text: # 12th | Volume 3 | Chapter:4 | Question No. 151 to 156 | Accounting Ratio | Ts grewal Accounts Solution 2022-2023
  
  #### Question 151:
  
  Calculate following ratios on the basis of the given information:
  
  (i) Current Ratio; (ii) Acid Test Ratio; (iii) Operating Ratio; (iv) Gross Profit Ratio.
  
   Current Assets `3,50,000; Revenue from Operations (Sales) `6,00,000; Current Liabilities `1,75,000; Operating Expenses `2,00,000; Inventory `1,50,000; Cost of Revenue from Operations `3,00,000;
  
  (i)                 Current Ratio;
  
  Current Ratio= Current Assets/ Current Liabilities
  
  Current Ratio= 3,50,000/1,75,000
  
  Current Ratio= 2/1= 2:1
  
  (ii)              Acid Test Ratio;
  
  Acid Test Ratio= Quick Assets/ Current Liabilities
  
  Quick Assets=3,50,000-1,50,000=2,00,000
  
  Current Ratio= 2,00,000/1,75,000
  
  Current Ratio= 1.14:1
  
  (iii)            Operating Ratio;
  
  Operating Cost = Operating Expenses + Cost of Revenue from Operations
  
  Operating Cost =2,00,000+3,00,000=5,00,000
  
  Operating ratio= Operation Cost/ Revenue from Operation
  
  Operating ratio= 5,00,000×100/6,00,000=83.33%
  
  (iv)             Gross Profit Ratio
  
  Gross Profit = Revenue from Operations (Sales) - Cost of Revenue from Operations
  
  Gross Profit = 6,00,000-3,00,00
  
  Gross Profit = 3,00,000
  
  Gross Profit Ratio= Gross Profit×100/ Revenue from Operations
  
  Gross Profit Ratio= 3,00,000×100/6,00,000 =50%
  
  #### Question 152:
  
  From the information given below, calculate any three of the following ratio:
  
  (i) Gross Profit Ratio;
  (ii) Working Capital Turnover Ratio:
  (iii) Debt to Equity Ratio; and
  (iv) Proprietary Ratio.
  
   ` ` Revenue from Operations (Net Sales) 5,00,000 Current Liabilities 1,40,000 Cost of Revenue from Operations (Cost of Goods Sold) 3,00,000 Paid-up Share Capital 2,50,000 Current Assets 2,00,000 13% Debentures 1,00,000
  
  (i)
  
  Net Sales = 5,00,000
  
  Cost of Goods Sold = 3,00,000
  
  Gross Profit = Net Sales − Cost of Goods Sold
  
  = 5,00,000 − 3,00,000 = 2,00,000
  
  Gross Profit Ratio= Gross profit ×100/Net Sales
  
  = 2,00,000×100/5,00,000
  
  = 40%
  
  (ii)
  
  Current Assets = 2,00,000
  
  Current Liabilities = 1,40,000
  
  Working Capital = Current Assets − Current Liabilities
  
  = 2,00,000 − 1,40,000 = 60,000
  
  Working Capital turnover ratio= Net Sales / Working Capital
  
  =5,00,000/60,000
  
  =8.33 Times
  
  (iii)
  
  Long-term Debts = 13% Debentures = 1,00,000
  
  Equity = Paid-up Share Capital = 2,50,000
  
  Debt-Equity Rato= Long-term Debts/ Equity
  
  =1,00,000/2,50,000
  
  =0.4:1
  
  (iv)
  
  Total Assets = Total Liabilities
  
  = Current Liabilities + Paid-up Share Capital + 13% Debentures
  
  = 1,40,000 + 2,50,000 + 1,00,000
  
  = 4,90,000
  
  Propietary Ratio= Shareholders’ Fund/ Total Assets
  
  =2,50,000/4,90,000
  
  =0.51:1
  
  #### Question 153:
  
  On the basis of the following information calculate:
  
  (i) Debt to Equity Ratio; and
  (ii) Working Capital Turnover Ratio.
  
   Information: ` ` 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
  
  (i)
  
  Long-term Debts = 6% Debentures + 9% Loan from Bank
  
  = 3,00,000 + 7,00,000 = 10,00,000
  
  Equity = Paid-up Share Capital + Debenture Redemption Reserve
  
  = 17,00,000 + 3,00,000 = 20,00,000
  
  Debts-Equity Ratio= Long-term Debts/ Equity
  
  =10,00,000/20,00,000
  
  =0.5:1
  
  (ii)
  
  Current Assets = Other Current Assets + Inventory
  
  = 8,00,000 + 1,00,000
  
  = 9,00,000
  
  Working Capital = Current Assets − Current Liabilities
  
  = 9,00,000 − 4,00,000
  
  = 5,00,000
  
  Net Sales = Cash Sales + Credit sales
  
  = 40,00,000 + 20,00,000
  
  = 60,00,000
  
  Working Capital tunover Ratio=Net Sales/Working Capital
  
  =60,00,000/5,00,000
  
  = 12 Times
  
  #### Question 154:
  
  From the following, calculate (a) Debt to Equity Ratio; (b) Total Assets to Debt Ratio; and (c) Proprietary Ratio:
  
   Equity Share Capital ` 75,000 Debentures ` 75,000 Preference Share Capital ` 25,000 Trade Payable ` 40,000 General Reserve ` 45,000 Outstanding Expenses ` 10,000 Balance in Statement of Profit and Loss ` 30,000
  
  (a)
  
  Debt to Equity Ratio=Long term Debts/Shareholders' Funds
  
  Debt to Equity Ratio=Debentures
  
  Equity=Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Losss
  
  Debt to Equity Ratio=75,000/75,000+25,000+45,000+30,000=0.43:1
  
  (b)
  
  Total Assets to Debt Ratio=Total Assets/Long term Debts
  
  Total Assets to Debt Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss/Debentures+Trade Payables+Outstanding ExpensesDebentures
  
  Total Assets to Debt Ratio=75,000+25,000+45,000+30,000+75,000+40,000+10,000/75,000
  
  =4:1
  
  (c)
  
  Proprietary Ratio=Shareholders' Funds/Total Assets
  
  Proprietary Ratio=Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss
  
  Equity Share Capital+Preference Share Capital+General Reserve+Balance in Statement of Profit & Loss+Debentures+Trade Payables+Outstanding Expenses
  
  Proprietary Ratio=75,000+25,000+45,000+30,000/75,000+25,000+45,000+30,000+75,000+40,000+10,000
  
  =0.58:1 or 58.33%
  
  #### Question 155:
  
  From the following information related to Naveen Ltd., calculate (a) Return on Investment and (b) Total Assets to Debt Ratio:
  Information: Fixed Assets
  ` 75,00,000; Current Assets  ` 40,00,000; Current Liabilities  ` 27,00,000; 12% Debentures  ` 80,00,000 and Net Profit before Interest, Tax and Dividend  ` 14,50,000.
  
  1) Return on Investment
  
  Return on Investment = Net profit  Before Interest, Tax and dividend ×100/ Capital Employed
  
  Net profit  Before Interest, Tax and dividend=14,50,000
  Capital employed= Fixed Assets +
  Current Assets+ Current Liabilities
  =75,00,000+40,00,000+27,00,000
  
  =88,00,000
  
  Return on Investment =14,50,000×100/88,00,000
  
  =16.48%
  
  2) Total Assets to Debt to Ratio
  Total Assets to Debt Ratio = Total Assets/Debt
  
  Total Assets = Fixed Assets + Current Assets
  
  = ` (75,00,000 + 40,00,000)
  
  = ` 1,15,00,000
  
  Debt =  ` 80,00,000
  
  Total Assets to Debt Ratio = 1,15,00,000/80,00,000
  
  = 1.44:1
  
  #### Question 156:
  
  From the following information, calculate Return on Investment (or Return on Capital Employed):
  
   Particulars ` Share Capital 5,00,000 Reserves and Surplus 2,50,000 Net Fixed Assets 22,50,000 Non-current Trade Investments 2,50,000 Current Assets 11,00,000 10% Long-term Borrowings 20,00,000 Current Liabilities 8,50,000 Long-term Provision NIL
  
  Net Profit before tax = 6,00,000
  Net Profit before interest, tax and dividend = Net Profit before tax + Interest on long-term borrowings
  = 6,00,000 + 10% of 20,00,000 = 6,00,000 + 2,00,000 = 8,00,000
  
  Capital Employed = Share Capital + Reserves and Surplus + Long-term borrowings
  = 5,00,000 + 2,50,000 + 20,00,000 = 27,50,000
  
  Return on Investment = Net profit  Before Interest, Tax and Dividend ×100/ Capital Employed
  
  =8,00,000×100/27,50,0000
  
  =29.09%