Question

From the given information, calculate the following ratios:

1. Debt-Equity Ratio
2. Debt to Total Assets Ratio
3. Operating Ratio
4. Trade Receivables Turnover Ratio
5. Trade Payables Turnover Ratio

	₹
Shareholder’s Funds	50,000
10% Debentures	25,000
Total Assets	1,75,000
Credit Revenue from Operations	2,70,000
Credit Purchases	1,80,000
Average Trade Receivables	30,000
Average Trade Payables	16,000
Cost of Revenue from Operations	2,16,000
Operating Expenses	24,000

Answer 1

(i) Long Term Debt = 10% Debentures = ₹ 25,000

Shareholder’s Funds = ₹ 50,000

Debt-Equity Ratio = `"Long Term Debts"/"Shareholder’s Funds"`

= `(₹ 25,000)/(₹ 50,000)`

= 0.5 : 1

(ii) Total Debt = 10% Debentures = ₹ 25,000

Total Assets = ₹ 1,75,000

Debt to Total Assets Ratio = `"Total Debt"/"Total Assets"`

= `(₹ 25,000)/(₹ 1,75,000)`

= 0.14 : 1

(iii) Credit Revenue from Operations = Revenue from Operations = ₹ 2,70,000

Operating Ratio = `("Cost of Revenue from Operations" + "Operating Expenses")/("Net Revenue from Operation") xx 100`

= `(₹ 2,16,000  + ₹ 24,000)/(₹ 2,70,000) xx 100`

= `(₹ 2,40,000)/(₹ 2,70,000) xx 100`

= 88.89%

(iv) Trade Receivables Turnover Ratio = `"Credit Revenue from Operations"/"Average Trade Receivables"`

= `(₹ 2,70,000)/(₹ 30,000)`

= 9 Times

(v) Trade Payables Turnover Ratio = `"Credit Purchases"/"Average Trade Payables"`

= `(₹ 1,80,000)/(₹ 16,000)`

= 11.25 Times