Question 112 Chapter 4 of +2-B - USHA Publication 12 Class

Question 112 Chapter 4 of +2-B

Miscellaneous (Analytical Questions)

112. (Liquid Ratio/GP Ratio/Debt Equity Ratio) From the following information calculate the following ratios (i) Liquid Ratio (ii) Gross Profit Ratio (iii) Debt Equity Ratio Information :

	₹
Net Sales (Revenue from Operation)	4,00,000
Opening Inventory	10,000
Closing Inventory 3,000 Less than opening inventory
Net purchases 80% of Net sales
Direct Expenses	20,000
Current Assets	1,00,000
Prepaid Expenses	3,000
Current Liabilities	60,000
9% Debentures	4,00,000
Long term Loans from bank	1,50,000
Equity Share capital	8,00,000
8% Preference share capital	3,00,000

The solution of Question 112 Chapter 4 of +2-B: –

(i) Liquid Ratio	=	Liquid Assets
(i) Liquid Ratio	=	Current Liabilities

	=	₹ 94,000
	=	₹ 60,000
	=	1.57: 1

(ii) Gross Profit Ratio	=	Gross Profit	X	100
		Net Sales

	=	₹ 57,000	X	100
		₹ 4,00,000
	=	14.25%

(iii) Debt Equity Ratio	=	Debt
(iii) Debt Equity Ratio	=	Equity

	=	₹ 5,50,000
	=	₹ 11,00,000
	=	0.5: 2

Working Notes :

Liquid Assets	=	Current Assets – Closing Stock – Prepaid Expenses
	=	₹ 1,00,000 – ₹ 3,000 – ₹ 3,000
	=	₹ 94,000
Cost of goods Sold	=	Opening Stock + Purchases + Direct Expenses – Closing Stock*
	=	₹ 10,000 + ₹ 4,00,000 x 80% + ₹ 20,000 – ₹ 7,000
	=	₹ 3,43,000
Gross Profit	=	Sales – Cost of goods Sold
	=	₹ 4,00,000 – ₹ 3,43,000
	=	₹ 57,000
*Closing Stock	=	3,000 Less than opening inventory
	=	₹ 10,000 – ₹ 3,000
	=	₹ 7,000
Debt	=	9% Debentures + Long from Bank
	=	₹ 4,00,000 + ₹ 1,50,000
	=	₹ 5,50,000
Equity	=	Equity Share Capital + 8% Preference Capital
	=	₹ 8,00,000 + ₹ 3,00,000
	=	₹ 11,00,000

End of Solution

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