000
Proprietary Ratio=10,00,000 / 16,00,000
= 0.625 : 1
Debt – Equity Ratio = External Equities / Internal Equities
External Equities = Long-term Liabilities + Short-term Liabilities
= 4,00,000 + 2,00,000 = 6,00,000
Internal Equities = Proprietor’s funds
= 6,00,000 / 10,00,000
= 0.6 : 1
Capital Gearing Ratio = Fixed Interest Bearing Securities / Equity Share Capital + Reserves
Fixed Interest Bearing Securities = Preference Shares           2,00,000
Debentures                  4,00,000
6,00,000
= 6,00,000 / 8,00,000
= 0.75 : 1
Problem 6. From the following details of a trader you are required to calculate :
(i) Purchase for the year.
(ii) Rate of stock turnover
(iii) Percentage of Gross profit to turnover
Sales $                         33,984             Stock at the close at cost price                        1814
Sales Returns              380                  G.P. for the year                                             8068
Stock at the beginning
at cost price     1378
Solution :
Trading Account
To Opening stock                                1378                By Sales                      33984
To Purchase (BD                                 25972              Sales Return                380
To gross profit                                     8068                                                    33604
By closing Stock         1814
35418                                                  35418
(i) Purchase for the year $ 25,972
(ii) Stock Turnover = Cost of Goods Sold
Cost of Goods Sold = Cost of Goods Sold / Average Stock
Average Stock = (Opening Stock + Closing Stock)/ 2
= (1372 + 1814 )/2
=  25916/1596
=16.23 times
(iii) Percentage of Gross Profit to Turnover = Gross Profit / Sales *100
= 8068 / 33 ,984 * 100
= 23.74%.
Problem 7. Calculate stock turnover ratio from the following information :
Opening stock 5                                  8,000
Purchases                                            4,84,000
Sales                                                    6,40,000
Gross Profit Rate – 25% on Sales.
Solution :
Stock Turnover Ratio = Cost of Goods Sold / Average Stock
Cost of Goods Sold = Sales- G.P
= 6,40,000 – 1,60,000 = 4,80,000
Stock Turnover Ratio= 4,80,000 /58000
= 8.27 times
Here, there is no closing stock. So there is no need to calculate the average stock.
Problem 8. Calculate the operating Ratio from the following figures.
Items                                       ($ in Lakhs)
Sales                                                    17874
Sales Returns                                      4
Other Incomes                                                53
Cost of Sales                                       15440
Administration and Selling Exp.        1843
Depreciation                                        63
Interest Expenses (Non- operating     456
Solution:
Operating Ratio = (Cost of Goods Sold + Operating Expenses * 100) / Sales
= ((15,440 + 1,843)/ 17,870)*100
= 97%
Problem 9. The following is the Trading and Profit and loss account of Mathan Bros Private Limited for the year ended June 30,2001.
$                                                                                  $
To Stock in hand                                 76250                          By Sales                                  500000
To Purchases                                       315250                        By Stock in hand                    98500
To Carriage and Freight                      2000
To Wages                                            5000
To Gross Profit                                   200000
598500                                                                        598500
To Administration
Expenses                                 1,01,000                      By Gross profit           2,00,000
To Finance Expenses. :                                                           By Non-operating Incomes
Interest                                    1200                                        Interest on Securities 1,500
Discount                      2400                                        Dividend on Shares 3, 750
Bad Debts                   3400    7000                            Profit on Sale of Shares 750   6,000
To Selling Distribution Expenses        12000
To Non-operating expenses
Loss on sale of securities 350
Provision for legal suit 1,650  2000
To Net profit                                       84000
206000                                                                        206000
You are required to calculate :
(i) Gross profit Ratio               (ii) Expenses Ratio (individual)
(iii) Net profit Ratio                (iv) Operating profit Ratio
(v) Operating Ratio                 (vi) Stock turnover Ratio
Gross Profit Ratio =Gross Profit/ Sales * 100 =  2,00,000 / 500000 * 100
Expenses Ratio =Individual Expenses / Sales
Administration Expenses / Sales *100 =101000/500000 *100= 2.02%
Finance Expenses/ Sales *100 = 7000/ 500000 * 100=1.04 %
Selling and Distribution Expenses / Sales* 100= 12 000/ 500000 *100= 2.40%
Non- Operating Expenses / Sales * 100 = 2000/ 500000 * 100= 0.4%
Net Profit Ratio :
Net Profit/ Sales *100 = 84000/ 500000 *100= 16.8%
Operating Profit Ratio =Operating Profit / Sales *100
Operating Profit = Net Profit + Non-Operating Expenses – Non Operating Incomes
= 84,000 + 2,000 – 6,000 = 80,000
= 80•000 / 5000000* 100 = 16%
Operating Ratio = ( Cost of Goods Sold + Operating Expenses)/Sales* 100
Cost of Goods Sold = Sales – Gross profit
5,00,000 – 2,00,000=  3,00,000
Operating Expenses
All Expenses Debited in the Profit & Loss A/c Except Non-Operating Expenses
[including Finance expense]
1,01,000 + 7,000 + 12,000 = 1,20,000
Operating Ratio = (3,00,000 + 1,20,0000) 500000 * 84%
Stock Turnover Ratio = Cost of Goods Sold / Average Stock
Costs of Goods Sold = 3,00,000
Average Stock = (Opening Stock + Closing Stock)/2
=(76,250 + 95,500) / 2
= 85,875

TO BUY ONLINE STUDY MATERIAL 

OF PRELIMS & MAINS 2017 

EXAM VISIT HERE

No comments: