Question 117 Chapter 4 of +2-B - USHA Publication 12 Class

Question 117 Chapter 4 of +2-B

Miscellaneous (Analytical Questions)

117. (Quick Ratio/Inventory T/O Ratio/Return on Shareholders’ Investment) The following are the Summarised Statement of Profit and Loss of Hindustan Products for the year ended 31.3.2018 and the Balance sheet of the company as of that date.

STATEMENT OF PROFIT AND LOSS
Particulars		₹
Revenue from Operations		8,00,000
Less : Expenses
Purchases	5,45,000
Changes in Inventories	(1,00,000)
(Opening Inventory – Closing Inventory)
(₹ 99,000 – ₹ 1,99,000)
Direct Expenses	15,000
Selling & Distribution Expenses	2,40,000
Loss on Sale of Assets	40,000	7,40,000
Net Profit		60,000

BALANCE SHEET
Particulars	₹
I. Equity and Liabilities
Shareholders’ Funds
Equity Share Capital	2.90.000
Reserves and Surplus
Surplus in Statement of Profit and Loss	60,000
Current Liabilities
Trade Payable	1,15,000
Outstanding Expenses	15,000
	4,80,000
II. Assets :
Non-Current Assets
Tangible Assets
Land	2,30,000
Current Assets
Inventory	1,99,000
Trade Receivable	21,000
Cash	30,000
	4,80,000

Calculate the following ratios
(i) Quick ratio (ii) Inventory Turnover Ratio (ii) Return on Shareholders Investment

The solution of Question 117 Chapter 4 of +2-B: –

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

	=	₹ 51,000
	=	₹ 1,30,000

	=	0.39 : 1

(ii) Inventory Turnover Ratio	=	Cost of goods sold
(ii) Inventory Turnover Ratio	=	Average Inventory

	=	₹ 4,60,000
	=	₹ 1,49,000
	=	3.08 times

(i) Return on investment Ratio	=	Net Profit	X	100
(i) Return on investment Ratio	=	Shareholders Funds	X	100

	=	₹ 60,000	X	100
	=	₹ 3,50,000	X	100

	=	17.14%

Working Notes:-

Quick Assets	=	Trade Receivable + Cash
	=	₹ 21,000 + ₹ 30,000
	=	₹ 51,000
Current Assets	=	Inventory + Trade Receivable + Bank + Cash
	=	₹ 78,400 + ₹ 36,000 + ₹ 10,000 + ₹ 2,000
	=	₹ 1,26,400
Current Liabilities	=	Trade Payable + Outstanding Expenses
	=	₹ 1,15,000 + ₹ 15,000
	=	₹ 1,30,000
Cost of goods sold	=	Opening stock + Purchases + Direct Expenses – Closing Stock
	=	₹ 99,000 + ₹ 5,45,000 + ₹ 15,000 – ₹ 1,99,000
	=	₹ 4,60,000
Shareholders’ Funds	=	Share capital + Surplus in Statement of Profit & Loss
	=	₹ 2,90,000 + ₹ 60,000
	=	₹ 3,50,000

Average Inventory	=	Opening Inventory + Closing Stock
Average Inventory	=	2

	=	₹ 99,000 + ₹ 1,99,000
	=	2
	=	₹ 1,49,000

End of Solution

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