Problem 1

Following is the Balance Sheet of Adarsh Products Ltd., as at 31st Dec 1982
Liabilities Rs. Assets Rs.
Equity Share of Rs. 100 each 400000 Fixed Assets(at cost) | 470000
Premium on Shares 20000 (-)Less Depriciation | 81900 388100
General Reserve 70000 Cash and Bank 45900
Profit & Loss A/c 12500 Stock in Trade 170500
Creditors 197700 Sundry Debtors 142700
Proposed Dividend 20000
Provision for Taxation 27000

Total 747200 Total 747200

The following additional information is available:

The profit for the year was Rs. 46000
You are required to arrange the above items in the form of a financial analysis and compute the
following:
i) Current Ratio
ii) Liquid Ratio (Acid Test Ratio)
iii) Return on Proprietor’s a Funds, together with other comments in case of each ratio.

Problem 2

From the Balance sheet of a corporation given below, compute,

i) Working Capital
ii) Net Capital Employed
iii) Current Ration
iv) Acid Test Ratio
v) Debt Equity Ratio
Balance Sheet as on 31st Dec 1985
Liabilities Rs. Assets Rs.
Equity Share Capital 25000 Fixed Assets 30000
Preference Share Capital 5000 Stores 2000
Reserves & Surplus 4000 Stock in Trade 4000
Debentures 8000 Sundry Debtors 1000
Bank Loan 4000 Cash in Hand 500
Sundry Creditors 1000 Balance with Scheduled Bank 2500
Provision for Taxation 2000 Preliminary Expenses 8000
Proposed Dividends 1000 Brokerage on subscription of shares 2000

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 Total 50000 Total 50000
Problem 3

The Following are the summarized Balance Sheets of Surplus Co. Ltd.
(Rs. in Lakhs)
Liabilities 31.12.80 31.12.81 Assets 31.12.80 31.12.81
Share Capital 2.00 3.00 Land & Building 0.50 0.40
General Reserve 0.60 0.70 Machinery 1.50 2.30
Profit & Loss A/c 0.30 0.40 Furniture 0.30 0.30
Debentures 0.50 1.00 Stock 0.40 0.56
Creditors 1.20 1.30 Debtors 1.80 2.40
Provision for Taxation 0.60 0.70 Cash & Bank Balance 0.50 1.04
Preliminary Expenses 0.20 0.10

Total 5.20 7.10 Total 5.20 7.10

The summarized Profit and Loss Account is as under

(Rs. in Lakhs)
Particulars 31.12.80 31.12.81
Sales 2.40 4.00
Less: Cost of goods sold 1.60 2.40
Gross Profit 0.80 1.60
Less: Administration and Selling Expenses 0.32 0.60
Net Profit 0.48 1.00

Calculate the following accounting ratios and comment in brief on each of them
i) Gross Profit Ratio
ii) Net Profit Ratio
iii) Return on Capital Employed
iv) Stock turnover Ratio
v) Current Ratio
vi) Debt Equity Ratio

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Problem 4

From the following Annual Accounts of ABC Ltd. For the year ended on 31 st March 1984, you are
required to calculate the following ratios and state the significance of each
i) Operating Ratio
ii) Stock Turnover Ratio
iii) Current Ratio
iv) Acid Test Ratio
v) Debtors Turnover Ratio
vi) Return on Net Worth Ratio

Balance Sheet as on 31st March 1984

(Omitted’000)
Liabilities Rs. Assets Rs.
Share Capital 500 Land & Building 500
General Reserve 400 Plant & Machinery 200
Profit & Loss A/c 150 Stock 150
Sundry Creditors 200 Sundry Debtors 250
Cash & Bank Balances 150

Total 1250 Total 1250

Profit & Loss Account as on 31st March 1984

(Omitted’000)
Particulars Rs. Particulars Rs.
To Opening Stock 250 By Sales 1800
To Purchases 1050 By Closing Stock 150
To Gross Profit C/f 650
1950 1950
To Selling Expenses 100 By Gross Profit B/f 650
To Administration Expenses 230 By Profit on sale of fixed assets 50
To Miscellaneous Expenses 20
To Net Profit 350
700 700

