Question

The following data is available from the records of Johnson and Company Limited:

Particulars	₹
Stock	50,000
Sundry debtors	40,000
Bills receivable	10,000
Advances paid	4,000
Cash in hand	30,000
Sundry creditors	60,000
Bills payable	40,000
Bank overdraft	4,000
Reserves	70,000
10% Preference Share Capital	5,00,000
Equity Share Capital	7,00,000
Net profit after tax	1,40,000

Calculate the following (up to two decimal places):

1. Current Ratio
2. Quick Ratio
3. Earning Per Share

Answer 1

(i) Total Current Assets = Stock + Sundry Debtors + Bills Receivable + Advances Paid + Cash in Hand

= ₹ 50,000 + ₹ 40,000 + ₹ 10,000 + ₹ 4,000 + ₹ 30,000

= ₹ 1,34,000

Current Liabilities = Sundry creditors + Bills payable + Bank overdraft

= ₹ 60,000 + ₹ 40,000 + ₹ 4,000

= ₹ 1,04,000

Current Ratio = `"Current Assets"/"Current Liabilities"`

= `(₹ 1,34,000)/(₹ 1,04,000)`

= 1.29 : 1

(ii) Quick Assets = Current Assets − Stock − Advances

= ₹ 1,34,000 − ₹ 50,000 − ₹ 4,000

= ₹ 80,000

Quick Ratio = `"Quick Assets"/"Current Liabilities"`

= `(₹ 80,000)/(₹ 1,04,000)`

= 0.77 : 1

(iii) Preference Dividend = 10% of 5,00,000

= ₹ 50,000

Net Profit after Tax and Preference Dividend = Net profit after tax − Preference Dividend

= ₹ 1,40,000 − ₹ 50,000

= ₹ 90,000

Assuming ₹10 face value per share:

Number of Equity Shares = `(₹ 7,00,000)/(10)`

= ₹ 70,000

Earning Per Share = `"Net Profit after Tax and Preference Dividend"/"Number of Equity Shares"`

= `(₹ 90,000)/(₹ 70,000)`

= 1.29