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Model Test Papers M.199

(b) A company has subscribed but not fully paid shares in the following two cases:

(i) When the company has called the entire nominal value of shares but has not
received the amount called.

(ii) When the company has not called-up the entire nominal value of the shares
(i.e., entire face value of the shares).
(c) Window dressing means painting better financial position than what it actually
is by manipulating the books of account. In this situation, financial analysis may
give false information to the users.

21.
Effect Reason
(a) No Change Neither Debt nor the Equity is affected.

(b) No Change Neither Debt nor the Equity is affected.
(c) No Change Neither Debt nor the Equity is affected.
(d) Reduce Equity is increased by the amount of profit but Debt remains unchanged.
(e) No Change Long-term Debts are not affected because debentures redeemed are Current Liabilities.
As per Schedule III of the Companies Act, 2013, long-term liabilities maturing within 12
months or within the period of Operating Cycle from the Balance Sheet Date are shown as
Current Liabilities under Current Maturities of Long-term Debts. Thus, redeemed debentures
are Current Liabilities and not Non-current Liabilities. Shareholders’ Funds also remain
unchanged. Therefore, Debt to Equity Ratio will not change.

Or
Net Profit before Interest, Tax and Dividend
(a) Return on Investment = ¥100
Capital Employed

` 14,50,000
= ¥100 = 16.48%.
` 88,00,000

Net Profit before Interest, Tax and Dividend = ` 14,50,000.
Capital Employed = Fixed Assets + Current Assets – Current Liabilities
= ` 75,00,000 + ` 40,00,000 – ` 27,00,000 = ` 88,00,000.

Total Assets
(b) Total Assets to Debt Ratio =
Long-term Debts

` 1,15,00,000
= = 1.44 : 1.
` 80,00,000
Total Assets = Fixed Assets + Current Assets
= ` 75,00,000 + ` 40,00,000 = ` 1,15,00,000.

Long-term Debt = 12% Debentures = ` 80,00,000.