Ratio Problems
Ratio Problems
Ratio Problems
PROBLEMS
1. The balance sheets and trading and profit and loss accounts
for the year ended 30 June, 19X2 of S Ltd and T Ltd are given in
Tables 4.30 and 4.31. You may assume that stocks have
increased evenly throughout the year. You are required to:
(a) Calculate three of the following ratios separately for each
company:
(i) net profit for the year as a percentage of net assets
employed at 30 June, 19X2;
(ii) net profit for the year as a percentage of sales;
(iii) gross profit for the year as a percentage of sales;
(iv) current assets to current liabilities at 30 June, 19X2;
(v) liquid ratio at 30 June, 19X2; and
(vi) stock turnover during the year.
(b) Describe briefly the main conclusions which you draw from
a comparison of the ratios which you have calculated for
each company. (C.A., adapted)
Table 25.30: S Ltd and T Ltd
Balance Sheet
as on 30 June, 19X2
S Ltd
(Rs)
T Ltd
10,000
5,000
62,00040,00065,00047,000
Sales amounted to Rs 350,000 in the first year and Rs
300,000 in the second year. You are required to comment on
the solvency position of the concern with the help of
accounting ratios.
3. From the following information you are required to (a) analyze the
relative position of ABC Ltd in the industry and (b) point out the
deficiencies and suggest improvements.
Table 25.33: ABC Ltd
Balance Sheet
2.95
1.05
50%
2.60%
0.35
0.80
0.50
16%
15%
21%
N
Rs
Sales
Total assets
Net profit
M
Rs
800,000
4,000,000600,000
750,000420,000
200,000
19X5
1,5002,2503,0003,750
4,500
.........
Inventory .........
56,233
Owners capital208,812181,341163,394
Total
277,451245,490219,627
19X319X219X1
Assets
Cash
19,55014,3769,542
Debtors
86,78461,60140,217
Stock
61,66163,16768,086
Prepaid expenses2,6671,433 863
Total current assets170,662140,577 118,708
Fixed assets
99,28597,87896,229
Investments
7,5047,0354,690
Total non-current assets106,789104,913
100,919
Total
277,451245,490219,627
Table 25.39: Surendra Mohan and Sons
Summarised Profit and Loss Statements
19X319X219X1
(Rs)
Sales
481,053457,172 399,291
Cost of goods sold310,720275,514229,878
Gross profit
170,333181,658169,413
Operating expenses141,377137,984
120,593
Net profit
28,956 43,674 48,820
8. The following are the comparative financial statements for
three years for Plastic Works Limited. You are required to
comment on the firms financial condition and indicate the
areas which require managements attention.
Table 25.40: Plastic Works Limited
Comparative Balance Sheets(Rs)
19X319X219X1
Liabilities and Capital
Bank borrowing
30,525 10,175
Creditors
331,127147,725113,980
Accrued expenses
21,510 14,361
20,350
Provision for dividend
20,350 20,350
20,350
Provision for taxes56,36788,43586,111
Total current liabilities 459,879281,046 240,791
Long-term loan 71,225 Nil Nil
Total liabilities531,104281,046240,791
Share capital 407,000407,000407,000
Reserves and surplus80,98388,826
67,067
Net worth
487,983495,826474,067
Total Funds 1019,087776,872714,858
Assets
Cash
99,164 35,922 13,930
Debtors
215,356207,780211,196
Stock:
Raw material 133,577107,409 98,411
Work in process
47,882 50,179
42,230
Finished goods 266,534177,788174,892
Prepaid expenses17,35013,72612,697
Total current assets779,863592,804 553,356
19X319X219X1
Buildings, plant and equipment 229,314
177,047
161,502
Misc. fixed assets9,9107,021
2000
ASEETS
Gross fixed assets
