Ratio Analysis Fixed Assets Fixed Assets + Net Working Capital =0.75 Fixed Assets

Transcription

1 Ratio Analysis CA Past Years Exam Answer Answer to Q.1: (Nov, 009) Fixed assets ` 18,00,000 Proprietor s funds ` 4,00,000 Note: 1 Ratio of fixed assets to proprietor s funds 0.75 Properietors Fund 0.75 Fixed assets + Net Working Capital Fixed Asset + ` 6,00,000 On solving, Fixed assets ` 18,00,000 (Assuming that, there are no long term borrowings, we can conclude that capital employed only consists of shareholders funds.) Note: Proprietor s funds 0.75 Answer to Q.: (May, 013) (a) Proprietor s fund ` 48,00,000 (b) Fixed assets ` 36,00,000 (c) Net profit ratio 1% Note: 1 Fixed assets to proprietor s fund ratio 0.75 Properietors Fund 0.75 ` 18,00, Net Working Capital Fixed Asset + ` 1,00,000 On Solving, Fixed assets ` 36,00,000 Proprietor s funds 0.75 Note: Working capital turnover ratio 5 times ` 4,00,000 ` 36,00,000 ` 48,00, ` 1,00,000 ` 60,00,000 Net Working Capital Note: 3 PAT Return equity Properietor's Fund 100 PAT Proprietor s funds 15% 48,00,000 15% ` 7,0,000 Net Profit ratio PAT 100 ` 7,0,000 1% ` 60,00,000 Page No. 1

2 Answer to Q.3: (Nov, 010) Income Statement Particulars ` Revenue,50,000 (-) Direct +Cost (1500,000) Gross Profit 7,50,000 (-) Other Operating Expenses (,40,000) Operating Profit (EBIT) 5,10, (-) Interest on Debt Capital (67,500) (5,00,000 7,50,000) PBT 4,4,500 (-) Tax@ 40% (1,77,000) PAT,65,500 PAT,65,500 (i) Net profit margin /rate %,50,000 EBIT 5,10,000 (ii) Return on Assets % Total Assets 5,00,000 (iii) Asset turnover Total Assets,50, times 5,00,000 PAT (iv) Return of Equity Share Holders Fund 100,65, % (70% of 5,00,000) Answer to Q.4: (Nov, 009) Quick Assets (a) Quick Ratio Current Liabilities - Closing Stock `7,50,000-4,0,000 1:1 ` 3,00,000 ` 3,00,000 (b) Turnover ` 35,00, times ` 10,00,000 Shareholder's Funds (c) Proprietor s Ratio Total Assets Equity + PreferenceShares + Reserve & Surplus `8,70, times + ` 10,00, ,50,000 Debt Equity Ratio 1:1.5 Capital Employed + Net Working Capital ` 10,00,000 + ` 4,50,000 ` 14,50,000 Debt ` 14,50,000 1 ` 5,80,000 and Equity ` 14,50, ` 8,70,000 Equity Capital ` 6,00,000; Preference Capital `,00,000 Reserve Surplus ` 70,000 [8,70,000 (6,00,000 +,00,000)] Earnings Available to Equity Shareholder `,44,500 (d) EPS ` No. of Equity Shares ` 60,000 Shares PAT Return on total assets (PAT) 15% Total Assets 15% PAT 15% of (fixed assets + current assets) Page No.

3 15 PAT 100 (10,00, ,50,000) 15 17,50,000 `,66, (-) Preference Dividend (9% on,00,000) ` (18,000) Earnings available to equity shareholders `,44,500 Market Price `16 (e) PE Ratio 3.93 times EPS ` Note: 1 Current Ratio.5:1 Current Liabilities.5.5 Current Liabilities Net Working Capital - Current Liabilities ` 4,50,000.5 Current Liabilities Current Liabilities Current Liabilities ` 3,00,000.5 ` 3,00,000 ` 7,50,000 Note: Total Assets Turnover Ratio Total Assets + (10,00, ,50,000) ` 35,00,000 Note: 3 Gross Profit 0 Gross Profit Ratio 0% `35,00,000 Gross profit ` 7,00, sales gross profit 35,00,000 7,00,000 ` 8,00,000 Note: 4 Stock turnover ratio 7 Goods Sold Average Stock 7 ` 8,00,000 Average Stock ` 4,00,000 7 Opening Stock + Closing Stock Average Stock 3,80,000 + Closing Stock ` 4,00,000 Closing Stock ` 4,0,000 Answer to Q.5: (Nov, 014) - Gross profit ` 30,00,000 5% of ` 30,00,000 ` 30,00,000 ` 7,50,000 `,50,000 (1) Inventory ratio 6 times `,50, Average stock Average stock `,50,000 Average stock ` 3,75,000 6 Closing inventory 80,000 + opening inventory Opening Inventory + Closing Inventory Average inventory Page No. 3