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Problem 5

From the following financial statement of limited company as on 31 st Dec 1988 prepare a statement
showing
i) Current Ratio
ii) Liquid Ratio
iii) Debt Equity Ratio
iv) Return on Proprietory Fund
v) Capital Gearing Ratio
The Profit of the year was Rs.90000

Balance Sheet as on 31st Dec 1988

Issued and Paid up Share Capital
Pref. Shares of Rs. 100 each 200000
Prd. Shares of Rs. 100 each 500000
Reserves and Surplus
General Reserves 80000
P & L A/c Balance 10000
790000
Debentures 100000
890000
Current Assets
Closing Stock 350000
Sundry Debtors 250000
Cash in Hand 15000
Cash at Bank 35000
650000
Less Current Liabilities
Sundry Creditors 300000
Proposed Dividend 25000
Interest Acrued 5000
Provision for Tax 20000
350000
Net Current 300000
Assets:- 690000
Fixed Assets 100000 590000
Less Depreciation 890000

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Problem 6

Following are the financial statements of Greenfield India Ltd. for the year 1986

Balance Sheets as on 31st Dec 1986

Owners Equity Rs. Assets Rs.
7% Preference Shares Capital 100000 Building 300000
Equity Share Capital 400000 Plant & Machinery 200000
General Reserve 450000 Furniture 100000
Retained Earning 12500 Patents 25000
Debts Current Assets
6% Debenture 50000 Cash 110000
Loan(Long Term) 40000 Bank 65000
8% Bonds 10000 Investments(Government Securities) 90000
Current Liabilities Sundry Debtors 57500
Creditors 30000 Bills Receivable 40000
Bills Payable 10000 Stock 150000
Outstanding Expenses 10000 Prepaid Expenses 10000
Bank Overdraft 10000
Proposed Dividend 25000
Total 1147500 Total 1147500
st
Profit and Loss Account for the year ended on 31 Dec 1986
Particulars Rs.
Sales 1200000
Less: Cost of goods sold 800000
Gross Profit 400000
Less: Expenses 350000
Net Profit 50000

Compute the following Ratios

i) Current Ratio
ii) Acid Test Ratio
iii) Gross Profit Ratio
iv) Return on Proprietors’ Funds
v) Debt Equity Ratio
vi) Fixed Assets to Net Tangible Worth Ratio
vii) Current Assets to Proprietors Funds Ratio

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viii) Total Assets Turnover Ratio ix) Operating Ratio x) Return on Capital Employed
Problem 7

The ABC Company’s financial statements contain the following information

Balance Sheets
Particulars 31.3.94 31.3.95
Cash 200000 160000
Sundry Debtors 320000 400000
Temporary Investments 200000 320000
Stock 1840000 2160000
Prepaid Expenses 28000 12000
Total Current Assets 2588000 2588000
Total Assets 5600000 6400000
Current Liabilities 640000 800000
10% Debentures 1600000 1600000
Equity Share Capital 2000000 2000000
Retained Earnings 468000 812000

Profitability Statement for the year ended 31.3.95

Particulars Rs.
Sales 4000000
Less: Cost of goods sold 2800000
Less: Interest 160000
2960000
Net Profit fpr 1995 1040000
Less: Taxes @50% 520000

Dividend declared on Equity Shares Rs. 220000

From the above figures, appraise the financial position of the company from the point of view of
i) Liquidity
ii) Solvency
iii) Profitability
iv) Activity

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Problem 8

On the basis of the following financial statement calculate following ratios and also comment on them
i) Current Ratio
ii) Operating Ratio
iii) Return on Investment Ratio
iv) Inventory Turnover Ratio

Income Statement for 1975

Particulars Rs.
Net Sales 1000000
Cost of Goods 756000
Operating Expenses 125000
Depreciation 44000
Income from Investment 140000
Income Tax 65000

