Question 143 Chapter 4 of +2-B – T.S. Grewal 12 Class

Question 143 Chapter 4 of +2-B

Question 143 Chapter 4 of +2-B

Miscellaneous

143. On the basis of the following information calculate:
(i) Debt to Equity Ratio; and
(ii) Working Capital Turnover Ratio.
Information:

    Rs   Rs 
Revenue from Operations (a) Cash Sales 40,00,000 Paid-up Share Capital 17,00,000
  (b) Credit Sales 20,00,000 6% Debentures  3,00,000
Cost of Goods Sold   35,00,000 9% Loan from Bank 7,00,000
Other Current Assets   8,00,000 Debentures Redemption Reserve 3,00,000
Current Liabilities   4,00,000 Closing Inventory 1,00,000

 

The solution of Question 143 Chapter 4 of +2-B: –

I

Long-term Debts = 6% Debentures + 9% Loan from Bank
  = Rs 3,00,000 – Rs 7,00,000
  = Rs 10,00,000
Equity = Paid-up Share Capital + Debenture Redemption Reserve
  = Rs 17,00,000 – Rs 3,00,000
  = Rs 20,00,000
Debt – Equity Ratio = Long-term Debts
Equity
Gross Profit Ratio = Rs. 10,00,000
Rs 20,00,000
  = 0.5 : 1
     

 

II

Current Assets = Other Current Assets + Inventory
  = Rs 8,00,000 + Rs 1,00,000
  = Rs 9,00,000
Working Capital = Current Assets − Current Liabilities
  = Rs 9,00,000 – Rs 4,00,000
  = Rs 5,00,000
Net Sales = Cash Sales + Credit sales
  = Rs 40,00,000 + Rs 20,00,000
  = Rs 60,00,000
Working Capital Turnover Ratio = Net Sales
Working Capital
Operating Ratio = Rs. 60,00,000
Rs 5,00,000
  = 12 Times

 

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Also, Check out the solved question of previous Chapters: –

T.S. Grewal’s Double Entry Book Keeping +2 (Vol. I: Accounting for Not-for-Profit Organizations and Partnership Firms)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

T.S. Grewal’s Double Entry Book Keeping (Vol. II: Accounting for Companies)

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2 Book 3 min 225x300 - Question 143 Chapter 4 of +2-B  - T.S. Grewal 12 Class
T.S. Grewal’s Analysis of Financial Statements

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