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    V Semester Bba Management Accounting-Ratio Analysis: Questions & Answers Continued

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    Falak Falak fatima
    The document provides the solution to a question regarding ratio analysis for a company. It involves calculating various financial ratios such as current ratio, liquidity ratio, and inventory turnover ratio based on information provided. It then shows the step-by-step calculation of the company's balance sheet as of June 30, 2014, determining values for current assets, current liabilities, stock, cost of sales, gross profit, sales, debtors, cash, fixed assets, capital, and reserves. The balance sheet presented has total assets and liabilities of Rs. 30,00,000.

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    V Semester Bba Management Accounting-Ratio Analysis: Questions & Answers Continued

    Uploaded by

    Falak Falak fatima
    570 views6 pages
    The document provides the solution to a question regarding ratio analysis for a company. It involves calculating various financial ratios such as current ratio, liquidity ratio, and inventory turnover ratio based on information provided. It then shows the step-by-step calculation of the company's balance sheet as of June 30, 2014, determining values for current assets, current liabilities, stock, cost of sales, gross profit, sales, debtors, cash, fixed assets, capital, and reserves. The balance sheet presented has total assets and liabilities of Rs. 30,00,000.

    Original Title

    RATIO ANALYSIS - 16 Q & A ONLY (1)

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    The document provides the solution to a question regarding ratio analysis for a company. It involves calculating various financial ratios such as current ratio, liquidity ratio, and inventory turnover ratio based on information provided. It then shows the step-by-step calculation of the company's balance sheet as of June 30, 2014, determining values for current assets, current liabilities, stock, cost of sales, gross profit, sales, debtors, cash, fixed assets, capital, and reserves. The balance sheet presented has total assets and liabilities of Rs. 30,00,000.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    570 views6 pages

    V Semester Bba Management Accounting-Ratio Analysis: Questions & Answers Continued

    Uploaded by

    Falak Falak fatima
    The document provides the solution to a question regarding ratio analysis for a company. It involves calculating various financial ratios such as current ratio, liquidity ratio, and inventory turnover ratio based on information provided. It then shows the step-by-step calculation of the company's balance sheet as of June 30, 2014, determining values for current assets, current liabilities, stock, cost of sales, gross profit, sales, debtors, cash, fixed assets, capital, and reserves. The balance sheet presented has total assets and liabilities of Rs. 30,00,000.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 6

    V SEMESTER BBA

    MANAGEMENT ACCOUNTING- RATIO ANALYSIS


    QUESTIONS & ANSWERS CONTINUED

    16. A company having a net working capital of Rs 2.8 lakhs as on 30-6-2014.


    Indicate the following financial ratios and performance figures:
    Current Ratio 2.4
    Liquidity Ratio 1.6
    Inventory Turnover (on cost of sales) 8
    Gross profit on sales 20%
    Credit allowed (months) 1.5
    The company’s fixed assets is equivalent to 90% of its net-worth (share
    capital plus reserves) while reserves amounted to 40% of share capital.
    Prepare the Balance sheet of the company as on 30-6-2014 showing
    step by step calculations.

    Solution:

    a) Calculation of Current Assets & Current Liabilities


    Let Current Liabilities = x
    Current Ratio = Current Assets
    Current Liabilities

    2.4 = Current Assets


    x
    Current Assets = 2.4x
    Working Capital = Current Assets – Current Liabilities
    2,80,000 = 2.4x – x
    2,80,000 = 1.4x
    X = 2,80,000 = 2,00,000
    1.4
    Current Liabilities = 2,00,000
    Current Assets = 2.4x
    = 2.4 X 2,00,000 = 4,80,000

    b) Calculation of Stock
    Stock = Current Assets – Quick Assets

    1 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE
    Quick Assets can be computed with the help of Quick Ratio.

    Quick Ratio = Quick Assets


    Current Liabilities
    1.6 = Quick Assets
    Current Liabilities
    1.6 = Quick Assets
    2,00,000

    1.6 X 2,00,000 = Quick Assets


    Quick Assets = 3,20,000
    Stock = Current Assets – Quick Assets
    = 4,80,000 – 3,20,000
    = 1,60,000

    c) Calculation of Cost of Sales


    Inventory Turnover Ratio = 8
    Stock Turnover Ratio = COGS
    Stock
    8 = COGS
    1,60,000

    COGS = 1,60,000 X 8 = 12,80,000

    d) Calculation of Gross Profit


    Gross Profit on sales = 20%
    Therefore, Gross Profit on Cost of sales = 25%
    Gross Profit = 12,80,000 X25% = 3,20,000

    e) Calculation of Sales
    Cost of Sales 12,80,000
    + Gross Profit 3,20,000
    Sales 16,00,000

    f) Calculation of Debtors
    Average Collection Period = Debtors X 12
    Credit Sales
    1.5 = Debtors X 12
    16,00,000
    12 X Debtors = 16,00,000 X 1.5

    2 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE
    12 X Debtors = 24,00,000
    Debtors = 24,00,000 = 2,00,000
    12

    g) Calculation of Cash
    Current Assets = Stock + Debtors + Cash
    4,80,000 = 1,60,000 + 2,00,000 + Cash
    4,80,000 = 3,60,000 Cash
    Cash = 1,20,000

    h) Calculation of Fixed Assets


    Fixed Assets = 90% of net worth
    Net Worth = Capital + Reserves
    Also Net Worth = Fixed Assets + Net Working Capital
    Net Worth = 0.9 Net worth + 2,80,000
    0.1 Net Worth = 2,80,000
    Net Worth = 2,80,000 = 28,00,000
    0.1
    Fixed Assets = 28,00,000 X 90% = 25,20,000.

    i) Calculation of Capital and Reserves


    Net Worth (i.e. Capital + Reserves) = Rs 28,00,000
    Reserves= 40% of Capital
    Capital + Reserves = 28,00,000
    Capital + 0.4 Capital = 28,00,000
    Therefore, Capital + 0.4 Capital = 28,00,000
    1.4 Capital = 28,00,000
    Capital = 28,00,000 = 20,00,000
    1.4
    Reserves = 20,00,000 X 40% = 8,00,000

    Balance Sheet

    Liabilities Amount Assets Amount


    Share Capital 20,00,000 Fixed Assets 25,20,000
    Reserves 8,00,000 Stock 1,60,000
    Current Liability 2,00,000 Debtors 2,00,000
    Cash 1,20,000

    3 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE
    30,00,000 30,00,000

    4 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE
    5 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE
    6 PROFESSOR SOGARA BI
    KRUPANIDHI DEGREE COLLEGE

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