(a) From the following information given below, calculate: (1+1+1=3)
(i) Gross Profit Ratio
(ii) Working Capital Turnover Ratio
(iii) Debt to Equity Ratio
Sl. No. / Particulars / Amount: 1. Net Sales – Rs. 30,00,000; 2. Cost of goods sold – Rs. 20,00,000; 3. Current liabilities –

Question

(a) From the following information given below, calculate: (1+1+1=3)
(i) Gross Profit Ratio
(ii) Working Capital Turnover Ratio
(iii) Debt to Equity Ratio
Sl. No. / Particulars / Amount: 1. Net Sales – Rs. 30,00,000; 2. Cost of goods sold – Rs. 20,00,000; 3. Current liabilities – Rs. 2,00,000; 4. Loan – Rs. 1,25,000; 5. Current Assets – Rs. 6,00,000; 6. Paid up Share Capital – Rs. 5,00,000; 7. Debentures – Rs. 2,50,000.
(b) From the following calculate Return on Investment: (1+1+1=3)
Sl. No. / Particulars / Amount: 1. Share Capital – Rs. 50,000; 2. Reserve and Surplus – Rs. 25,000; 3. Net fixed assets – Rs. 2,25,000; 4. Non-Current Trade investment – Rs. 25,000; 5. Current Assets – Rs. 1,10,000; 6. 12 % long term borrowings – Rs. 2,00,000; 7. Current liabilities – Rs. 85,000.

Accepted Answer

>

> [!TLDR]
> Three ratios are computed from part (a)'s data; part (b) gives enough to find Capital Employed but not enough to compute ROI without an unstated profit figure.
>
> **(a)(i) Gross Profit Ratio = (Gross Profit ÷ Net Sales) × 100**
> Gross Profit = Net Sales − Cost of Goods Sold = 30,00,000 − 20,00,000 = Rs. 10,00,000
> Gross Profit Ratio = (10,00,000 ÷ 30,00,000) × 100 = **33.33%**
>
> **(a)(ii) Working Capital Turnover Ratio = Net Sales ÷ Working Capital**
> Working Capital = Current Assets − Current Liabilities = 6,00,000 − 2,00,000 = Rs. 4,00,000
> Ratio = 30,00,000 ÷ 4,00,000 = **7.5 times**
>
> **(a)(iii) Debt to Equity Ratio = Debt ÷ Equity**
> Debt = Loan + Debentures = 1,25,000 + 2,50,000 = Rs. 3,75,000
> Equity = Paid-up Share Capital = Rs. 5,00,000
> Ratio = 3,75,000 ÷ 5,00,000 = **0.75 : 1**
>
> **(b) Return on Investment = (Net Profit before Interest and Tax ÷ Capital Employed) × 100**
> Capital Employed = Shareholders' Funds + Long-term Borrowings
> = (Share Capital 50,000 + Reserves & Surplus 25,000) + 12% Long-term Borrowings 2,00,000
> = Rs. 2,75,000 (cross-check: Net Fixed Assets 2,25,000 + Non-current Trade Investment 25,000 + Current Assets 1,10,000 − Current Liabilities 85,000 = 2,75,000 ✓)
> …

Category	What it measures	Example
Liquidity ratios	Ability to pay short-term debts	Current ratio
Solvency ratios	Ability to pay long-term debts	Debt-equity ratio
Activity ratios	How efficiently assets are used	Inventory turnover ratio
Profitability ratios	How much profit relative to sales/investment	Gross profit ratio

Particulars	Note No.	Amount (₹)
I. Revenue from Operations		xxx
II. Other Income		xxx
III. Total Revenue (I + II)		xxx
IV. Expenses:
Cost of Materials Consumed		xxx
Purchases of Stock-in-Trade		xxx
Changes in Inventories		xxx
Employee Benefit Expenses		xxx
Finance Costs		xxx
Depreciation and Amortisation		xxx
Other Expenses		xxx
Total Expenses		xxx
V. Profit before Tax (III – IV)		xxx
VI. Tax Expense		xxx
VII. Profit for the Period (V – VI)		xxx

Particulars	Note No.	Amount (₹)
EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital		xxx
(b) Reserves and Surplus		xxx
2. Non-Current Liabilities		xxx
3. Current Liabilities		xxx
Total		xxx
ASSETS

Item	Working	Amount (₹)
Total Sales	50,000 (cash) + 4,50,000 (credit)	5,00,000
Less: Cost of Goods Sold		4,40,000
Gross Profit	5,00,000 − 4,40,000	60,000
…

Q.(a) From the following information given below, calculate: (1+1+1=3)

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Concept: Debt-Equity Ratio

Analysis of Each Transaction

(A) Issue of Shares ₹2,00,000

(B) Issue of 8% Debentures ₹5,00,000

(C) Issue of Bonus Shares ₹4,00,000

Q.(a) From the following information given below, calculate: (1+1+1=3)

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