# On the Basis of the Following Information Calculate: - Accountancy

Sum

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

#### Solution

(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

Debt - Equity Ratio = "Long Term Debts"/"Equity" = 1000000/2000000 = 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 Turnover Ratio = "Net Sales"/"Working Capital" = 6000000/500000 = 12 times

Is there an error in this question or solution?

#### APPEARS IN

TS Grewal Class 12 Accountancy - Analysis of Financial Statements
Chapter 3 Accounting Ratios
Exercise | Q 143 | Page 110