Page 135 - MA12

Model Test Papers M.41

4. Discount on issue of debentures has been adjusted from Securities Premium Reserve as per Section 52(2)
of the Companies Act, 2013. The balance of ` 5,000 in Securities Premium Reserve is after writing off
Discount on Issue of Debentures of ` 10,000.
5. Provision for tax of previous year, i.e., ` 10,000 has been paid during the Current Year. So, it is substracted from
Cash Generated from Operations to arrive at Cash Flow from Operating Activities. Provision for tax of Current
Year ` 30,000 is added back to the Current Year’s profit to arrive at Net Profit before tax.
Debt/Long-term Debt
10. (a) (i) Debt to Equity Ratio =
Equity/Shareholders’ Funds
` 2,00,000
= = 0.29 : 1.
` 7,00,000
Notes: 1. Debt = 9% Debentures = ` 2,00,000.
2. Equity = Equity Share Capital + General Reserve + Statement of Profit and Loss (Cr.)
= ` 5,50,000 + ` 50,000 + ` 1,00,000 = ` 7,00,000.
Revenue from Operations
(ii) Working Capital Turnover Ratio =
Working Capital
= ` 15,00,000 = 15 Times.
` 1,00,000

Note: Working Capital = Current Assets – Current Liabilities
= [Debtors + Cash] – Creditors
= (` 1,45,000 + ` 55,000) – ` 1,00,000 = ` 1,00,000.
Net Profit before Interest and Tax
(iii) Return On Investment (ROI) = × 100
Capital Employed
` 2,18,000
= × 100 = 24.22%.
` 9,00,000
Working Notes:
1. Calculation of Net Profit before Interest and Tax:
Profit after Interest and Tax = ` 1,00,000
Tax paid = 50%
` 1,00,000 ×100
Profit after interest but before Tax = = ` 2,00,000
50
Add: Interest on Debentures (9% of ` 2,00,000) = ` 18,000
Net Profit before Interest and Tax = ` 2,18,000

2. Capital Employed = Equity Share Capital + General Reserve + Statement of Profit and Loss + 9% Debentures
= ` 5,50,000 + ` 50,000 + ` 1,00,000 + ` 2,00,000 = ` 9,00,000.
Debt
(b) Debt to Total Assets Ratio =
Total Assets
` 12,00,000
= = 0.5 : 1.
` 24,00,000