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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 
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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?
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APPEARS IN

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