1.

From the following details prepare a Balance Sheet:

 Current Ratio 1.75

 Liquid Ratio 1.25
 Stock Turnover Ratio (Closing Stock) 9 times
 Gross Profit Ratio 25%
 Debt. Collection period 1.5 months
 Reserves to capital 0.2
 Turnover of fixed assets 1.2
 Capital gearing ratio 0.6
 Fixed assets to net worth 1.25
 Sales for the year Rs. 12,00,000

2. Current Ratio is 3.5 and Acid test Ratio is 2.1. If inventory is Rs. 30,000 find current asset and current
liabilities?

3. Current asset is Rs. 5,00,000/- and current liabilities is Rs. 3,00,000/- Management intent make current ratio
to 2.1 by making payment to creditors. How much should they pay?

4. Profit after interest on tax is Rs. 4,00,000/-. Interest is Rs. 30,000/-, Tax is Rs.50,000/-. Calculate Interest
coverage ratio.

5. The Current Ratio of company is 3:1 representing current asset worth Rs. 4,50,000/- and current liabilities
worth Rs. 1,50,000/-. The management desires to make current ratio at 2:1 by acquiring additional current
asset. Calculate the current asset to be acquired.

6. From the following details, prepare statement of proprietary funds with as many
details as possible:

1. stock velocity : 6
2. Capital turnover ratio based on cost of sales: 2
3. Fixed assets turnover ratio based on cost of sales: 4
4. Gross Profit turnover ratio: 20 %
5. Debtors Velocity: 2 months
6. Creditors Velocity: 73 days
Other details:
(a) The gross profit was Rs. 60,000
(b) Reserve and Surplus comes to Rs. 20,000
(c) Closing stock was Rs. 5,000 in excess of opening stock.

7. In projecting the financial plan of firm, the use of the following accounting
ratios is made:
Estimated Annual Sales Rs. 2,00,000
Sales to Net Worth 2.5
Current Debt to Net Worth 25 %
Total Debt to Net Worth 60 %
 Current Ratio 3.6 Times
Net Sales to Inventory 4 Times
Average Collection Period 36 days
(A year = 360 days)
Fixed Assets to Net Worth 70 %

On the above basis prepare proforma Balance Sheet of the firm.

7. From the following details prepare a Balance Sheet:

 Current Ratio 1.75

 Liquid Ratio 1.25
 Stock Turnover Ratio (Closing Stock) 9 times
 Gross Profit Ratio 25%
 Debt. Collection period 1.5 months
 Reserves to capital 0.2
 Turnover of fixed assets 1.2
 Capital gearing ratio 0.6
 Fixed assets to net worth 1.25
 Sales for the year Rs. 12,00,000

8. Current Ratio is 3.5 and Acid test Ratio is 2.1. If inventory is Rs. 30,000 find current asset and current
liabilities?

9. Current asset is Rs. 5,00,000/- and current liabilities is Rs. 3,00,000/- Management intent make current ratio
to 2.1 by making payment to creditors. How much should they pay?

10. Profit after interest on tax is Rs. 4,00,000/-. Interest is Rs. 30,000/-, Tax is Rs.50,000/-. Calculate Interest
coverage ratio.

11. The Current Ratio of company is 3:1 representing current asset worth Rs. 4,50,000/- and current liabilities
worth Rs. 1,50,000/-. The management desires to make current ratio at 2:1 by acquiring additional current
asset. Calculate the current asset to be acquired.

12. From the following details, prepare statement of proprietary funds with as many
details as possible:

1. stock velocity : 6
2. Capital turnover ratio based on cost of sales: 2
3. Fixed assets turnover ratio based on cost of sales: 4
4. Gross Profit turnover ratio: 20 %
5. Debtors Velocity: 2 months
6. Creditors Velocity: 73 days
Other details:
(a) The gross profit was Rs. 60,000
(b) Reserve and Surplus comes to Rs. 20,000
(c) Closing stock was Rs. 5,000 in excess of opening stock.
 13. In projecting the financial plan of firm, the use of the following accounting
ratios is made:

Estimated Annual Sales Rs. 2,00,000

Sales to Net Worth 2.5
Current Debt to Net Worth 25 %
Total Debt to Net Worth 60 %
Current Ratio 3.6 Times
Net Sales to Inventory 4 Times
Average Collection Period 36 days
(A year = 360 days)
Fixed Assets to Net Worth 70 %

On the above basis prepare proforma Balance Sheet of the firm.

