However, the fixed assets to proprietorship ratio reveals that the entire fixed assets were not purchased by the proprietors’ equity. Calculate the following ratios from the balance sheet given below : (i) Debt – Equity Ratio (ii) Liquidity Ratio, (iii) Fixed Assets to Current Assets (iv) Fixed Assets Turnover, Liabilities $ Assets $, Equity shares of $ 10 each 1,00,000 Goodwill 60000, Reserves 20,000 Fixed Assets 140000, P.L. The Balance sheet of Naronath & Co. as on 31.12.2000 shows as follows: Liabilities $ Assets $, Equity capital 1,00,000 Fixed Assets 1,80,000, 15% Preference shares 50,000 Stores 25,000, 12% Debentures 50,000 Debtors 55,000, Retained Earnings 20,000 Bills Receivable 3,000, Creditors 45,000 Bank 2,000, 2,65,000 2,65,000. It is a sign of under trading. On the other hand, low Turnover Ratio and long collection period reflects that payments by debtors are delayed. Candidates must be prepared to apply … Stock Turnover Ratio and Turnover to fixed assets indicate an unhealthy sign. Disclaimer 8. For example, maturity of debentures cannot be identified with ratio analysis. Report a Violation 10. Examples of Questions on Ratio Analysis. Fixed assets are not used properly. Financial ratio analysis is one of the best tools of performance evaluation of any company. It means the firm is not dependent on outside liabilities. Quick ratio helps us find the solvency for six months and the reason why inventory is subtracted is that inventory usually take more than six month to convert into liquid asset. Ratio is the quantitative relation between two amounts showing the number of times one value contains or is contained within the other. DEFINITION: “The indicate quotient of two mathematical expressions and as “The … The average collection period ratio measures the quality of debtors since it indicates the rapidity or slowness of their collectability. Among the three, current ratio comes in handy to analyze the liquidity and solvency of the start-ups. It means current assets of Rs.2.90 are available against each rupee of current liability. Return on Assets. Terms of Service 7. Practice the concepts of Ratio and Proportion at MBA section of jagranjosh.com and prepare well … Ram & Company supplies you the following information regarding the year ended 31st December: A high Inventory turnover ratio is better than a low ratio. "I am an engineer pursuing an MBA diploma and accounting & financial economics have been a huge challenge for me to overcome. Problem 3. (vii) A. M. cannot be used in the study of ratios, rates etc. 2 RATIO ANANLYSIS Introduction The ratio analysis is the most powerful tool of financial analysis. Students should solve the CBSE issued sample papers to understand the pattern of the question paper which will come in class 12 board exams this year. for the year 8068, To Opening stock 1378 By Sales 33984, To Purchase (BD 25972 Sales Return 380, To gross profit 8068 33604, 35418 35418, Cost of Goods Sold = Cost of Goods Sold / Average Stock, Average Stock = (Opening Stock + Closing Stock)/ 2, (iii) Percentage of Gross Profit to Turnover = Gross Profit / Sales *100. Several ratios calculated from the accounting data can be grouped into various classes according to financial activity or function to be evaluated. To help identify the short term liquidity of a firm, this ratio is used. Problem 9. Fixed asset turnover. Calculate the operating Ratio from the following figures. This chapter focuses on the interpretation and analysis of fi nancial statements. The Supply Co. has total equity of $639,400 and net income of Financial Performance Analysis (MBA project) January 2019; DOI: 10.13140/RG.2.2.33643.39203. From the data calculate : (i) Gross Profit Ratio (ii) Net Profit Ratio (iii) Return on Total Assets (iv) Inventory Turnover (v) Working Capital Turnover (vi) Net worth to Debt Sales 25,20,000 Other Current Assets 7,60,000. The following is the Balance Sheet of a company as on 31st March: From the following particulars found in the Trading, Profit and Loss Account of A Company Ltd., work out the operation ratio of the business concern: The following is the summarised Profit and Loss Account of Taj Products Ltd. for the year ended 31st December: From the following Balance Sheet and additional information, you are required to calculate: A company has capital of Rs. 1. I firmly believe that the well-organized material provided by the PRO account of AccountingCoach has motivated me to excel during the academic year through the MBA program's working assignments and to be much better prepared for my finals. MBA Quiz Quiz Revision Quizes, MBA Quiz articles. A low inventory turnover ratio is dangerous. Ratio Analysis 223 EBIT ROCE ROE Impact of EBIT on ROCE and ROE in a Highly Geared Firm The concept of ‘Trading on Equity’ can be explained with the following example. 1843, Depreciation 63, Interest Expenses (Non- operating 456, Operating Ratio = (Cost of Goods Sold + Operating Expenses * 100) / Sales. questions are followed by the purpose of this thesis. Here is a compilation of top thirteen accounting problems on ratio analysis with its relevant solutions. Here are the answers to some of the most frequently asked Financial Analyst interview questions for the position of a financial analyst: Download PDF. Ans. Financial Analysis Questions, Answers and Examiners’ Comments LEVEL 5 DIPLOMA IN CREDIT MANAGEMENT JANUARY 2013 Instructions to candidates Answer all questions Time allowed: 3 hours The answers to this examination were disappointing. Which of the following is considered a profitability measure? Cash coverage ratio. : By Non-operating Incomes, Interest 1200 Interest on Securities 1,500, Discount 2400 Dividend on Shares 3, 750, Bad Debts 3400 7000 Profit on Sale of Shares 750 6,000, To Selling Distribution Expenses 12000, To Net profit 84000, 206000 206000, (i) Gross profit Ratio (ii) Expenses Ratio (individual), (iii) Net profit Ratio (iv) Operating profit Ratio, (v) Operating Ratio (vi) Stock turnover Ratio, Gross Profit Ratio =Gross Profit/ Sales * 100 = 2,00,000 / 500000 * 100, Expenses Ratio =Individual Expenses / Sales, Administration Expenses / Sales *100 =101000/500000 *100= 2.02%, Finance Expenses/ Sales *100 = 7000/ 500000 * 100=1.04 %, Selling and Distribution Expenses / Sales* 100= 12 000/ 500000 *100= 2.40%, Non- Operating Expenses / Sales * 100 = 2000/ 500000 * 100= 0.4%, Net Profit/ Sales *100 = 84000/ 500000 *100= 16.8%, Operating Profit Ratio =Operating Profit / Sales *100, Operating Profit = Net Profit + Non-Operating Expenses – Non Operating Incomes, Operating Ratio = ( Cost of Goods Sold + Operating Expenses)/Sales* 100, Cost of Goods Sold = Sales – Gross profit, All Expenses Debited in the Profit & Loss A/c Except Non-Operating Expenses, Operating Ratio = (3,00,000 + 1,20,0000) 500000 * 84%, Average Stock = (Opening Stock + Closing Stock)/2, Copyright © 2012-19 Finance-assignment.com All Rights Reserved | Privacy Policy | Terms & Conditions | Finance Homework Help. ) A. 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