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R K Mohanty: Faculty Member, Sir SPBT College, Central Bank of India, Mumbai
R K Mohanty: Faculty Member, Sir SPBT College, Central Bank of India, Mumbai
As
Balance
Sheet Ratio
Financial Ratio
Current Ratio
Quick Asset
Ratio
Proprietary
Ratio
Debt Equity
Ratio
P&L Ratio or
Balance Sheet
Income/Revenu and Profit &
e Statement
Loss Ratio
Ratio
Operating Ratio
Composite Ratio
Fixed Asset
Turnover Ratio,
Return on Total
Resources Ratio,
Return on Own
Funds Ratio,
Earning per Share
Ratio, Debtors
Turnover Ratio,
LIABILITIES
ASSETS
CURRENT LIABILTIES
Bank Working
Capital Limits such as
CC/OD/Bills/Export Credit
Sundry /Trade Creditors/Creditors/Bills
Payable, Short duration loans or deposits
Expenses payable & provisions against
various items
Assets other than Current Assets are Long Term Use of Funds
Installments of Term Loan Payable in 12 months are to be taken as
Current Liability only for Calculation of Current Ratio & Quick Ratio.
If there is profit it shall become part of Net Worth under the
head Reserves and if there is loss it will become part of
Intangible Assets
Investments in Govt. Securities to be treated current only if these
are marketable and due. Investments in other securities are to be
treated Current if they are quoted. Investments in
allied/associate/sister units or firms to be treated as Non-current.
Bonus Shares as issued by capitalization of General reserves and
as such do not affect the Net Worth. With Rights Issue, change
takes place in Net Worth and Current Ratio.
1.
2.
Example :
Cash
50,000
Debtors
1,00,000
Inventories
1,50,000
1,00,000
Total Current Assets 3,00,000
Current Ratio
= 3:1
Quick Ratio
=>
=>
Current Liabilities
3,00,000/1,00,000
1,50,000/1,00,000
800/500
i.e. 1.6 : 1
=>
=>
9.
Net
Net
Composite Ratio
17. RETRUN ON EQUITY CAPITAL (ROE) :
Net Profit after Taxes / Tangible Net
Worth
18.EARNING PER SHARE
: EPS indicates the
quantum of net profit of the year that would be
ranking for dividend for each share of the company
being held by the equity share holders.
Net profit after Taxes and Preference
Dividend/ No. of Equity Shares
19. PRICE EARNING RATIO : PE Ratio indicates the
number of times the Earning Per Share is covered
by its market price.
EXERCISE 1
LIABILITES
Capital
Reserves
ASSETS
180 Net Fixed Assets
20 Inventories
Term Loan
300 Cash
Bank C/C
200 Receivables
Trade Creditors
50 Goodwill
Provisions
50
800
400
150
50
150
50
800
a.
b.
c.
d.
e.
f.
EXERCISE 2
LIABILITIES
200506
200607
200506
Capital
300
Reserves
140
160 Security
320
Bank CC (Hyp)
200607
730
750
30
30
280 Investments
110
110
490
150
170
Unsec. Long T L
150
170 S I P
20
30
Creditors (RM)
120
140
170
30
20
310
240
Electricity
70 Finished
Goods
Bills Payable
40
80 Cash
Expenses
Payable
20
30 Receivables
Provisions
40+ Loans/Advanc
30
190
1.
Tangible Net Worth for 1st20
Year : ( 300
140) - 50 = 390
es
2. Current Ratio for 2nd Year : (170 + 20 + 240
+ 2+ 190 ) / (580+70+80+70)
Goodwill
50
50
820 /800 = 1.02
Total
1600
1760
1600
1760
3. Debt Equity Ratio for 1st Year : 320+150 / 390 = 1.21
Exercise 3.
LIABIITIES
ASSETS
Equity Capital
800
Preference Capital
100 Inventory
300
Term Loan
600 Receivables
150
Bank CC (Hyp)
Sundry Creditors
Total
1400
50
100
1400
= 2:1
Exercise 4.
LIABILITIES
ASSETS
Capital + Reserves
355
265
7 Cash
Loan From S F C
100 Receivables
1
125
Bank Overdraft
38 Stocks
Creditors
26 Prepaid Expenses
9 Intangible Assets
30
Provision of Tax
Proposed Dividend
15
550
128
550
Exercise 4.
contd
LIABILITIES
Capital + Reserves
P & L Credit Balance
Loan From S F C
ASSETS
355
7 Cash
100 Receivables
265
1
125
Bank Overdraft
38 Stocks
Creditors
26 Prepaid Expenses
9 Intangible Assets
30
Provision of Tax
Proposed Dividend
128
15
550
550
Exercise 4.
contd
LIABILITIES
Capital + Reserves
P & L Credit Balance
Loan From S F C
ASSETS
355
7 Cash
100 Receivables
265
1
125
Bank Overdraft
38 Stocks
Creditors
26 Prepaid Expenses
9 Intangible Assets
30
Provision of Tax
Proposed Dividend
128
15
550
550
Q. What is the Debtors Velocity Ratio ? If the sales are Rs. 15 Lac.
Ans : ( Average Debtors / Net Sales) x 12 = (125 / 1500) x 12
= 1 month
Q. What is the Creditors Velocity Ratio if Purchases are Rs.10.5 Lac ?
Ans : (Average Creditors / Purchases ) x 12 = (26 / 1050) x 12 = 0.3 months
Q. How many broader categories are there for the Sources of funds, in
the Fund Flow Statement ?
1. Only One, Source of Funds
2.Two, Long Term and Short Term Sources
3.Three , Long, Medium and Short term sources
4.None of the above.
Q. Which of following item is not an application of funds in the