PROTECT- 5 Analysis of Financial Statements

5.58

PROJECT9-SPECIFICRATIOANALYSIS)
Following information has been obtained from Multiple Software Solutions:
2017-18 2018-19 2019-20
Partlculars

Gross Profit 4,00,000 3,60,000 5,20,000

Net Profit 3,50,000 3,60,000 6.20,000

Revenue from Operations 65,00,000 48,00,000 70,00,000

Current Assets 9,00,000 12,00,000 15,00,000

Quick Assets 8,50,000 9,00,000 13,50,000

Current Liabilities 6,50,000 6,00,000 6,50,000

You are required to prepare a comparative statement showing the following ratio:
(i) Gross Profit Ratio (ii) Net Profit Ratio
(iüi}Current Ratio (iv) Quick Ratio
Solution:
Introduction of the Project:
The project work is to prepare a comparative statement showing (i) Gross Profit Ratio, (ii) Net Profit
Ratio, (ii) Current Ratio, and (iv) Quick Ratio and comment on the performance of the company
for three years.
Planning and Execution of the Project:
The project work is planned and executed by preparing comparative statements as follows:
Particulars 2017-18 2018-19 2019-20

(i) Gross Profit Ratio =

Gross Profit 4,00,000 x 100 = 6.15% 360000 x 100 =7.5%
x 100 520000
Revenue from Operatións 6500,000 x 100 = 7.42%
4800000 7000000
(1) Net Profit Ratio =
Net Profit Ratio 350000
x 100 x 100 = 5.38% 364,000 x 100 = 7.5% 620.000
x 100 = 8.86%
Revenue from Operaions 6500000 4804000 7400000
Assets
(ui) Current Ratio = Current 900,000 = 1.38:1 12,00000 =2:1 1500000 = 2.31 :1
Curent Liabilities 650,000 600000 654000

(iv) Quick Ratio= Quick Assets 850,000 g00000

= 1.31:1 =1.5: 1 1350000
Current Líabilities 650000 600000 = 2.08:1
650000

Comments: The company shows an increasing trend in terms of gross profit ratio and net profit
ratio. Current ratio of the company is not satisfactory in the year 2017-18, but in the years 2018-19
and 2019-20, it is 2:1 and 2.31:1 respectively which
indicates the satisfactory liquid ratio of the
company. Quick ratio is also satisfactory in the years 2017-18 and 2018-19. However, in the
2019-20, it is 2.08:1 which indicates the idleness of quick year
assets.
Project Work 5.59

3.86%

7.5% 84 7.5%
6.15% 7.42%
74
6

51 5.33%¢
4

13 34

|2 2
1

2017-18 2018-19 2019-20 2017-18 2018-19 2019-20

GROSS PROFIT RATIO NET PROFIT RATIO
YA
|34

2.31
2.08
|2 24

1.38
1p---
-

2017-18 2018-19 2019-20 2017-18 2018-19 2019-20

CURRENT RATIO QUICK RATIO

Gross Profit Ratio, Net Profit Ratio, Current Ratio and Quick Ratio for three different years are
presented by drawing graph as follows: