Question

From the following Balance Sheet and other information, calculate the following ratios:

1. Debt-Equity Ratio
2. Working Capital Turnover Ratio
3. Trade Receivables Turnover Ratio

Balance Sheet as at March 31, 2017
Particulars	Note No.	Rs.
I. Equity and Liabilities:
1. Shareholders’ funds
a) Share capital		10,00,000
b) Reserves and surplus		7,00,000
c) Money received against share warrants		2,00,000
2. Non-current Liabilities
Long-term borrowings		12,00,000
3. Current Liabilities
Trade payables		5,00,000
Total		36,00,000
II. Assets
1. Non-current Assets
a) Fixed assets
Tangible assets		18,00,000
2. Current Assets
a) Inventories		4,00,000
b) Trade Receivables		9,00,000
c) Cash and cash equivalents		5,00,000
Total		36,00,000

Additional Information: Revenue from Operations Rs. 18,00,000

Answer 1

1) Debt-Equity Ratio:

Debt Equity Ratio = `"Debt"/"Equity"`

=`(12,00,000)/(19,00,000)`

= 0.63 : 1

Debt = Long Term Borrowings = Rs. 12,00,0000

Equity = Share Capital + Reserve and Surplus + Money received against share warrants

= 10,00,000 + 7,00,000 + 2,00,000
= Rs. 19,00,000

2. Working Capital Turnover Ratio:

Working Capital = 18,00,000 − 5,00,000

= Rs. 13,00,000

Working Capital Turnover Ratio = `"Revenue From Operation"/"Working Capital"`

= `(18,00,000)/(13,00,000)`

= 1.38 times

3) Trade Receivables Turnover Ratio:

Trade Receivables Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`

= `(18,00,000)/(9,00,000)`

= 2 times