Page 281 - MA-12

Ratio Analysis 4.9

II. ASSETS
1. Non-Current Assets
Fixed Assets (Tangible) 2,20,000
2. Current Assets
(a) Inventories 80,000
(b) Trade Receivables 30,000
(c) Cash and Bank Balances 20,000
Total 3,50,000
Calculate the following ratios:
(i) Debt to Total Assets Ratio; and (ii) Proprietary Ratio.

Solution:
Debt ` 1,25,000
(i) Debt to Total Assets Ratio = = = 0.36 : 1.
Total Assets ` 3,50,000
Debt = Long-term Borrowings + Long-term Provisions
= ` 1,00,000 + ` 25,000 = ` 1,25,000.

Shareholders’ Funds/Equity Share Capital
(ii) Proprietary Ratio = =
Total Assets Total Assets
` 2,00,000
= = 0.57 : 1.
` 3,50,000
Illustration 4.
From the following information, calculate Trade Receivables Turnover Ratio and Trade
Payables Turnover Ratio:
Average Stock held ` 5,00,000; Revenue from Operations ` 54,00,000; Purchases ` 36,00,000;
Cost of Revenue from Operations or Cost of Goods Sold ` 16,20,000; Average Trade
Receivables Outstanding ` 6,00,000; Average Trade Payables Outstanding ` 3,60,000.

Note: All purchases and sales are made on credit.
Solution:
Credit Revenue from Operations
Trade Receivables Turnover Ratio =
Average Trade Receivables
` 54,00,000
= = 9 Times.
` 6,00,000
Net Credit Purchases ` 36,00,000
Trade Payables Turnover Ratio = = = 10 Times.
Average Trade Payables ` 3,60,000
Illustration 5.
Calculate Opening Trade Payables and Closing Trade Payables from the following information:
(i) Cash Purchases 25% of Total Purchases.
(ii) Revenue from Operations ` 6,00,000.
(iii) Gross Profit Ratio 25%.