On the basis of the following information, calculate:
(i) Debt-Equity Ratio and
(ii) Working Capital Turnover Ratio
Information: Rs.
Net Sales 60,00,000
Cost of goods sold 45,00,000
Other current assets 11,00,000
Current liabilities 4,00,000
Paid up share capital 6,00,000
6% Debentures 3,00,000
9% Loan 1,00,000
Debenture Redemption Reserve 2,00,000
Closing Stock 1,00,000
(i) Debt Equity ratio = (Debt / Equity) = 4,00,000 / 8,00,000 = 0.5 : 1
Debt =( 6% Debentures + 9% Loan) = Rs. 3,00,000 + Rs.1,00,000 = Rs. 4,00,000
Equity = (Paid up Share Capital + Debenture Redemption Reserve) = Rs.6,00,000 +Rs. 2,00,000 = Rs.8,00,000
(ii) Working Capital Turnover Ratio = (Cost of goods sold / Working Capital) OR (Net Sales / Working Capital)
= 45,00,000 / 8,00,000 or 60,00,000 / 8,00,000
= 5.63 times or 7.5 times
Working capital = (Other Current Assets + Closing Stock - Current Liabilities)
= Rs. 11,00,000 + Rs.1,00,000 – Rs.4,00,000= Rs. 8,00,000
(a)From the following information, compute Debt-Equity Ratio:
| Long Term Borrowings | 2,00,000 |
| Long Term Provisions | 1,00,000 |
| Current Liabilities | 50,000 |
| Non-Current-Assets | 3,60,000 |
| Current - Assets | 90,000 |
(b) The current ratio of X. Ltd is 2:1. State with reason which of the following transaction could (i) increase; (ii) decrease or (iii) not change the ratio.
(1) Included in the trade payables was a bills payable of Rs 9,000 which was met on maturity.
(2) Company issued 1,00,000 equity shares of Rs 10 each to the Vendors of machinery purchased.
O.M. Ltd has a Current Ratio of 3.5:1 and Quick Ratio of 2:1. If the excess of Current Assets over Quick Assets as represented by Stock is Rs 1,50,000, calculate Current Assets and Current Liabilities.
Compute Working Capital Turnover Ratio using the following information:
| Particulars | Amount (Rs) |
| Cash Sales | 1,30,000 |
| Credit Sales | 3,80,000 |
| Sales Returns | 10,000 |
| Liquid Assets | 1,40,000 |
| Current Liabilities | 1,05,000 |
| Inventory | 90,000 |
Compute Debt Equity Ratio using the following information:
| Particulars | Amount (RS.) |
| Total Assets | 3,50,000 |
| Total Debts | 2,50,000 |
| Current Liabilities | 80,000 |
