Question

On the basis of the following information, calculate:

(i) Gross Profit Ratio;
(ii) Working Capital Turnover Ratio:
(iii) Debt to Equity Ratio; and 
(iv) Proprietary Ratio.

	₹		₹
Revenue from Operations (Net Sales)	5,00,000	Current Liabilities	1,40,000
Cost of Revenue from Operations (Cost of Goods Sold)	3,00,000	Paid-up Share Capital	2,50,000
Current Assets	2,00,000	13% Debentures	1,00,000

Answer 1

(i)

Net Sales = 5,00,000

Cost of Goods Sold = 3,00,000

Gross Profit = Net Sales − Cost of Goods Sold

= 5,00,000 − 3,00,000 = 2,00,000

Gross Profit Ratio = `"Gross Profit"/"Net Sales" xx 100`

`= 200000/500000 xx 100 = 40%`

(ii)

Current Assets = 2,00,000

Current Liabilities = 1,40,000

Working Capital = Current Assets − Current Liabilities

= 2,00,000 − 1,40,000 = 60,000

Working Capital Turnover Ratio =`"Net Sales"/"Working Capital" = 500000/60000 = 8.33` times

(iii)

Long-term Debts = 13% Debentures = 1,00,000

Equity = Paid-up Share Capital = 2,50,000

Debt-Equity Ratio =`"Long-term Debts"/"Equity"`

`= 100000/250000 = 0.4 : 1`

(iv) 

Total Assets = Total Liabilities

= Current Liabilities + Paid-up Share Capital + 13% Debentures

= 1,40,000 + 2,50,000 + 1,00,000

= 4,90,000

Proprietary Ratio =`"Shareholder's Funds"/"Total Assets"`

`= 250000/490000 = 0.51 : 1`