Advertisements
Advertisements
Question
From the following Balance Sheet and other information, calculate following ratios: (i) Debt-Equity Ratio (ii) Working Capital Turnover Ratio (iii) 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 | 9,00,000 | |
| 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
Advertisements
Solution
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
= 10,00,000 + 9,00,000
= Rs 19,00,000
2. Working Capital Turnover Ratio
Working Capital Turnover Ratio = `"Ravenue From Operation"/"Working Capital"`
= `"18,00,000"/"13,00,000"`
= 1.39 times
Revenue from Operations = Rs 18, 00,000
Working Capital = Current Assets – Current Liabilities
= 18,00,000 – 5,00,000
= Rs 13,00,000
3. Trade Receivables Turnover Ratio
Trade Receivables Turnover Ratio = `"Net Credit Sales"/"Average Trade Receivables"`
= `[18,00,000]/[9,00,000]`
= 2 times
Net Credit Sales = Rs 18,00,000
Average Trade Receivables = Rs 9,00,000
Notes:
1. Revenue from Operations are assumed to be revenue generated from credit sales.
2. The amount of trade receivables given in the Balance Sheet is assumed to be Average Trade Receivables.
