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Ratio Analysis 4.21

Net Profit after Tax and Preference Dividend
(ii) Earning Per Share =
No. of Equity Shares
` 22,00,000 – 1,50,000`
= = 51.25.`
40,000
Market Value of an Equity Share ` 205
(iii) Price-Earning Ratio = = = 4 Times.
Earning Per Share (EPS) ` 51.25
Debt/Long-term Debt ` 15,00,000
(iv) Debt to Equity Ratio = = = 0.27 : 1.
Equity/Shareholders’ Funds ` 55,00,000

Note: Equity = Equity Share Capital + 15% Preference Share Capital + Reserves and Surplus
= ` 40,00,000 + ` 10,00,000 + ` 5,00,000 = ` 55,00,000.
Illustration 15.
Following is the Balance Sheet of Gyan Ltd. You are required to calculate Working Capital
Turnover Ratio:
BALANCE SHEET as at 31st March, 2019
Particulars Note No. `
I. EQUITY AND LIABILITIES
1. Shareholders’ Funds
(a) Share Capital 5,00,000
(b) Reserves and Surplus 2,00,000
2. Current Liabilities
(a) Trade Payables 2,50,000
(b) Short-term Provisions 50,000
Total 10,00,000
II. ASSETS
1. Non-Current Assets
Fixed Assets—Tangible (Net) 4,00,000
2. Current Assets
(a) Current Investments 1,00,000
(b) Inventories 1,00,000
(c) Trade Receivables 2,50,000
(d) Cash and Bank Balances 1,50,000
Total 10,00,000
(i) Total Sales during the year ` 32,00,000. (ii) Sales Return during the year ` 2,00,000.

Solution:
Revenue from Operations (WN 1)
Working Capital Turnover Ratio =
Working Capital (WN 2)

` 30,00,000
= = 10 Times.
Working Notes: ` 3,00,000
1. Revenue from Operations = Total Sales – Sales Return
= ` 32,00,000 – ` 2,00,000 = ` 30,00,000.