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Model Test Papers M.123
(b) Financial statements are not free from personal bias since the subjectivity
is inherent in personal judgements in taking decision regarding method of
depreciation, method of inventory valuation, Provision for Doubtful Debts, etc.
Net Profit before Interest, Tax and Dividend
21. (a) Return on Investment = × 100
Capital Employed
` 29,00,000
= × 100 = 16.48%.
` 1,76,00,000
Note: Capital Employed = Fixed Assets + Current Assets – Current Liabilities
= ` 1,50,00,000 + ` 80,00,000 – ` 54,00,000 = ` 1,76,00,000.
Total Assets ` 2,30,00,000
(b) Total Assets to Debt Ratio = = = 1.44 : 1.
Debt ` 1,60,00,000
Notes: 1. Total Assets = Fixed Assets + Current Assets
= ` 1,50,00,000 + ` 80,00,000 = ` 2,30,00,000.
2. Debt = 12% Debentures = ` 1,60,00,000.
Or
Liquid Assets
(i) Liquid Ratio =
Current Liabilities
Liquid Assets
2 =
` 50,000
Liquid Assets = ` 50,000 × 2 = ` 1,00,000
Current Assets = Liquid Assets + Inventories
= ` 1,00,000 + ` 20,000 = ` 1,20,000
Current Assets ` 1,20,000
Current Ratio = = = 2.4 : 1.
Current Liabilities ` 50,000
Debt (Note) ` 5,00,000
(ii) Debt to Equity Ratio = = = 1.67 : 1.
Equity ` 3,00,000
Note: Debt = Total Assets – Current Liabilities – Equity
= ` 10,00,000 – ` 2,00,000 – ` 3,00,000 = ` 5,00,000.
22. COMPARATIVE INCOME STATEMENT for the years ended 31st March, 2017 and 2018
Particulars Note 31st March, 31st March, Absolute Change Percentage
No. 2017 2018 (Increase/ Change (Increase/
Decrease) Decrease)
` ` ` %
I. Revenue from Operations 50,000 60,000 10,000 20.00
II. Other Incomes 2,000 3,000 1,000 50.00
III. Total Revenue (I + II) 52,000 63,000 11,000 21.15
IV. Expenses
(a) Cost of Materials Consumed 30,000 35,000 5,000 16.67
(b) Employees Benefit Expenses 16,000 14,000 (2,000) (12.50)
(c) Other Expenses 2,500 3,500 1,000 40.00
Total Expenses 48,500 52,500 4,000 8.25
V. Profit before Tax (III – IV) 3,500 10,500 7,000 200.00
VI. Tax Expenses 1,750 5,250 3,500 200.00
VII. Profit after Tax (V – VI) 1,750 5,250 3,500 200.00