FINANCIAL MANAGEMENT

Assignment 1 | Ratio Calculation

Given Data:

Liabilities Amount (Rs.) Assets Amount (Rs.)

Equity Capital 200000 fixed Assets 140000
Reserves and Surplus 30000 Cash 12000
Sundry Creditors 70000 Debtors 93000
Inventories 55000
300000 300000

Other Information:

Sales = 260000

(-)Cost of goods sold = (180000)

Gross Profit = 80000

(-)Administration and other expenses = (62500)

Net Profit = 17500

A) To Calculate Current Ratio, we use the following equation:

Current Ratio = Current Asset ÷ Current Liabilities

Current Asset = Cash + Debtors + Inventories

= 12000 + 93000 + 55000

= 160000

Current Liabilities = Sundry Creditors

= 70000

Therefore:

Current Ratio = 160000 ÷ 70000 = 2.285 ≈ 2.29

B) To Calculate Quick Ratio, we use the following equation:

Quick Ratio = Quick Asset ÷ Current Liabilities

Quick Asset = Cash + Debtors

= 12000 + 93000

= 105000

Current Liabilities = Sundry Creditors

= 70000

Therefore:

Quick Ratio = 105000 ÷ 70000 ≈ 1.5

C) To Calculate Inventory Turnover Ratio, we use the following equation:

Inventory Turnover Ratio = Cost of Goods Sold (COGS) ÷ Average of Inventory

COGS = Opening Stock + Purchase – Closing Stocks

Here, COGS is given as 180000

Average of Inventory = (Opening Stock + Closing Stock) ÷ 2

Assuming no information about opening inventory is provided, let's consider closing

inventory as given 55000.

If only opening stock or closing stock is given then we can consider the same as
average inventory.

Hence, Average of Inventory = 55000

Therefore:

Inventory Turnover Ratio = 180000 ÷ 55000 = 3.272 ≈ 3.28

D) To Calculate Debtor’s Turnover Ratio, we use following equation:

Debtor’s Turnover Ration = Net Credit Sales ÷ Average Receivables

 Net Credit Sales = Total Sales – Cash Sales (Assuming Cash Sales = 0)

= 260000 – 0

= 260000

Average Receivables = (Opening Debtors + Closing Debtors) ÷ 2

As there is no opening debtors, we are assuming closing debtors as average

receivables.

Hence, Average Receivables = 93000

Therefore:

Debtor’s Turnover Ratio = 260000 ÷ 93000 = 2.795 ≈ 2.80

E) To Calculate Net Profit Ratio, we use following equation:

Net Profit Ratio = Net Profit ÷ Net Sales
Net Profit is given as = 17500
Net Sales = 260000

Therefore:

Net Profit Ratio = 17500 ÷ 260000 = 0.067 = 6.7%

F) To Calculate Sales to Total Asset Ratio, we use following equation:

Sales to Total Asset Ratio = Net Sales ÷ Average Total Asset

Net Sales = 260000

Average Total Asset = 300000 (As per given data)

Therefore:

Sales to Total Asset Ratio = 260000 ÷ 300000 = 0.866 = 86.6%

-Parth Vishnukumar Limbachiya

STUDENT ID: Jul-23.MBA-OG10