Page 81 - MA12

4.26 Management Accounting (Section B)—ISC XII

(x) Debt to Total Assets Ratio = Debt
Total Assets

` 40,000
= = 0.098 : 1.
` 4,06,250

(xi) Earning Per Share (EPS) = Profit after Tax – Preference Dividend
Number of Equity Shares
` 93,200
= = ` 7.46.
` 12,500

Note: Preference Dividend is ` 4,800, i.e., 8% of ` 60,000.
Net Profit before Interest and Tax
(xii) Return on Investment = ¥ 100
Capital Employed

` 98,000 + 3,200 + ` 42,000
`
= ¥100
` 3,30,250
` 1,43,200
= ¥100 = 43.36%.
` 3,30,250

Market Value of Equity Share ` 39.20
(xiii) Price-Earning Ratio = = = 5.25 Times.
Earning Per Share (EPS) ` 7.46
Working Notes:
1. Capital Employed = Share Capital + Reserves and Surplus + Long-term Borrowings `
Equity Share Capital 1,25,000
10% Preference Share Capital 60,000
Reserves and Surplus 1,05,250
Long-term Borrowings (Debentures) 40,000
3,30,250
2. Shareholders’ Funds = Share Capital + Reserves and Surplus
Share Capital (Equity Share Capital + 10% Preference Share Capital) 1,85,000
Reserves and Surplus 1,05,250
2,90,250

Advanced Level Questions
Illustration 18.
From the following information, calculate the following ratios:
(i) Operating Ratio, (ii) Inventory Turnover Ratio.
Cash Revenue from Operations Credit Revenue from Operations
—` 10,00,000 —120% of Cash Revenue form Operations
Operating Expenses Gross Profit Ratio
—10% of Total Revenue from Operations —40%
Opening Stock—` 1,50,000 Closing Stock—` 20,000 more than Opening Stock