INSTITUTE OF INNOVATION IN TECHNOLOGY & MANAGEMENT

MANAGEMENT ACCOUNTING

BBA-III SEMESTER

ASSIGNMENT-3

RATIO ANALYSIS

1. Explain the methodology for construction of Du Pont Chart. Do you think that it is one of the best tools
of financial analysis of firms? Give reasons for your answer.
2. The following information is available for KCP Ltd for the year March 31, 2000:-

Total debt to equity

2.5 Current ratio 2.4
ratio
Cost of goods sold to
Acid-test ratio 1.6 8
inventory ratio
Gross profit margin 20% Average collection period 45
Current assets minus Current Liabilities Rs. 56 lakhs.
The capital structure of the company consists of equity share capital, reserves and surplus and current
liabilities. The assets of the company consist of fixed assets, inventories, debtors and cash. The reserves
and surplus amount to two-third of equity share capital and fixed assets amount to 44% of the net
worth. All the sales of the company are on credit basis.
Assume 1 year=360days. Prepare the balance sheet of the company as on March 31, 2000.

3. Using the following data, complete the balance sheet of X ltd. As on 31.3.2009

(i) Gross profit is 25% of sales

(ii) Gross profit =1,20,00,000
(iii) Shareholder’s equity=Rs. 20,00,000
(iv) Credit sales to total sales=80%
(v) Total turnover to total assets id 4 times
(vi) Cost of sales to inventory is 10 times.
(vii) Average collection period is 30 days.
(viii) Long term data=?
(ix) Current ratio is 1.5
(x) Sundry creditors are Rs. 60,00,000

Balance Sheet of X Ltd.

Liabilities Rs. Assets Rs.
Sundry creditors - Cash -
Long term debt - Sundry debtors -
Share capital - Inventory -

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 Fixed assets -

5. Following are the income statements of W Ltd. For 2008 and 2009.

Profit and Loss account

Income 2008(Rs) 2009(Rs)
Sales 20, 00,000 25, 00,000
Dividend Income 60,000 35,000
Total income 20, 60,000 25, 35,000

Expenditure
Purchases 6,00,000 7,00,000
Manufacturing expense 3,00,000 4,00,000
Office expense 2,50,000 2,10,000
Selling expenses 2,00,000 3,50,000
Depreciation 50,000 60,000
Interest paid 25,000 30,000

PBT 6,35,000 7,85,000

Provision for Tax 1,20,000 1,50,000
PAT 5,15,000 6,35,000
Proposed Dividend 50,000 60,000
Reserves and surplus 4,65,000 5,75,000

Additional information:
Share capital 25,00,000 35,00,000
Secured loans 8,00,000 10,00,000
Creditors 2,50,000 ` 2,40,000
Inventory 10,00,000 11,00,000
Debtors 12,00,000 14,00,000

Comment upon:
i) Profitability
ii) Return generation
iii) Liquidity
6. Calculate currents assets of a company for the following information:-

(a) Stock Turnover Ratio : 4 Times

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(b) Stock of the end of year is Rs.20,000 more than stock in the beginning.
(c) Sales Rs. 3,00,000.
(d) Gross Profit Ratio 25%.
(e) Current Liabilities Rs.40,000.
(f) Quick Ratio 0.75.
7. The balance sheet of XYZ Ltd is given as under for the year 31 st March 2013:
Liabilities Amount Assets Amount
Equity share capital 300000 Goodwill 200000
Reserve fund 150000 Land and building 300000
8% debentures 200000 Plant and machinery 250000
Mortgage load 400000 Patents 50000
Sundry creditors 50000 Stock 150000
Bills payable 25000 Sundry debtors 100000
Bank overdraft 40000 Bills receivable 80000
Outstanding expenses 10000 Marketable securities 18000
Tax liabilities 15000 Cash balance 40000
Prepaid expenses 2000
1190000 1190000
Purchases are Rs. 300000 and sales are Rs. 500000.
From the following, calculate:
(i) Current ratio
(ii) Acid-test ratio
(iii) Inventory turnover ratio
(iv) Average collection period
(v) Debtor’s turnover ratio
(vi) Creditor’s turnover ratio
(vii) Average payment period
(viii) On the basis of the above analysis, also comment on the cash
management of the firm.
8. Following are the ratios of the trading activities of National Traders Ltd.
Debtor’s velocity = 3 months
Stock velocity = 8 months
Creditor’s velocity = 2months
Gross profit ratio = 25%

Gross profit for the year ended 31st Dec.2008 amounts to Rs. 4,00,000.
Closing stock of the year is Rs. 10000 above the opening stock.
Bills receivables amount to Rs. 25,000 and bills payable Rs. 10000.
Find out: (a) Sales (b) Sundry debtors (c) Closing stock (d) Sundry creditors

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