4 Opening Inventory + 80,000 + Opening Inventory ` 3,75,000 Opening inventory ` 3,35,000 Closing inventory ` 3,35,000 + ` 80,000 ` 4,15,000 () Purchases Cost of Goods Sold Opening Stock + Closing Stock `,50,000-3,35, ,15,000 ` 3,30,000 (3) Creditors turnover ratio 10 times Creditors Purchase Average Creditors 10 Average creditors 1,00,000 `,10, Credit purchase ` 3,30,000 `,30,000 ` 1,00,000 Credit (4) Debtors Turnover ratio 8 times Average Debtors 8 Credit ` 4,00,000 Average Debtors ` 3,00, Credit Total Cash ` 30,00,000 5% of credit sales 5 Credit + Credit ` 30,00,000 Credit ` 4,00, (5) Current Ratio Current Liabilities.4.4 Current Liabilities Working Capital Current Liabilities Working Capital.4 Current Liabilities Current Liabilities `,80, Current Liabilities `,80,000 Current Liabilities `,00, days (6) Average payment period Creditors Turnover Ratio days days (7) Average collection period Debitors Turnover Ratio days 8 Answer to Q.6: ( Nov, 011) - Stock - Prepaid Expenses (a) Quick Ratio Current Liabilities 30,50,000-1,60,000-10, times 10,00,000 Long-term debt (b) Debt Equity Ratio Sharholders Funds 16,00,000 16,00,000 0,00,000+ 8,00,000 8,00, :1 EBIT (c) ROCE 100 Capital Employed ` 1,00,000 Sharholders Funds + long-term loan 100 Page No. 4

5 ` 1,00,000 ` 1,00, % (0,00, ,00,000)+ 16,00,000 `44,00, (d) Average collection period Debtor Turnover Ratio days 8 Creditors of ` 40,00,000 Debtors Turnover Ratio 80% 3,00,000 Average Debtors 4,00,000 4,00,000 8 times Answer to Q. 7:(May, 005) Balance Sheet Share capital 1,00,000 Fixed assets 60,000 Debt Current assets Long-term 36,000 Inventory 40,000 Current 4,000 60,000 Liquid assets 60,000 1,00,000 1,60,000 1,60,000 Note 1: Total Debt Owner equity 0.60 Total Debt 0.60 Owner equity ,00,000 60,000 Note : Current Debt 0.40 Total Debt ,000 ` 4,000 Note 3: Fixed assets 0.60 Owner equity ,00,000 60,000 Note 4: Total Assets Turnover Total Assets 1,60,000 ` 3,0,000 Inventory turnover 8 times 8 Inventory Inventory 8 3,0,000 40,000 8 Answer to Q. 8: (Nov, 007) Balance Sheet Equity Share capital 4,00,000 Plant & Machinery & Other 4,5,000 Reserve & Surplus 6,00,000 Net Worth 10,00,000 Inventory 7,00,000 Total Debt Debtors 3,33,333 Current liabilities 5,00,000 Cash 41,667 10,75,000 15,00,000 15,00,000 Note: 1 Total debt 1: Total debt 1/ net worth 1/ 1,00,000 ` 5,00,000 Net Worth Note: Total assets turnover Total Assets 15,00,000 30,00,000 Gross profit 30% of sales ` 9,00,000 0,00,000 9,00,000 ` 1,00,000 Page No. 5