Balance Sheet as on 31st Dec 1975

Liabilities Rs. Assets Rs.
Share Capital 300000 Building 250000
Debentures 200000 Plant & Machinery 210000
Profit after Tax 150000 Investments 80000
Bills Payable 130000 Stocks 115000
Sundry Creditors 60000 Bills Receivable 160000
Provision for Taxation 65000 Sundry Debtors 45000
Outstanding Expenses 5000 Accrued Income 15000
Cash 35000

Total 910000 Total 910000

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Problem 9

A Corporation gives the following information during the period ending 31.12.79 and 31.12.80.
You are required to find out
i) Current Ratio
ii) Quick Ratio
iii) Average Collection Period
iv) Receivable Turnover Ratio
v) Inventory Turnover Ratio

Balance Sheets
Liabilities 1980 1979 Assets 1980 1979
Equity Stock (Rs. 10 per shares) 3.00 3.00 Land & Building 10.00 6.00
Less: Depreciation 1.20 0.72
Free Leserves 6.00 3.50 8.80 5.28
12% Debentures 5.00 5.00 Plant & Machinery 3.00 3.36
Less: Depreciation 0.50 0.56
Bills Payable 2.00 1.75 2.50 2.80
Outstanding Taxes 0.80 0.30 Inventory 3.50 3.22
Accounts Receivables 2.00 2.25

Total 16.80 13.55 Total 16.80 13.55

Income Statement
Particulars 1980 1979
Net Sales(60% on credit) 45.00 36.00
Cost of goods sold 33.00 29.00
Gross Profit 12.00 7.00
Distributing Expenses 5.00 3.00
Profit before Tax (PBT) 7.00 4.00
Taxes (50%) 3.50 2.00
Profit After Tax (PAT) 3.50 2.00
Free Reserves at the beginning 3.50 2.00
7.00 4.00
Payment of Cash Dividend 1.00 0.50
Free Reserves at the end 6.00 3.50

Inventory was valued at Rs.2.96 Laks as on 31.12.78

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Problem 10

Following accounting information is obtained relating to a limited company

Particulars Rs.
Sales 3000000
Cash of goods sold 1500000
1500000
Administrative Expenses 500000
1000000
Taxes 500000
Net Profit 500000

Balance Sheet
Liabilities Rs. Assets Rs.
10% Preference Shares Capital 2000000 Fixed Assets 5500000
Equity Shares Capital 2000000 Stock 200000
Reserves 1000000 Debtors 400000
10% Debentures 1100000 Cash 200000
Current Liabilities 300000 Ficticious Assets 100000

Total 910000 Total 910000

Opening Stock was Rs. 300000

Administration expenses include depreciation and debenture interest
Assume 360 days in year
Compute the following ratios
i) Gross Profit Ratio
ii) Net Profit Ratio
iii) Current Ratio
iv) Liquid Ratio
v) Proprietory Ratio
vi) Rate of Return on Equity share capital

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Problem 11

From the following statements of X Ltd. calculate

i) Current Ratio
ii) Liquid Ratio
iii) Gross Profit Ratio
iv) Net Profit Ratio
v) Fixed Assets Turnover
vi) Net Profit to capital employed
vii) Sales to capital employed
viii) Debtors Turnover

Income Statement for the year ending 31st Dec 1988

Particulars Rs. Rs.
Sales
- Cash 64000
- Credit 684000
748000
Less - Cost of Sales 596000
Gross Profit 152000
Less - Expenses
- Warehouse & Transport 48000
- Administration 38000
- Selling 28000
- Debenture Interest 4000
118000
34000

Balance Sheet as on 31st Dec 1988

Liabilities Rs. Assets Rs.
Share Capital 150000 Fixed Assets (Net) 80000
Reserves 60000 Current Assets
Profit & Loss A/c 24000 Stock 188000
Debentures 60000 Debtors 164000
Current Liabilities 152000 Cash 14000

Total 446000 Total 446000

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