14.From the following details prepare a Balance Sheet:

 Current Ratio 1.75

 Liquid Ratio 1.25
 Stock Turnover Ratio (Closing Stock) 9 times
 Gross Profit Ratio 25%
 Debt. Collection period 1.5 months
 Reserves to capital 0.2
 Turnover of fixed assets 1.2
 Capital gearing ratio 0.6
 Fixed assets to net worth 1.25
 Sales for the year Rs. 12,00,000
.
Selected balance sheet information of Jones Limited (JL) for the recent four years is presented below:
Particulars 2013 2014 2015 2016
Non-current assets 150 175 225 ?
Shareholders’ equity ? 250 300 360
Total assets ? ? 750 ?
Current liabilities 200 225 ?a ?b
Current assets 350 ? ?a ?b
Non-current liabilities 100 ? ? 180
Total liabilities & Shareholder’ equity ? 650 ? 800
a) Current assets - Current liabilities = 225
b) Current assets - Current liabilities = 300
Fill up the blank - You need not prepare the table only write the year and items.
 FORMULAE

Current assets
1. Current ratio =
Current liabilities

Quick assets
2. Acid–test ratio =
Current liabilities

Cost of goods sold

3. Inventory turnover ratio =
Average inventory

Net Credit Sales

4. Debtors turnover ratio =
Average debtors

Net credit purchases

5. Creditors turnover ratio =
Average creditors

Liquid assets
6. Defensive-interval ratio =
Projected daily cash requirement

Cash flow from operations

7. Cash-flow from operations ratio =
Current liabilities

Long−term debt
8. D/E ratio =
Shareholders′ equity

Total debt
9. D/E ratio =
Shareholders′ equity

Long−term debt
10. Debt to total capital ratio =
Permanent capital

Total debt
11. Debt to total assets/capital ratio =
Total assets
 Proprietor′ s funds
12. × 100
Total assets

EBIT
13. Interest coverage =
Interest

EAT
14. Dividend coverage =
Preference dividend

EBIT+Lease payment
15. Total fixed charge coverage = Interest+Lease payments+(Preference
dividend+Instalment of principal)/(1−t)

16. Total cash flow coverage =

EBIT+Lease Payments+Depreciation+Non−cash expenses

(𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝑟𝑒𝑝𝑎𝑦𝑚𝑒𝑛𝑡) (𝑃𝑟𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑑𝑖𝑣𝑖𝑑𝑒𝑛𝑑)

𝐿𝑒𝑎𝑠𝑒 𝑝𝑎𝑦𝑚𝑒𝑛𝑡+𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+ (1−𝑡)
+ (1−𝑡)

∑𝑛
𝑡=1 𝐸𝐴𝑇𝑡 +𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡𝑡 +𝐷𝑒𝑝𝑟𝑒𝑐𝑖𝑎𝑡𝑖𝑜𝑛𝑡 +𝑂𝐴𝑡
17. DSCR =
∑𝑛
𝑡=1 𝐼𝑛𝑠𝑡𝑎𝑙𝑚𝑒𝑛𝑡𝑡

Gross profit
18. Gross profit margin = × 100
Sales

Earnings before interest and taxes (EBIT)

19. Operating profit ratio =
Net sales

Earnings before taxes (EBT)

20. Pre-tax profit ratio =
Net sales

Earnings after interest and taxes (EAT)

21. Net profit ratio =
Net sales

Cost of goods sold

22. Cost of goods sold ratio = × 100
Net sales
 Administrative expenses +Selling expenses
23. Operating expenses ratio = × 100
Net Sales

Administrative expenses
24. Administrative expenses ratio = × 100
Net sales

Selling expenses
25. Selling expenses ratio = × 100
Net sales

Cost of goods sold+Operating expenses

26. Operating ratio = × 100
Net sales

Financial expenses
27. Financial expenses ratio = × 100
Net sales

Net profit after taxes

28. Return on assets (ROA) = × 100
Average total assets

Net profit after taxes+Interest

29. ROA = × 100
Average total assets

Net profit after taxes+Interest

30. ROA = × 100
Average tangible assets

Net profit after taxes+Interest

31. ROA = × 100
Average fixed assets

EAT+(Interest−Tax advantage on interest)or After tax interest cost

32. ROA =
Average total assets/Tangible assets /Fixed assets

EBIT
33. ROCE = × 100
Average total capital employed

Net profit after taxes+Interest−Tax advantage on interest

34. ROCE = × 100
Average total capital employed
 Net profit after taxes+Interest−Tax advantage on interest
35. ROCE = ×100
Average total capital employed