6 Note: 3 Debtors velocity 40 days Debtors balance 40 days credit sales 40 30,00,000 ` 3,33, Note: 4 Acid test ratio 0.75 Debtors + Cash ,33,333 + Cash ,00,000 Current liabilities Cash ` 41,667 Note: 5 Inventory turnover 3 1,00,000 ` 7,00, Inventory Inventory Answer to Q.9: (May, 010) Balance Sheet Share Capital 7,81,50 Fixed assets 15,00,000 Reserve & Surplus 4,68,750 Current assets Net worth 1,50,000 Stock 3,75,000 Long-term debt 6,5,000 Debtors 5,00,000 Capital employed 18,75,000 Cash (balancing figure),50,000 11,5,000 Current liabilities 7,50,000 6,5,000 6,5,000 COGS Gross Profit ` 30,00,000 5% of ` 30,00,000 `,50,000 Note 1: Turnover 1.5 times COGS 1.5 `,50, Note: Stock Turnover 6 6 Stock Stock Note: 3 Debt collection period months 000 ` 15,00, `,50,000 6 Debtors balance month credit sales ` 30,00,000 ` 5,00,000 1 Note: 4 Fixed assets to net worth 1.0 : 1 Net Worth Note: Net Worth 6 ` 15,00, ` 3,75,000 ` 1,50,000 Reserve and surplus to share capital 0.6:1 Share Capital ` 1,50, ` 7,81,000 Reserve and surplus ` 1,50, ` 4,68,750 Page No. 6

7 Note: 4 Current Ratio Current Liabilities Current Liabilities Liquid ratio 1:1 - Stock Quick Ratio CurrentLiabilities - Stock 1.5 Current Liabilities- Stock 1 1 Current Liabilities CurrentLiabilities 1.5 Current Liabilities- ` 3,75,000 1 Current Liabilities Current Liabilities ` 7,50,000 (b) Statement of working Capital Particulars Amount (`) Amount (`) Stock 3,75,000 Debtors 5,00,000 Bank,50,000 11,5,000 Current Liabilities (7,50,000) Net working Capital 3,75,000 10% Provision for contingencies (3,75,000 10/90) 41,667 Required net working capital 4,16,667 Answer to Q.10: (Nov, 013) Balance Sheet Share Capital 5,75,000 Fixed assets (bal. figure) 6,85,000 Reserve & Surplus,60,000 Current assets Current liabilities 3,00,000 Stock,10,000 Debtors 1,75,000 Cash & Bank (bal. figure) 65,000 4,50,000 11,35,000 11,35,000 Note 1: Current Ratio Current Liabilities 1.5:1 1.5 Current Liabilities Working capital ` 1,50,000 Working capital - Current Liabilities ` 1,50, Current Liabilities - Current Liabilities ` 1,50,000 Current Liabilities ` 3,00, Current Liabilities 1.5 ` 3,00,000 ` 4,50,000 Note : CurrentAssets- Stock Quick ratio 0.8: 1 Quick Ratio Current Liabilities - Stock ` 4, 50, 000- Stock Current Liabilities ` 3,00,000 Stock `,10,000 Page No. 7

8 Note 3: Inventory Turnover 5 times 5 COGS 5 `,10,000 ` 10,50,000 Stock 75% of Gross margin `10,50,000 ` 14,00,000 75% Note 4: Average collection period 1.5 months Debtors balance 1.5 month credit sales 1.5 ` 14,00,000 ` 1,75,000 1 Note: 5 Reserve and surplus to Cash and bank 4 times Reserve and surplus 4 Cash and bank Reserve and surplus 4 ` 65,000 `,60,000 Answer to Q.11: (May, 006) (a) Inventory Turnover Average Stock Opening Stock + Closing Stock ` 0,860 lakhs `,867 lakhs + `,407 lakhs 7.91 times (b) Financial Leverage EBIT EBT ` 170 lakhs.98 ` 57 lakhs EBIT (c) Return on Investment Average Capital Employed 100 ` 170 lakhs ` 170 lakhs 100 ` 5,947 lakhs + ` 4,555 lakhs 5,51 lakhs % ` PAT (d) Return on Equity Average Shareholders' Funds 100 ` 34 lakhs 100 `,377 lakhs + ` 1,47 lakhs ` 34 lakhs ` 1,94.5 lakhs % (e) Average collection period Average Debtors 360 days Net Credit ` 1,495 lakhs + ` 1,168 lakhs ` 1,331.5 lakhs 360 days 360 days 1.63 days `,165 lakhs `,165 lakhs Answer to Q.1: (May, 007) Summarized Profit and Loss Account To Raw Material Consumed 13,6,000 By sales 78,00,000 To Direct Wages 66,3,000 To Direct Expenses 46,41,500 To Gross Profit (15% of sales) 11,70,000 78,00,000 78,00,000 To Net Profit (8% of sales) 6,4,000 11,70,000 11,70,000 Page No. 8

