Page 86 - MA12

Ratio Analysis 4.31
Debt ` 16,00,000
(d) Debt to Total Assets Ratio = = = 0.5 :1.
Total Assets ` 32,00,000
Note:
Total Assets = Fixed Assets + Non-current Investments + Long-term Loans and Advances + Current
Investments + Inventories + Trade Receivables (Net) + Cash and Bank Balances +
Short-term Loans and Advances + Other Current Assets (Prepaid Expenses)
= ` 10,00,000 + ` 4,00,000 + ` 2,00,000 + ` 20,000 + ` 7,90,000 + ` 7,60,000 + ` 10,000
+ ` 10,000 + ` 10,000 = ` 32,00,000.
Or
Total Assets = Shareholders Funds + Non-current Liabilities + Current Liabilities
= [` 2,00,000 + ` 2,00,000 + ` 1,60,000 + ` 2,40,000] + ` 16,00,000 + ` 8,00,000
= ` 32,00,000.

Shareholders’ Funds/Equity ` 8,00,000
(e) Proprietary Ratio = = = 0.25 :1.
Total Assets ` 32,00,000
Net Profit before Interest and Tax
(f) Interest Coverage Ratio =
Interest on Long-term Borrowings

` 6,00,000
= = 5 Times.
` 1,20,000
Notes:

1. Net Profit before Interest and Tax = Profit after Tax + Tax + Interest
= ` 2,40,000 + ` 2,40,000 + ` 1,20,000 = ` 6,00,000.
2. Interest on Debentures = 12% of ` 10,00,000 = ` 1,20,000.

Cost of Goods Sold/Cost of Revenue from Operations
(g) Inventory Turnover Ratio =
Average Inventory
` 12,00,000
= = 2.4 Times.
` 5,00,000
Notes:
1. Cost of Revenue from Operations = Net Purchases + Opening Inventory – Closing Inventory
= ` 17,80,000 + ` 2,10,000 – ` 7,90,000 = ` 12,00,000.

Opening Inventory + Closing Inventory
2. Average Inventory =
2
` 2,10,000 + ` 7,90,000
= = ` 5,00,000.
2
Credit Revenue from Operations
(h) Trade Receivables Turnover Ratio =
Average Trade Receivables

` 16,00,000
= = 2 Times.
` 8,00,000