Net profit after taxes

36. Return on total shareholders’ equity = ×100
Average total shareholders′ equity

Net profit after taxes−Preference dividend

37. Return on equity funds= × 100
Average ordinary shareholders′ equity or net worth

Net profit available to equity−holders

38. EPS =
Number of ordinary shares outstanding

Net profit available to equity−owners+Depreciation+Amortisation

+Non−cash expenses
39. Cash EPS =
Number of equity shares outstanding

Net worth
40. Book value per share =
Number of equity shares outstanding

MPS
41. P/B ratio =
BPS

Dividend paid to ordinary shareholders

42. DPS =
Number of ordinary shares outstanding

Total dividend (cash dividend) to equityholders

43. D/P ratio = × 100
Total net profit belonging to equityholders

Dividend per ordinary share (DPS)

44. D/P = × 100
Earnings per share (EPS)

EPS
45. Earnings yield = × 100
Market value per share

DPS
46. Dividend yield = × 100
Market value per share
 Market price of share
47. P/E ratio =
EPS

Cost of goods sold

48. Inventory turnover =
Average Inventory

Sales
49. Inventory turnover =
Closing inventory

Cost of raw materials used

50. Raw materials turnover =
Average raw material inventory

Cost of goods manufactured

51. Work-in-progress turnover =
Average work−in−progress inventory

Credit sales
52. Debtor turnover =
Average debtors+Average bills receivable (B/R)

Total sales
53. Debtors turnover =
Debtors+Bills receivable

Months (days)in a year

54. Average collection period =
Debtors turnover

Months (days)in a year (×)(Average Debtors+Average (B/R)

55. Alternatively =
Total credit sales

Cost of goods sold

56. Total assets turnover =
Average total assets

Cost of goods sold

57. Fixed assets turnover =
Average fixed assets

Cost of goods sold

58. Capital turnover =
Average capital employed
 Cost of goods sold
59. Current assets turnover =
Average current assets

Cost of goods sold

60. Working capital turnover ratio =
Net working capital

61. Earning power = Net profit margin × Assets turnover

Earnings after taxes Sales EAT

62. Earning power = × =
Sales Total assets Total assets

Earnings after taxes, EAT Sales Assets

63. × × Equity
Sales Assets

64. Net profit ratio (×) Assets turnover (×) Financial leverage/Equity multiplier

65. Net profit ratio × Assets turnover × Financial leverage

66. ROE = (ROA – Interest cost ÷ Assets) × Assets ÷ equity

EAT EBT EBIT Net Profit

67. × EBIT × =
Earnings before taxes (EBT) Sales Sales

EAT EBT EBIT Sales Assets

68. × EBIT × Sales × ×
EBT Assets Equity

Internal Growth Rate (IGR)

The IGR is the maximum rate at which a firm can grow (in terms of sales or
assets) without external financing of any kind. To determine the IGR the
following assumptions are made:
(i) There is an increase in assets of the firm in proportion to the sales,
(ii) The net profit margin after taxes (EAT) is in direct proportion to
sales,
(iii) The firm has a target dividend payout ratio (in other words,
retention ratio) which it wants to maintain,
 (iv) The firm wants to grow at a rate which is warranted by its
retentions. In other words, the firm does not raise external funds
(neither equity nor debt) to finance assets.

ROA ×b
69. IGR =
1−(ROA ×b)

Sustainable Growth Rate (SGR)

The SGR is the maximum rate at which the firm can grow by using internal
sources (retained earnings) as well as additional external debt but without
increasing its financial leverage (debt – equity ratio). To determine SGR,
the two additional assumptions are made:
(i) The firm has a target capital structure (D/E ratio) which it wants to
maintain,
(ii) The firm does not intend to sell new equity shares as it is a costly
source of finance.

ROE ×b
70. SGR =
1−(ROE ×b)

b= retention ratio i.e (1-dividend pay out ratio)

Since ROE is the product of net profit margin (P), asset turn over (A) and
financial leverage (A/E) SGR can be decomposed as shown below(71)

P×A×A/E×b
71. SGR =
1−(P×A×A/E×b