9 Page No. 9 Summarized Balance Sheet as on December, 31 Share Capital 3,00,000 6,00,000 Reserve & Surplus 1,00,000 Net Worth 15,00,000 Debtors 13,00,000 Long Term Loan,00,000 Stock Capital Employed 37,00,000 Raw Material 3,31,500 Current Liability 11,00,000 Finished Goods 3,97,800 Cash (Balancing Figure) 1,70,700,00,000 48,00,000 48,00,000 Note ,00,000 ` 78,00,000 Note Current assets ,00, `,00, Note 3 Current Liabilities 1,00,000 Current Liabilities ` 11,00,000 Note 4 Long term loan current liabilities 11,00,000 `,00,000 Note 5 Capital to Reserve & Surplus 1:4 Capital 15,00, ` 3,00,000 and Reserve & Surplus 15,00, ` 1,00,000 Note 6 Debtors Velocity 60 days 60 Debtors Balance 60 days credit sales 78,00, ` 13,00,000 Note 7 sales gross profit 78,00,000 11,70,000 ` 66,30,000 Let us assumed the cost of goods sold is equal to work cost. Note 8 Raw Material Consumed 0% of works cost 0% of ` 66,30,000 ` 13,6,000 Note 9 Direct Wages 10% of Work Cost Direct Wages 10% of ` 66,30,000 ` 6,63,000 Note 10 3 Stock of Raw Material 3 months Usage Stock of Raw Material 13,6,000 1 ` 3,31,500 Note 11 Stock of Finished Goods 6% Work Cost Stock of Finished Goods 6% of ` 66,30,000 ` 3,97,800

10 Answer to Q.13: (May, 014) Trading A/c and Profit & Loss A/c for the year ending 31 st March, 014 Particulars ` Particulars ` To Opening Stock 3,37,500 By 31,5,000 To Purchases (Balancing figure) 6,06,50 By Closing Stock 6,00,000 To Gross Profit c/d 7,81,50 37,5,000 37,5,000 To Miscellaneous Expenses (bal. fig.) 1,56,50 By Gross Profit b/d 7,81,50 To Net Profit 6,5,000 7,81,50 7,81,50 Note 1: Net Profit to Capital 1 4 Net Profit 1 Net Profit 1 Capital 4 ` 5,00,000 4 Net Profit ` 6,5,000 Note : Net Profit to Sale 0% Net Profit ` 6,5,000 0% 0% Sale Sale Sale ` 31,5,000 Note 3: Gross Profit ratio 5% Gross Profit Gross Profit 5 100% 5% Sale ` 31,5, Gross Profit ` 7,81,50 Note 4: Stock Turnover Ratio 5 times COGS 5 Average Stock Sale - Gross Profit Average Stock ` 31,5,000 ` 7,81,50 5 Average Stock ` 3,43,750 Average Stock Note 5: Opening Stock + Closing Stock Average Stock Opening Stock 6,00, ` 3,43,750 ` 000 Opening Stock ` 3,37,500 Answer to Q.14: (Nov, 014) Balance sheet of Capital (Bal. fig.) 18,00,000 Fixed assets 16,00,000 Reserves and surplus 6,00,000 Current assets Net Worth 4,00,000 Stock 6,00,000 Current liabilities 8,00,000 Debtors 7,00,000 Bank (Bal fig.) 3,00,000 16,00,000 3,00,000 3,00,000 Page No. 10