6,962.897,408.467,850.82
8,948.52
10,032.1710,668.3311,258.17
Less: Cumulative depreciation1,749.412,014.902,324.42
2,648.48
2,973.593,241.953,720.08
Net fixed assets
5,213.485,393.565,526.40
6,300.04
7,058.587,426.387,538.09
Investments
220.65410.94664.90626.08
588.84
818.89850.83
Current Assets
Inventories
1,039.70
Receivables
1,948.40
Marketable investment
399.51
Cash and bank balance
336.19
865.341,076.571,021.11
1,016.51944.85921.77
1,341.871,723.632,178.76
1,874.181,868.772,060.70
175.51365.75479.77453.03
342.35381.38
162.44437.09251.38462.96
232.87239.78
2,545.163,603.043,931.02
3,904.09
3,626.393,388.843,603.63
Misc. expenses not written off31.33167.99278.32896.98
1,118.53
828.12920.29
Total Assets
7,835.119,209.789,920.87
11,274.16
11,992.8312,119.8812,531.46
CAPITAL & LIABILITIES
Net worth
4,064.88
Share capital
367.77
2,688.043,742.403,974.02
4,164.424,558.404,888.43
336.87367.23367.38367.55
517.77507.77
Equity capital
336.87367.23367.38367.55
367.77
367.77367.77
Preference capital
0.00 0.00 0.00 0.00 0.00
150.00
140.00
Reserves & surplus
2,351.173,375.173,606.64
3,697.33
3,796.654,040.634,380.66
Total borrowings
3,582.733,842.074,082.49
5,212.44
5,503.264,946.524,672.56
Current liabilities & provisions1,564.341,625.311,864.36
1,996.84
2,325.152,614.962,970.47
Current liabilities
1,421.511,326.821,385.47
1,414.66
1,463.351,492.551,696.38
Sundry creditors
1,256.721,203.971,251.00
1,296.61
1,340.171,345.651,574.35
Others
164.79122.85134.47118.05
123.18
146.90122.03
Provisions
142.83298.49478.89582.18
861.80
1,122.411,274.09
Tax provision
21.2418.96111.40150.58
185.53
167.04180.20
Dividend provision
118.24156.97165.66147.25
147.11
147.11183.89
Other provisions
3.35122.56201.83284.35
529.16
808.26910.00
Total Liabilities 7,835.11 9,209.78 9,920.87 11,274.16
11,992.8312,119.8812,531.46
Table 25.43: Tata Iron and Steel Company Limited
Summarized Profit & Loss Account for the Year Ending
on 31 March
(Rs in crore)
2000
Income
Sales
7012.35
Less: Excise
710.09
Net sales
6175.03
19951996199719981999
2001
4993.396349.356919.4
6885.127015.167822.58
440.77592.61696.49724.34
796.86920.83
4552.625756.746222.916288.01
6218.36901.75
Other income
96.73
Change in stocks
33.19
Non-recurring income
152.44
Total Income
6457.78
PBDIT (EBITDA)
1058.26
Less: Depreciation
382.18
PBIT
687.15
Less: Interest
360.35
44.5876.18150.52117.16
68.5186.53
17.3566.2442.12 4.846.18
56.74
16.03 0.35 11.227.59139.84
13.15
4595.885899.516426.756437.56
6406.066944.69
808.11212.741260.451030.38
1291.981507.68
262.26297.61326.83343.23
426.54492.25
545.84915.13933.62
676.08865.441015.43
281.4348.91390.66323.42
388.35412.39
PBT
264.44566.22542.96
363.73
315.73477.09603.04
Less: Tax provision
0.25 0.4373.7541.65 33.5
54.5
49.6
PAT
264.19565.79469.21
322.08
282.23422.59553.44
Appropriation of Profit
Equity Dividends
118.24156.97165.66147.25
147.11
154.86196.09
Dividend Tax
0
016.5714.7316.18
17.04
21.52
Retained earnings
145.95408.82286.98160.1
118.94
250.69335.83
Other Financial Items
Cash profit
530.35867.3801.69665.31
664.41
849.131045.69
Cash flow from business activities681.14638.86881.3880.44
1007.98
1323.941718.7
Value of output
4504.295795.266238.26257.51
6189.62
6154.846812.71
Gross value added
1501.192174.542205.362055.3
1998.68
2273.552732.1
Net value added
1238.93 1876.93 1878.53 1712.07
1616.5
1847.01 2239.85