11 Note 1: Current Ratio Current Liabilities times Current Liabilities and Net working capital ` 8,00,000 - Current Liabilities ` 8,00,000 Current Liabilities - Current Liabilities ` 8,00,000 Current Liabilities ` 8,00,000 Current Liabilities ` 8,00,000 ` 16,00,000 Note : Quick ratio Current assets 1.5 times. Current liabilities Current assets - Stock 16,00,000 - Stock 1.5 Current liabilities ` ` 8, 00, 000 Stock ` 6,00,000 Note 3: Stock Turnover Ratio 7 times 7 COGS 7 ` 6,00,000 ` 4,00,000 Stock Gross Profit COGS 5% of 4,00,000 ` 56,00,000 Note 4: Average Debt Collection Period 1.5 months Debtors balance 1.5 month credit sales 1.5 ` 56,00,000 ` 7,00,000 1 Note 5: ` 56,00,000 to times Net fixed assets Net fixed assets ` 56,00,000 Net fixed assets ` 16,00, Note 6: Net worth to fixed assets 1.5 times Net Worth Net Worth Fixed assets ` 56,00,000 Net worth ` 16,00, ` 4,00,000 and Reserves & Surplus ` 4,00, ` 6,00,000 Answer to Q.15: (May, 015) (i) Calculate the operating expenses for the year ended 31 st March, 015 Particulars Amount (`) 60,00,000 Less: Cost of Goods Sold 18,00,000 EBIT 8,10,000 (6,10,000) Operating Expenses 33,90,000 Computation of Earnings before interest and tax (EBIT) Particulars Amount (`) Net Profit 3,75,000 50% 3,75,000 Profit Before Tax 7,50,000 Add: Interest on Debentures 60,000 EBIT 8,10,000 Page No. 11

12 Page No. 1 (ii) Balance Sheet as on 31 st March, 015 Capital 10,50,000 Fixed assets (Bal. fig.) 17,00,000 Reserves and surplus 4,50,000 Current assets Net Worth 15,00,000 Closing stock 1,50,000 15% Debentures 4,00,000 Debtors,00,000 Sundry creditors,00,000 Bank (Bal fig.) 50,000 4,00,000 1,00,000 1,00,000 Note 1: Net-Profit to sales (after tax) 6.5% Net Profit 6.5% of ` 60,00,000 ` 3,75,000 Note : Return on net worth 5% Profit After Tax 5% Shareholders' Funds Shareholder Funds ` 3,75, 000 ` 15,00,000 5% Note 3: Share capital to reserves 7:3 Share Capital ` 15,00, ` 10,50,000 and Reserve & surplus ` 15,00, ` 4,50,000 `60,000 Interest on 15% ` 60,000 Debentures ` 4,00, Note 4: Current Ratio times `,00,000 ` 4,00,000 Current Liabilities Note 5: Inventory turnover 1 COGS 1 Closing Stock ` 18,00,000 ` 18,00,000 1 Closing Stock ` 1,50,000 Closing Stock 1 Answer to Q.16: (Nov, 015) Trading and profit & loss account for the year ended on ` ` To Opening Stock 4,50,000 By 90,00,000 To Material Purchased, Wages & Direct Expenses 65,70,000 By Closing Stock 7,0,000 (Balancing Figure) (8% of sales) To Gross Profit (30% of sales) 7,00,000 97,0,000 97,0,000 To Indirect Expenses (Balancing Figure) 7,76,93 By Gross Profit 7,00,000 To Income-tax 7,73,077 To PAT 1,50,000 7,00,000 7,00,000 Note 1: Debt equity ratio :1 14% long term debt ` 50,00,000 and Equity Capital 1 Capital Employed ` 75,00,000 Capital Turnover 1. times 50,00,000 ` 5,00, Hence, Capital 1. ` 90,00,000 Capital Note ROE 50% PAT Equity Capital 50% 5,00,000 50% ` 1,50,000 Note 3 PAT PBT 1 - Tax Rate 1,50,000 ` 19,3,077. Hence, Income-tax 35% of PBT ` 6,73,